E5-13 Consolidation After One Year of Ownership

E5-13 Consolidation after One Year of Ownership

a. / Eliminating entries, January 1, 20X2:
E(1) / Common Stock — Lowe Corporation / 120,000
Retained Earnings, January 1 / 80,000
Differential / 37,500
Investment in Lowe Corporation Stock / 190,000
Noncontrolling Interest / 47,500
Eliminate investment balance.
Computation of differential
Fair value of consideration given by Pioneer / $190,000
Fair value of noncontrolling interest / 47,500
Total fair value / 237,500
Underlying book value / (200,000)
Differential / $ 37,500
E(2) / Buildings / 32,000
Goodwill / 5,500
Differential / 37,500
Assign differential:
$5,500 = $37,500 - $32,000
b. / Eliminating entries, December 31, 20X2:
E(1) / Income from Subsidiary / 28,800
Investment in Lowe Corporation Stock / 28,800
Eliminate income from subsidiary.
Computation of income from subsidiary
Reported net income of Lowe / $40,000
Amortization of differential assigned to
buildings ($32,000 / 8 years) / (4,000)
Income after amortization of differential / $36,000
Proportion of stock acquired / x .80
Income from subsidiary for 20X2 / $28,800

E5-13 (continued)

E(2) / Income to Noncontrolling Interest / 7,200
Noncontrolling Interest / 7,200
Assign income to noncontrolling interest:
$7,200 = ($40,000 - $4,000) x .20
E(3) / Common Stock — Lowe Corporation / 120,000
Retained Earnings, January 1 / 80,000
Differential / 37,500
Investment in Lowe Corporation Stock / 190,000
Noncontrolling Interest / 47,500
Eliminate beginning investment balance.
E(4) / Buildings / 32,000
Goodwill / 5,500
Differential / 37,500
Assign beginning differential.
E(5) / Depreciation Expense / 4,000
Accumulated Depreciation / 4,000
Amortize differential.

E5-14 Consolidation Following Three Years of Ownership

a. / Computation of increase in value of patents:
Fair value of consideration given by Knox / $277,500
Fair value of noncontrolling interest / 185,000
Total fair value / $462,500
Book value of Conway stock / (400,000)
Excess of fair value over book value / $ 62,500
Increase in value of land ($30,000 - $22,500) / (7,500)
Increase in value of equipment ($360,000 - $320,000) / (40,000)
Increase In value of patents / $ 15,000
b. / E(1) / Common Stock — Conway Company / 250,000
Retained Earnings / 150,000
Differential / 62,500
Investment in Conway Company Stock / 277,500
Noncontrolling Interest / 185,000
Eliminate investment balance:
$62,500 = ($277,500 + $185,000) – ($250,000 + $150,000)
E(2) / Land / 7,500
Equipment / 40,000
Patents / 15,000
Differential / 62,500
Assign differential.
c. / Computation of investment account balance at January 1, 20X9:
Fair value of consideration given / $277,500
Undistributed income since acquisition
($100,000 - $60,000) x .60 / 24,000
Amortization of differential assigned to:
Equipment ($40,000 / 8) x .60 x 2 years / (6,000)
Patents ($15,000 / 10) x .60 x 2 years / (1,800)
Account balance at January 1, 20X9 / $293,700
d. / Entries recorded by Knox during 20X9:
(1) / Cash / 6,000
Investment in Conway Company Stock / 6,000
Record dividends from subsidiary.
(2) / Investment in Conway Company Stock / 18,000
Income from Subsidiary / 18,000
Record equity-method income.
(3) / Income from Subsidiary / 3,900
Investment in Conway Company Stock / 3,900
Amortize differential:
$3,900 = [($40,000 / 8 years) x .60] +
[($15,000 / 10 years) x .60]

