E4-5 Balance Sheet Consolidation

E4-5 Balance Sheet Consolidation

Eliminating entries:

E(1) / Common Stock – Thorne Corporation / 120,000
Retained Earnings / 240,000
Differential / 35,000
Investment in Thorne Corporation Stock / 395,000
Eliminate investment balance.
Computation of differential
Fair value of consideration given / $395,000
Book value of Thorne's assets / $640,000
Book value of Thorne's liabilities / (280,000)
Net book value / (360,000)
Differential / $35,000
E(2) / Inventory / 36,000
Goodwill / 19,000
Buildings (net) / 20,000
Differential / 35,000
Assign differential.

E4-10 Computation of Consolidated Balances

a. / Inventory / $ 140,000
b. / Land / $ 60,000
c. / Buildings and Equipment / $550,000
d. Goodwill: / Fair value of consideration given / $576,000
Book value of net assets
at acquisition / $450,000
Fair value increment for:
Inventory / 20,000
Land / (10,000)
Buildings and equipment / 70,000
Fair value of net assets
at acquisition / (530,000)
Balance assigned to goodwill / $ 46,000
e. / Investment in Astor Corporation: Nothing would be reported; the balance in the
investment account is eliminated.

E4-15 Basic Consolidation Workpaper

a. / Eliminating entries:
E(1) / Income from Subsidiary / 30,000
Dividends Declared / 10,000
Investment in Shaw Corporation Stock / 20,000
Eliminate 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 beginning investment balance.

E4-15 (continued)

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
Income from Subsidiary / 30,000 / (1) 30,000
Credits / 230,000 / 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 / 100,000 / 30,000 / 30,000 / 100,000
Ret. Earnings, Jan. 1 / 230,000 / 50,000 / (2) 50,000 / 230,000
Income, from above / 100,000 / 30,000 / 30,000 / 100,000
330,000 / 80,000 / 330,000
Dividends Declared / (40,000) / (10,000) / (1) 10,000 / (40,000)
Ret. Earnings, Dec. 31,
carry forward / 290,000 / 70,000 / 80,000 / 10,000 / 290,000
Current Assets / 145,000 / 105,000 / 250,000
Depreciable Assets / 325,000 / 225,000 / 550,000
Investment in Shaw
Corporation Stock / 170,000 / (1) 20,000
(2)150,000
Debits / 640,000 / 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 / 290,000 / 70,000 / 80,000 / 10,000 / 290,000
Credits / 640,000 / 330,000 / 180,000 / 180,000 / 800,000

E4-16 Basic Consolidation Workpaper for Second Year

a. / Eliminating entries:
E(1) / Income from Subsidiary / 35,000
Dividends Declared / 15,000
Investment in Shaw Corporation Stock / 20,000
Eliminate income from subsidiary.
E(2) / Common Stock — Shaw Corporation / 100,000
Retained Earnings, January 1 / 70,000
Investment in Shaw Corporation Stock / 170,000
Eliminate beginning investment balance.

E4-16 (continued)

b. / Blake Corporation and Shaw Corporation
Consolidation Workpaper
December 31, 20X4
Blake / Shaw / Eliminations / Consol-
Item / Corp. / Corp. / Debit / Credit / idated
Sales / 230,000 / 140,000 / 370,000
Income from Subsidiary / 35,000 / (1) 35,000
Credits / 265,000 / 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)
Income, carry forward / 90,000 / 35,000 / 35,000 / 90,000
Ret. Earnings, Jan. 1 / 290,000 / 70,000 / (2) 70,000 / 290,000
Income, from above / 90,000 / 35,000 / 35,000 / 90,000
380,000 / 105,000 / 380,000
Dividends Declared / (50,000) / (15,000) / (1) 15,000 / (50,000)
Ret. Earnings, Dec. 31,
Carry forward / 330,000 / 90,000 / 105,000 / 15,000 / 330,000
Current Assets / 210,000 / 150,000 / 360,000
Depreciable Assets / 300,000 / 210,000 / 510,000
Investment in Shaw
Corporation Stock / 190,000 / (1) 20,000
(2)170,000
Debits / 700,000 / 360,000 / 870,000
Current Liabilities / 70,000 / 50,000 / 120,000
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 / 330,000 / 90,000 / 105,000 / 15,000 / 330,000
Credits / 700,000 / 360,000 / 205,000 / 205,000 / 870,000

P4-22 Balance Sheet Consolidation [AICPA Adapted]

