Price Company purchased 90% of the outstanding common stock of Score Company on

Question

Price Company purchased 90% of the outstanding common stock of Score Company on January 1, 2011, for $454,320. At that time, Score Company had stockholders' equity consisting of common stock, $199,200; other contributed capital, $157,300; and retained earnings, $88,900. On December 31, 2015, trial balances for Price Company and Score Company were as follows ce ore Cash Accounts Receivable Note Receivable Inventory Investment in Score Company Plant and Equipment Land Dividends Declared Cost of Goods Sold Other Expenses $108,700 $79,200 92,900 167,800 75,000 454,320 157,600 314,300 159,100 957,200 411,900 69,300 49,000 837,200 244,000 250,800 124,500 $3,393,220 $1,229,900 70,300 Total Debits Accounts Payable Notes Payable Common Stock Other Contributed Capital Retained Earnings, 1/1 Sales Dividend and Interest Income $133,000 $46,300 294,500 122,300 493,400 199,200 260,400 157,300 692,400 208,300 1,467,920 496,500 51,600 Total Credits $3,393,220 $1,229,900 Price Company's note receivable is receivable from Score Company. Interest of $7,500 was paid by Score to Price during 2015. Any difference between book value and the value implied by the purchase price relates to goodwill Prepare a consolidated statements workpaper on December 31, 2015. (List items that increase retained earnings first.)

Explanation / Answer

        Consolidation Entries     Price Score Dr Cr Consolidated Sales       (14,67,920)    (4,96,500)          (19,64,420) Cost of sales           8,37,200      2,44,000            10,81,200 Operating Expenses           2,50,800      1,24,500               3,75,300 Dividend & interest income             (51,600)                (51,600)         (4,31,520)    (1,28,000)                 -              (5,59,520) Consolidated Net Income     To non controlling Interest     To Gibson Company Retained earning, 1/1         (6,92,400)    (2,08,300)            (9,00,700) Net Income         (4,31,520)    (1,28,000)            (5,59,520) Dividend declared               70,300          49,000               1,19,300       (10,53,620)    (2,87,300)                 -                  -            (13,40,920) Cash           1,08,700          79,200               1,87,900 Receivables           1,67,800          92,900               2,60,700 Notes Receivables               75,000                   -           7,500                  67,500 Inventory           3,14,300      1,59,100               4,73,400 Investment in Score           4,54,320                   -   4,54,320                            -   Goodwill       53,460                  53,460 Plant and equipment           9,57,200      4,11,900            13,69,100 Land           1,57,600          69,300               2,26,900 Total Assets         22,34,920      8,12,400       53,460 4,61,820            26,38,960                         Accounts Payable           1,33,000          46,300               1,79,300 Notes Payable           2,94,500      1,22,300          7,500               4,09,300 Common Stock           4,93,400      1,99,200    1,99,200               4,93,400 Other contributed Capital           2,60,400      1,57,300    1,57,300               2,60,400 Retained earning,12/31         10,53,620      2,87,300    1,08,740            12,32,180 Minority Interest       64,380                  64,380             Total Liabilities & Equity         22,34,920      8,12,400    4,72,740       64,380            26,38,960                   -                              -   Common stock           1,99,200 Other contributed capital           1,57,300 retained earning               88,900 Total net worth           4,45,400 Calculation of Goodwill Purchase price           4,54,320 Less: 90% book value 445400*90%           4,00,860 Goodwill               53,460 Minotrity Interest Common Stock           1,99,200 Other contributed Capital           1,57,300 Retained earning,12/31           2,87,300           6,43,800 10% Minority Interest               64,380 Calculation of retained earning to be debited Retained earning at acquisition 88900 10% of the retained earned               19,840 (287300-88900)*10%           1,08,740

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