E5-14 (continued)

e. / Eliminating entries:
E(1) / Income from Subsidiary / 14,100
Dividends Declared / 6,000
Investment in Conway Company Stock / 8,100
Eliminate income from subsidiary:
$14,100 = $18,000 - $3,900
E(2) / Income to Noncontrolling Interest / 9,400
Dividends Declared / 4,000
Noncontrolling Interest / 5,400
Assign income to noncontrolling interest:
$9,400 = ($30,000 - $5,000 - $1,500) x .40
E(3) / Common Stock — Conway Company / 250,000
Retained Earnings, January 1 / 190,000
Differential / 49,500
Investment in Conway Company Stock / 293,700
Noncontrolling Interest / 195,800
Eliminate beginning investment balance:
$49,500 = $62,500 – ($5,000 x 2) – ($1,500 x 2)
E(4) / Land / 7,500
Buildings and Equipment / 40,000
Patents / 12,000
Differential / 49,500
Accumulated Depreciation / 10,000
Assign beginning differential:
$12,000 = $15,000 – ($1,500 x 2)
E(5) / Depreciation Expense / 5,000
Amortization Expense / 1,500
Accumulated Depreciation / 5,000
Patents / 1,500
Amortize differential.

E5-16 Consolidation Workpaper for Majority-Owned Subsidiary for SecondYear

a. / Eliminating entries:
E(1) / Income from Subsidiary / 28,000
Dividends Declared / 12,000
Investment in Stergis Company Stock / 16,000
Eliminate income from subsidiary.
E(2) / Income to Noncontrolling Interest / 7,000
Dividends Declared / 3,000
Noncontrolling Interest / 4,000
Assign income to noncontrolling interest.
E(3) / Common Stock — Stergis Company / 100,000
Retained Earnings, January 1 / 70,000
Investment in Stergis Company Stock / 136,000
Noncontrolling Interest / 34,000
Eliminate beginning investment balance.

E5-16 (continued)

b. / Proud Corporation and Stergis Company
Consolidation Workpaper
December 31, 20X4
Proud / Stergis / Eliminations / Consol-
Item / Corp. / Co. / Debit / Credit / idated
Sales / 230,000 / 140,000 / 370,000
Income from Subsidiary / 28,000 / (1) 28,000
Credits / 258,000 / 140,000 / 370,000
Depreciation Expense / 25,000 / 15,000 / 40,000
Other Expenses / 150,000 / 90,000 / 240,000
Debits / (175,000) / (105,000) / (280,000)
Consolidated Net Income / 90,000
Income to Noncon-
trolling Interest / (2) 7,000 / (7,000)
Income, carry forward / 83,000 / 35,000 / 35,000 / 83,000
Ret. Earnings, Jan. 1 / 284,000 / 70,000 / (3) 70,000 / 284,000
Income, from above / 83,000 / 35,000 / 35,000 / 83,000
367,000 / 105,000 / 367,000
Dividends Declared / (50,000) / (15,000) / (1) 12,000
(2) 3,000 / (50,000)
Ret. Earnings, Dec. 31,
carry forward / 317,000 / 90,000 / 105,000 / 15,000 / 317,000
Current Assets / 235,000 / 150,000 / 385,000
Depreciable Assets / 500,000 / 300,000 / 800,000
Investment in Stergis
Company Stock / 152,000 / (1) 16,000
(3)136,000
Debits / 887,000 / 450,000 / 1,185,000
Accum. Depreciation / 200,000 / 90,000 / 290,000
Current Liabilities / 70,000 / 50,000 / 120,000
Long-Term Debt / 100,000 / 120,000 / 220,000
Common Stock
Proud Corporation / 200,000 / 200,000
Stergis Company / 100,000 / (3)100,000
Retained Earnings,
from above / 317,000 / 90,000 / 105,000 / 15,000 / 317,000
Noncontrolling Interest / (2) 4,000
(3) 34,000 / 38,000
Credits / 887,000 / 450,000 / 205,000 / 205,000 / 1,185,000