Case Inc. and Frey Inc.
Consolidated Balance Sheet Workpaper
December 31, 20X4
Case / Frey / Eliminations / Consol-
Item / Inc. / Inc. / Debit / Credit / idated
Cash / 825,000 / 330,000 / 1,155,000
Accounts and
Other Receivables / 2,140,000 / 835,000 / 2,975,000
Inventory / 2,310,000 / 1,045,000 / 3,355,000
Land / 650,000 / 300,000 / (2) 250,000 / 1,200,000
Deprec. Assets (net) / 4,575,000 / 1,980,000 / 6,555,000
Investment in
Frey Inc. Stock / 2,680,000 / (1)2,680,000
Long-Term Investments
and Other Assets / 865,000 / 385,000 / 1,250,000
Differential / (1) 250,000 / (2) 250,000
Total Debits / 14,045,000 / 4,875,000 / 16,490,000
Accounts Payable
and Other Current
Liabilities / 2,465,000 / 1,145,000 / 3,610,000
Long-Term Debt / 1,900,000 / 1,300,000 / 3,200,000
Common Stock, $25 Par / 3,200,000 / 1,000,000 / (1) 1,000,000 / 3,200,000
Additional Paid-In
Capital / 2,100,000 / 190,000 / (1) 190,000 / 2,100,000
Retained Earnings / 4,380,000 / 1,240,000 / (1) 1,240,000 / ______/ 4,380,000
Total Credits / 14,045,000 / 4,875,000 / 2,930,000 / 2,930,000 / 16,490,000

P4-24 Comprehensive Problem: Consolidation in Subsequent Period

a. / Journal entries recorded by Thompson Company:
(1) / Cash / 12,000
Investment in Lake Corporation Stock / 12,000
Record dividends from subsidiary.
(2) / Investment in Lake Corporation Stock / 32,000
Income from Subsidiary / 32,000
Record equity-method income.
(3) / Income from Subsidiary / 4,000
Investment in Lake Corporation Stock / 4,000
Amortize differential: $40,000 / 10 years
b. / Eliminating entries:
E(1) / Income from Subsidiary / 28,000
Dividends Declared / 12,000
Investment in Lake Corporation Stock / 16,000
Eliminate income from subsidiary.
E(2) / Common Stock — Lake Corporation / 100,000
Retained Earnings, January 1 / 120,000
Differential / 32,000
Investment in Lake Corporation Stock / 252,000
Eliminate beginning investment balance.
E(3) / Buildings and Equipment / 40,000
Accumulated Depreciation / 8,000
Differential / 32,000
Assign differential.
E(4) / Depreciation Expense / 4,000
Accumulated Depreciation / 4,000
Amortize differential.
E(5) / Accounts Payable / 2,500
Accounts Receivable / 2,500
Eliminate intercorporate receivable/payable.

P4-24 (continued)

c. / Thompson Company and Lake Corporation
Consolidation Workpaper
December 31, 20X4
Thompson / Lake / Eliminations / Consol-
Item / Co. / Corp. / Debit / Credit / idated
Service Revenue / 610,000 / 240,000 / 850,000
Income from Subsidiary / 28,000 / (1) 28,000
Credits / 638,000 / 240,000 / 850,000
Cost of Services
Provided / 470,000 / 130,000 / 600,000
Depreciation Expense / 35,000 / 18,000 / (4) 4,000 / 57,000
Other Expenses / 57,000 / 60,000 / 117,000
Debits / (562,000) / (208,000) / (774,000)
Income, carry forward / 76,000 / 32,000 / 32,000 / 76,000
Ret. Earnings, Jan. 1 / 292,000 / 120,000 / (2) 120,000 / 292,000
Income, from above / 76,000 / 32,000 / 32,000 / 76,000
368,000 / 152,000 / 368,000
Dividends Declared / (30,000) / (12,000) / (1) 12,000 / (30,000)
Ret. Earnings, Dec. 31,
carry forward / 338,000 / 140,000 / 152,000 / 12,000 / 338,000
Cash / 74,000 / 42,000 / 116,000
Accounts Receivables / 130,000 / 53,000 / (5) 2,500 / 180,500
Land / 60,000 / 50,000 / 110,000
Buildings and Equipment / 500,000 / 350,000 / (3) 40,000 / 890,000
Investment in Lake
Corporation Stock / 268,000 / (1) 16,000
(2)252,000
Differential / (2) 32,000 / (3) 32,000
Debits / 1,032,000 / 495,000 / 1,296,500
Accum. Depreciation / 265,000 / 93,000 / (3) 8,000
(4) 4,000 / 370,000
Accounts Payable / 71,000 / 17,000 / (5) 2,500 / 85,500
Taxes Payable / 58,000 / 60,000 / 118,000
Notes Payable / 100,000 / 85,000 / 185,000
Common Stock
Thompson Company / 200,000 / 200,000
Lake Corporation / 100,000 / (2)100,000
Retained Earnings,
from above / 338,000 / 140,000 / 152,000 / 12,000 / 338,000
Credits / 1,032,000 / 495,000 / 326,500 / 326,500 / 1,296,500

