PROBLEMS

Consolidatiaon adjustments and worksheets

The trial for FIRE and WALL as of 31 Desember 20X3 are as follows:

FIRE WALL
Debit Credit Debit
Cash $ 19,800 $
Account receivable 32,000
Inventory 330,000
Land 160,000
Buildings and equipment 680,000
Investment in WALL, at cost 196,000
Cost of goods sold 372,000
Depreciation 40,000
Interest expense 32,000
Other expenses (including tax) 44,850
Dividends declared 60,000
Accumulated depreciation $ 280,000
Accounts payable 184,800
Bonds payable 400,000
Bond premium
Share capital 240,000
Retained earnings 241,600
Sales 520,000
Other income 79,250
Dividend income from subsidiary 21,000
Total 1,966,650 1,966,650

Additional information:
(a) On 1 January 20x2, FIRE purchased 70% of WALL's ordinary shares. At the date of acquisition, share
capital of WALL was $160,000 and retained earnings were $40,000.
(i) The excess of the acquisition price over the underlying book value was assigned to:
- Buildings that had a fair value of $40,000 greater than book value and remaining useful life of t
from 1 Januar 20x2; and
- Goodwill. Goodwill impairment amounting to 20% of its original cost was recognized in 20x2.
(ii) Fair value of WALL as at acquisition date was $280,000. Non-controlling interests as at 1 January
had a proportionate share in the fair value of WALL as at that date.
(b) During 20x2, the following transactions arose:
(i) WALL purchased inventory for $64,000 and sold it to FIRE for $96,000. FIRE resold $54,000 of
inventory during 20x3, while the balance of $42,000 remained unsold as at 31 December 20x3.
(ii) FIRE sold the buillding that it originally purchased for $40,000 to WALL for $64,000. Accumulat
depreciation at the date of sale was $8,000. Estimated useful life at date of original purchase was t
years and at the date of resale was eight years. WALL had recognized a full year's depreciation on
building in 20x2
(c) During 20x3, FIRE sold inventory purchased for $120,000 to WALL for $180,000. WALL resold 40%
the inventory during 20x3
(d) Tax rate was 20%. Recognize tax effects where appropriate
Required:
1. Show all consolidation adjustment and elimination entries for the year ended 31 December 20x3.
2. Perform an analytical check on the non-controlling interests in WALL as at 31 December 20x3.
3. Prepare the consolidation worksheets for FIRE and WALL for the year ended 31 December 20x3.
4. Determine the following amounts for 20x3 analytically and compare with the amounts in your consoli
worksheets in 3:
(a) Consolidated cost of sales
(b) Consolidated depeciation expense
(c) Consolidated inventory balance
(d) Consolidated carrying amount of buildings and equipment
(e) Consolidated retained earnings.
 WALL
Debit Credit
3,200
38,000
170,000
80000
520,000

159,600
30,000
10,400
52,000
30,000
$ 160,000
70,000
300,000
3,200
160,000
100,000
250,000
50,000

1,093,200 1,093,200

res. At the date of acquisition, share

0.
alue was assigned to:
value and remaining useful life of ten yars

ginal cost was recognized in 20x2.

controlling interests as at 1 January 20x2
date.

r $96,000. FIRE resold $54,000 of the

unsold as at 31 December 20x3.
to WALL for $64,000. Accumulated
e at date of original purchase was ten
gnized a full year's depreciation on the

LL for $180,000. WALL resold 40% of

 ear ended 31 December 20x3.
LL as at 31 December 20x3.
year ended 31 December 20x3.
re with the amounts in your consolidation