E5-24A Basic Cost-Method Workpaper

a. / Eliminating entries:
E(1) / Dividend Income / 10,000
Dividends Declared / 10,000
Eliminate dividend income from subsidiary.
E(2) / Common Stock — Shaw Corporation / 100,000
Retained Earnings, January 1 / 50,000
Investment in Shaw Corporation Stock / 150,000
Eliminate original investment balance.
b. / Blake Corporation and Shaw Corporation
Consolidation Workpaper
December 31, 20X3
Blake / Shaw / Eliminations / Consol-
Item / Corp. / Corp. / Debit / Credit / idated
Sales / 200,000 / 120,000 / 320,000
Dividend Income / 10,000 / (1) 10,000
Credits / 210,000 / 120,000 / 320,000
Depreciation Expense / 25,000 / 15,000 / 40,000
Other Expenses / 105,000 / 75,000 / 180,000
Debits / (130,000) / (90,000) / (220,000)
Income, carry forward / 80,000 / 30,000 / 10,000 / 100,000
Ret. Earnings, Jan. 1 / 230,000 / 50,000 / (2) 50,000 / 230,000
Income, from above / 80,000 / 30,000 / 10,000 / 100,000
310,000 / 80,000 / 330,000
Dividends Declared / (40,000) / (10,000) / (1) 10,000 / (40,000)
Ret. Earnings, Dec. 31,
carry forward / 270,000 / 70,000 / 60,000 / 10,000 / 290,000
Current Assets / 145,000 / 105,000 / 250,000
Deprec. Assets (net) / 325,000 / 225,000 / 550,000
Investment in Shaw
Corporation Stock / 150,000 / (2)150,000
Debits / 620,000 / 330,000 / 800,000
Current Liabilities / 50,000 / 40,000 / 90,000
Long-Term Debt / 100,000 / 120,000 / 220,000
Common Stock
Blake Corporation / 200,000 / 200,000
Shaw Corporation / 100,000 / (2)100,000
Retained Earnings,
from above / 270,000 / 70,000 / 60,000 / 10,000 / 290,000
Credits / 620,000 / 330,000 / 160,000 / 160,000 / 800,000

E5-25A Cost-Method Workpaper in Subsequent Period

a. Eliminating entries:

E(1) / Dividend Income / 15,000
Dividends Declared / 15,000
Eliminate dividend income from subsidiary.
E(2) / Common Stock – Shaw Corporation / 100,000
Retained Earnings, January 1 / 50,000
Investment in Shaw Corporation Stock / 150,000
Eliminate original investment balance.
b. / Blake Corporation and Shaw Corporation
Consolidation Workpaper
December 31, 20X4
Blake / Shaw / Eliminations / Consol-
Item / Corp. / Corp. / Debit / Credit / idated
Sales / 300,000 / 200,000 / 500,000
Dividend Income / 15,000 / (1) 15,000
Credits / 315,000 / 200,000 / 500,000
Depreciation Expense / 25,000 / 15,000 / 40,000
Other Expenses / 250,000 / 160,000 / 410,000
Debits / (275,000) / (175,000) / (450,000)
Income, carry forward / 40,000 / 25,000 / 15,000 / 50,000
Ret. Earnings, Jan. 1 / 270,000 / 70,000 / (2) 50,000 / 290,000
Income, from above / 40,000 / 25,000 / 15,000 / 50,000
310,000 / 95,000 / 340,000
Dividends Declared / (20,000) / (15,000) / (1) 15,000 / (20,000)
Ret. Earnings, Dec. 31,
carry forward / 290,000 / 80,000 / 65,000 / 15,000 / 320,000
Current Assets / 170,000 / 110,000 / 280,000
Deprec. Assets (net) / 300,000 / 210,000 / 510,000
Investment in Shaw
Corporation Stock / 150,000 / (2)150,000
Debits / 620,000 / 320,000 / 790,000
Current Liabilities / 30,000 / 20,000 / 50,000
Long-Term Debt / 100,000 / 120,000 / 220,000
Common Stock
Blake Corporation / 200,000 / 200,000
Shaw Corporation / 100,000 / (2)100,000
Retained Earnings,
from above / 290,000 / 80,000 / 65,000 / 15,000 / 320,000
Credits / 620,000 / 320,000 / 165,000 / 165,000 / 790,000