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P4-29 Consolidation Workpaper at End of Second Year of Ownership

a. / Eliminating entries:
E(1) / Income from Subsidiary / 34,000
Dividends Declared / 20,000
Investment in Roller Company Stock / 14,000
Eliminate income from subsidiary.
E(2) / Common Stock — Roller Company / 60,000
Retained Earnings, January 1 / 48,000
Differential / 26,000
Investment in Roller Company Stock / 134,000
Eliminate beginning investment balance.
E(3) / Buildings and Equipment / 20,000
Goodwill / 2,500
Retained Earnings, January 1 / 5,500
Differential / 26,000
Accumulated Depreciation / 2,000
Assign beginning differential.
E(4) / Depreciation Expense / 2,000
Accumulated Depreciation / 2,000
Amortize differential:
$2,000 = $20,000 / 10 years

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P4-29 (continued)

b. / Mill Corporation and Roller Company
Consolidation Workpaper
December 31, 20X9
Mill / Roller / Eliminations / Consol-
Item / Corp. / Co. / Debit / Credit / idated
Sales / 290,000 / 200,000 / 490,000
Income from Subsidiary / 34,000 / ______/ (1)34,000
Credits / 324,000 / 200,000 / 490,000
Cost of Goods Sold / 145,000 / 114,000 / 259,000
Wage Expense / 35,000 / 20,000 / 55,000
Depreciation Expense / 25,000 / 10,000 / (4) 2,000 / 37,000
Interest Expense / 12,000 / 4,000 / 16,000
Other Expenses / 23,000 / 16,000 / 39,000
Debits / (240,000) / (164,000) / ______/ ______/ (406,000)
Income, carry forward / 84,000 / 36,000 / 36,000 / 84.000
Ret. Earnings, Jan. 1 / 136,500 / 48,000 / (2) 48,000 / 131,000
(3) 5,500
Income, from above / 84,000 / 36,000 / 36,000 / 84,000
220,500 / 84,000 / 215,000
Dividends Declared / (30,000) / (20,000) / ______/ (1) 20,000 / (30,000)
Ret. Earnings, Dec. 31,
carry forward / 190,500 / 64,000 / 89,500 / 20,000 / 185,000
Cash / 45,500 / 32,000 / 77,500
Accounts Receivable / 85,000 / 14,000 / 99,000
Inventory / 97,000 / 24,000 / 121,000
Land / 50,000 / 25,000 / 75,000
Buildings and Equipment / 350,000 / 150,000 / (3) 20,000 / 520,000
Investment in Roller
Company Stock / 148,000 / (1) 14,000
(2)134,000
Differential / (2) 26,000 / (3) 26,000
Goodwill / (3) 2,500 / 2,500
Debits / 775,500 / 245,000 / 895,000

P4-29 (continued)

Mill / Roller / Eliminations / Consol-
Item / Corp. / Co. / Debit / Credit / idated
Accum. Depreciation / 170,000 / 50,000 / (3) 2,000
(4) 2,000 / 224,000
Accounts Payable / 51,000 / 15,000 / 66,000
Wages Payable / 14,000 / 6,000 / 20,000
Notes Payable / 150,000 / 50,000 / 200,000
Common Stock
Mill Corporation / 200,000 / 200,000
Roller Company / 60,000 / (2) 60,000
Retained Earnings,
from above / 190,500 / 64,000 / 89,500 / 20,000 / 185,000
Credits / 775,500 / 245,000 / 198,000 / 198,000 / 895,000

P4-29 (continued)

c. / Mill Corporation and Subsidiary
Consolidated Balance Sheet
December 31, 20X9
Cash / $ 77,500
Accounts Receivable / 99,000
Inventory / 121,000
Land / 75,000
Buildings and Equipment / $520,000
Less: Accumulated Depreciation / (224,000) / 296,000
Goodwill / 2,500
Total Assets / $671,000
Accounts Payable / $ 66,000
Wages Payable / 20,000
Notes Payable / 200,000
Common Stock / $200,000
Retained Earnings / 185,000 / 385,000
Total Liabilities and Stockholders' Equity / $671,000
Mill Corporation and Subsidiary
Consolidated Income Statement
Year Ended December 31, 20X9
Sales / $490,000
Cost of Goods Sold / $259,000
Wage Expense / 55,000
Depreciation Expense / 37,000
Interest Expense / 16,000
Other Expenses / 39,000
Total Expenses / (406,000)
Consolidated Net Income / $84,000
Mill Corporation and Subsidiary
Consolidated Retained Earnings Statement
Year Ended December 31, 20X9
Retained Earnings, January 1, 20X9 / $131,000
20X9 Net Income / 84,000
$215,000
Dividends Declared, 20X9 / (30,000)
Retained Earnings, December 31, 20X9 / $185,000

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