consolidation-problems

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P5-39 Comprehensive Problem: Majority-Owned Subsidiary

Master Corporation acquired 80 percent ownership of Stanley Wood Products Company on January 1, 20X1, for $160,000. On that date, the fair value of the noncontrolling interest was $40,000, and Stanley reported retained earnings of $50,000 and had $100,000 of common stock outstanding. Master has used the equity method in accounting for its investment in Stanley. 250,000 18,000$1,052,400 Trial balance data for the two companies on December 31, 20X5, are as follows:

Master Corporation

Stanley Wood Products Company

Debit

Credit

Debit

Credit

Cash & Receivables

$81,000

65,000

Inventory

$260,000

90,000

Land

$80,000

80,000

Building & Equipment

$500,000

150,000

Inventments in stanley Wood Products stock

$188,000

COGS

$120,000

50,000

Depreciation Expense

$25,000

15,000

Inventory losses

$15,000

5,000

Dividends Declared

$30,000

10,000

Accumulated Depreciation

$205,000

105,000

Accounts Payable

$60,000

20,000

Notes Payable

$200,000

50,000

Common Stock

$300,000

100,000

Retained Earnings

$314,000

90,000

Sales

$200,000

100,000

Income from Subsidairy

$20,000

$1,299,000

1,299,000

465,000

465,000

Additional information:

1.On the date of combination, the fair value of Stanley’s depreciable assets was 50,000 more than book value. The accumulated depreciation on those assets were 10,000 on the acquisition date. The differential assigned to depreciable assets should be written off over the following 10-year period.

2.There was 10,000 of incorporate receivables and payables at the end of 20X5

Required:

A.Give all journal entries that Master recorded during 20X5 related to its investments in Stanley.

B.Give all consolidation entries needed to prepare consolidated statements for 20X5

C.Prepare a three-part worksheet as of December 31, 20X5