Problem 16-5

P Company and Subsidiary S. Company

Consolidation Working Paper
Year Ended December 31, 2017
P Company S Company Eliminations Adjustments Consolidated
Debit Credit
Statement of CI
Sales 12,000,000 1,300,000 (5) 520,000 12,780,000
Dividend income 210,000 (1) 210,000 -
Total revenue 12,210,000 1,300,000 12,780,000
Cost of goods sold 7,000,000 750,000 (7) 66,000 (5) 520,000 7,296,000
Operating expenses 4,210,000 50,000 (4) 40,000 4,300,000
Total cost and expenses 11,210,000 800,000 11,596,000

CI to retained earnings 1,000,000 500,000 1,184,000

Statement of Retained
Earnings
Retained earnings, January 1 5,500,000 2,200,000 (2) 2,200,000 5,500,000
CI from above 1,000,000 500,000 1,184,000
Total 6,500,000 2,700,000 6,684,000
Dividends declared - 210,000 (1) 210,000 -
Retained earnings, 12/31 to BS 6,500,000 2,490,000 6,684,000

Statement of FP
Cash 810,000 170,000 980,000
Accounts receivable 425,000 445,000 (6) 25,000 845,000
Inventory 600,000 275,000 (7) 66,000 809,000
Property, plant and equipment 4,000,000 2,300,000 (3) 400,000 (4) 40,000 6,660,000
Investment in S Company 3,200,000 (2) 2,800,000
(3) 400,000

Total assets 9,035,000 3,190,000 9,294,000

Account payable 35,000 100,000 (6) 25,000 110,000

Common stock 1,000,000 400,000 (2) 400,000 1,000,000
Additional paid in capital 1,500,000 200,000 (2) 200,000 1,500,000
Retained earnings from above 6,500,000 2,490,000 6,684,000

Total liabilities and equity 9,035,000 3,190,000 4,061,000 4,061,000 9,294,000

Problem 16-5 Continued

Determination and Allocation of Excess Schedule

Price paid by the parent P 3,200,000

Less book value of interest acquired (100%)
Common stock – S Company P 400,000
Additional paid in capital – Company 200,000
Retained earnings, Jan 1 – S Company 2,200,000 2,800,000
Excess allocated to equipment P 400,000

Amortization (P400,000/10) P 40,000

s
Note: There is no NCI since this is a wholly-owned subsidiary

1,300,000 x 40%= 520,000

E(5)Sales 520,000
Cost of Goods Sold 520,000

E(7) Cost of Goods Sold 66,000

Inventory 66,000

520,000-300,000= 220,000x30%=66,000