E5-26A Cost-Method Consolidation for Majority-Owned Subsidiary

a. / Eliminating entries:
E(1) / Dividend Income / 16,000
Dividends Declared / 16,000
Eliminate dividend income from subsidiary.
E(2) / Income to Noncontrolling Interest / 6,000
Dividends Declared / 4,000
Noncontrolling Interest / 2,000
Assign income to noncontrolling interest.
E(3) / Common Stock – Knight Company / 100,000
Retained Earnings, January 1 / 50,000
Investment in Knight Company Stock / 120,000
Noncontrolling Interest / 30,000
Eliminate original investment balance.
E(4) / Retained Earnings, January 1 / 4,000
Noncontrolling Interest / 4,000
Assign undistributed prior earnings of
subsidiary to noncontrolling interest:
($70,000 - $50,000) x .20

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E5-26A (continued)

b. / Lintner Corporation and Knight Company
Consolidation Workpaper
December 31, 20X7
Lintner / Knight / Eliminations / Consol-
Item / Corp. / Co. / Debit / Credit / idated
Sales / 300,000 / 200,000 / 500,000
Dividend Income / 16,000 / (1) 16,000
Credits / 316,000 / 200,000 / 500,000
Depreciation Expense / 25,000 / 15,000 / 40,000
Other Expenses / 251,000 / 155,000 / 406,000
Debits / (276,000) / (170,000) / (446,000)
Consolidated Net Income / 54,000
Income to Noncon-
trolling Interest / (2) 6,000 / (6,000)
Income, carry forward / 40,000 / 30,000 / 22,000 / 48,000
Ret. Earnings, Jan. 1 / 268,000 / 70,000 / (3) 50,000
(4) 4,000 / 284,000
Income, from above / 40,000 / 30,000 / 22,000 / 48,000
308,000 / 100,000 / 332,000
Dividends Declared / (25,000) / (20,000) / (1) 16,000
(2) 4,000 / (25,000)
Ret. Earnings, Dec. 31,
carry forward / 283,000 / 80,000 / 76,000 / 20,000 / 307,000
Current Assets / 183,000 / 80,000 / 263,000
Deprec. Assets (net) / 500,000 / 300,000 / 800,000
Investment in Knight
Company Stock / 120,000 / (3)120,000
Debits / 803,000 / 380,000 / 1,063,000
Accum. Depreciation / 200,000 / 90,000 / 290,000
Accounts Payable / 120,000 / 110,000 / 230,000
Common Stock
Lintner Corporation / 200,000 / 200,000
Knight Company / 100,000 / (3)100,000
Retained Earnings,
from above / 283,000 / 80,000 / 76,000 / 20,000 / 307,000
Noncontrolling Interest / (2) 2,000
(3) 30,000
(4) 4,000 / 36,000
Credits / 803,000 / 380,000 / 176,000 / 176,000 / 1,063,000

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E5-26A (continued)

c. / Lintner Corporation and Subsidiary
Consolidated Balance Sheet
December 31, 20X7
Current Assets / $263,000
Depreciable Assets / $800,000
Less: Accumulated Depreciation / (290,000) / 510,000
Total Assets / $773,000
Accounts Payable / $230,000
Stockholders’ Equity:
Controlling Interest:
Common Stock / $200,000
Retained Earnings / 307,000
Total Controlling Interest / $507,000
Noncontrolling Interest / 36,000
Total Stockholders’ Equity / 543,000
Total Liabilities and Stockholders' Equity / $773,000
Lintner Corporation and Subsidiary
Consolidated Income Statement
Year Ended December 31, 20X7
Sales / $500,000
Depreciation / $ 40,000
Other Expenses / 406,000
Total Expenses / (446,000)
Consolidated Net Income / $ 54,000
Income to Noncontrolling Interest / (6,000)
Income to Controlling Interest / $ 48,000
Lintner Corporation and Subsidiary
Consolidated Retained Earnings Statement
Year Ended December 31, 20X7
Retained Earnings, January 1, 20X7 / $284,000
Income to Controlling Interest, 20X7 / 48,000
$332,000
Dividends Declared, 20X7 / (25,000)
Retained Earnings, December 31, 20X7 / $307,000

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