Parent and Two Subsidiaries, Intercompany Notes On January 2, 2014, Phillips Com

Question

Parent and Two Subsidiaries, Intercompany Notes On January 2, 2014, Phillips Company purchased 80% of Sanchez Company and 90% of Thomas Company for $225,000 and $168,000, respectively. Immediately before the acquisitions, the balance sheets of the three com- panies were as follows:

The note receivable and interest receivable of Sanchez relate to a loan made to Thomas Company on October 1, 2013. Thomas failed to record the accrued interest expense on the note.

Required: Prepare a consolidated balance sheet workpaper as of January 2, 2014. Any difference between book value and the value implied by the purchase price relates to subsidiary land.

Philips Sanchez Thomas Cash $400,000 $43,700 $20,000 Accounts Receivable 28,000 24,000 20,000 Note Receivable -0- 10,000 -0- Interest Receivable -0- 300 -0- Inventory 120,000 96,000 43,000 Equipment 60,000 40,000 30,000 Land 180,000 80,000 70,000 Total $788,000 $294,000 $183,000 Accounts Payable $28,000 $20,000 $18,000 Note Payable -0- -0- 10,000 Common Stock 300,000 120,000 75,000 Other Contributed Capital 300,000 90,000 40,000 Retained Earnings 160,000 64,000 40,000   Total $788,000 $294,000 $183,000

Explanation / Answer

Consolidated baalnce sheet

(3)7,250**

(4)

31,697***

(3)64,000

(4)39,700*

(a)300

Working notes

* (40,000 - 300)

**(225,000/.80 ) - (120,000 +90,000+64,000)

***(168,000/.90) - (75,000+40,000+40,000- 300)

Phillips Sanchez thomas DR CR Non controllint interest Cosnolidated baalance sheet Cash 7,000 43,700 20,000 70,700 A/c receivable 28,000 24,000 20,000 72,000 Note receivable 10,000 (1)10,000 Interest receivable 300 (2)300 Inventory 120,000 96,000 43,000 259,000 Investment in sanchez 225,000 (3)225,000 investment in thomas 168,000 (4)168,000 Equipment 60,000 40,000 30,000 130,000 Land 180,000 80,000 70,000

(3)7,250**

(4)

31,697***

369,217 total Assets 788,000 294,000 183,000 $900,917 A/c payable 28,000 20,000 18,000 66,000 Notes paayble 10,000 (1)10,000 Accrued interest paayble (2) 300 (a)300 Common stock Phillips 300,000 300,000 Sanchez 120,000 (3)120,000 thomas 75,000 (4)75,000 Other consolidated capital Philips 300,000 300,000 Sanchez 90,000 (3)90,000 Thomas 40,000 (4)40,000 Retained Earnings Philpps 160,000 160,000 Sanchez 64,000

(3)64,000

Thomas 40,000

(4)39,700*

(a)300

Non controlling interest $74,917 $74,917 total 788,000 294,000 183,000 478,517 478517 74,917 900,917

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