Price Corporation acquired 100 percent ownership of Saver Company on January 1,

Question

Price Corporation acquired 100 percent ownership of Saver Company on January 1, 20X8, for $128,000. At that date, the fair value of Saver's buildings and equipment was $20,000 more than the book value. Accumulated depreciation on this date was $30,000. Buildings and equipment are depreciated on a 10-year basis. Although goodwill is not amortized, Price’s management concluded at December 31, 20X8, that goodwill involved in its acquisition of Saver shares had been impaired and the correct carrying value was $2,500. No additional impairment occurred in 20X9.

Trial balance data for Price and Saver on December 31, 20X9, are as follows:

a. Prepare all consolidating entries needed to prepare a three-part consolidation worksheet as of December 31, 20X9.

b. Prepare a three-part consolidation worksheet for 20X9

c-1. Prepare a consolidated balance sheet for 20X9

c-2. Prepare a consolidated income statement for 20X9.

c-3. Prepare a retained earnings statement for 20X9.

Price Corporation Debit Saver Company Debit Item Cash Accounts Receivable Inventory Land Buildings & Equipment Investment in Saver Company Cost of Goods Sold wage Expense Depreciation Expense Interest Expense Other Expenses Dividends Declared Accumulated Depreciation Accounts Payable Wages Payable Notes Payable Common Stock Retained Earnings Sales Income from Saver Company Credit Credit $ 32,000 $ 45,500 85,000 97,000 50,000 350,000 142,500 145,000 35,000 25,000 12,000 23,000 30,000 14,000 24,000 25,000 150,000 114,000 20,000 10,000 4,000 16,000 20,000 $ 170,000 51,000 14,000 150,000 200,000 131,000 290,000 34,000 $ 50,000 15,000 6,000 50,000 60,000 48,000 200,000 $1,040,000 $1,040,000 429,000 $429,000

Explanation / Answer

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Requirement a Consolidating entry required to prepare the three part Three part consolidation worksheet Common stock 60000 Retained earning 48000 Goodwill 2500 Equipment 20000 Income from Saver Company 34000 Depreciation on Building & equipment 2000 Investment in saver company 142500 Dividends by saver Company 20000 Accumulated depreciation on Buiding &equipment 4000 Consolidating Consolidated Requirement b Price Corporation Saver Company Debit Credit Income statement Sales -290000 -200000 -490000 Cost of goods sold 145000 114000 259000 Wage expense 35000 20000 55000 Depreication expense 25000 10000 2000 37000 Interest expense 12000 4000 16000 Other expense 23000 16000 39000 Net Income before subsidiary earning -50000 -36000 -84000 Income from Saver company -34000 0 34000 0 Net Income -84000 -36000 36000 -84000 Retained earning 0 Retained earning 1/1/2019 -131000 -48000 48000 -131000 Net income for the year -84000 -36000 36000 -84000 Dividends 30000 20000 20000 30000 Retained earning 12/31/2019 -185000 -64000 84000 20000 -185000 Balance sheet Cash 45500 32000 77500 Accounts Receivable 85000 14000 99000 Inventory 97000 24000 121000 Land 50000 25000 75000 building and equipment 350000 150000 20000 520000 Accumulated depreciation -170000 -50000 4000 -224000 Goodwill 2500 2500 Investment in Saver company 142500 142500 0 Total assets 600000 195000 671000 Accounts Payable -51000 -15000 -66000 Wages Payable -14000 -6000 -20000 Notes payable -150000 -50000 -200000 Common stock -200000 -60000 60000 -200000 Retained earning -185000 -64000 64000 -185000 Total liabilities and equity -600000 -195000 -671000 Consolidated balance sheet Assets Cash 77500 Accounts Receivable 99000 Inventory 121000 Land 75000 building and equipment 520000 Accumulated depreciation -224000 296000 Goodwill 2500 2500 Total asset 671000 Liabilities & shareholder's equity Accounts Payable 66000 Wages Payable 20000 Notes payable 200000 Common stock 200000 Retained earning 185000 Total Liabilities & shareholder's equity 671000 Consolidated Income statement Sales 490000 Cost of goods sold 259000 Gross Profit 231000 Less : expenses Wages expense 55000 Depreciation expense 37000 Interest expense 16000 Other expense 39000 Total expenses 147000 Net Income 84000 Retained earning statement Retained earning 1/1/2018 131000 Net Income 84000 Dividends 30000 Retained earning 12/31/2018 185000

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