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Comprehensive Problem Differential Apportionment in Subsequent Period This problem is a continuation of P5-35 Mortar Corporation acquired 80 percent ownership of Granite Company on January

Comprehensive Problem Differential Apportionment in Subsequent Period This problem is a continuation of P5-35 Mortar Corporation acquired 80 percent ownership of Granite Company on January

Comprehensive Problem: Differential Apportionment in Subsequent Period

This problem is a continuation of P5-35. Mortar Corporation acquired 80 percent ownership of Granite Company on January 1, 20X7, for $173,000. At that date, the fair value of the noncontrolling interest was $43,250. The trial balances for the two companies on December 31, 20X8, included the following amounts:

 

Mortar Corporation

Granite Company

Item

Debit

Credit

Debit

Credit

Cash

$ 68,500

 

$ 31,000

 

Accounts Receivable

85,000

 

71,000

 

Inventory

97,000

 

118,000

 

Land

50,000

 

30,000

 

Buildings & Equipment

350,000

 

150,000

 

Investment in Granite Company Stock

106,875

 

 

 

Cost of Goods Sold

145,000

 

310,000

 

Depreciation Expense

35,000

 

15,000

 

Other Expenses

25,000

 

100,000

 

Dividends Declared

12,000

 

25,000

 

Accumulated Depreciation

23,000

$ 180,000

$ 90,000

Accounts Payable

30,000

86,000

 

30,000

Mortgages Payable

 

200,000

 

70,000

Common Stock

 

300,000

 

50,000

Retained Earnings

 

385,000

 

140,000

Sales

 

650,000

 

470,000

Income from Subsidiary

 

24,200

 

 

 

$1,825,200

$1,825,200

$850,000

$850,000

Additional Information

1. On January 1, 20X7, Granite reported net assets with a book value of $150,000 and a fair value of $191,250. The difference between fair value and book value of Granite’s net assets is related entirely to Buildings and Equipment. Granite’s depreciable assets had an estimated economic life of 11 years on the date of combination.

2. At December 31, 20X8, Mortar’s management reviewed the amount attributed to goodwill and concluded goodwill was impaired and should be reduced to $14,000. Goodwill and goodwill impairment were assigned proportionately to the controlling and noncontrolling shareholders.

3. Mortar used the equity method in accounting for its investment in Granite.

4. Detailed analysis of receivables and payables showed that Mortar owed Granite $9,000 on December 31, 20X8.

Required

a. Give all journal entries recorded by Mortar with regard to its investment in Granite during 20X8.

b. Give all elimination entries needed to prepare a full set of consolidated financial statements for 20X8.

c. Prepare a three-part consolidation worksheet as of December 31, 20X8.

Tripti 09-Jul-2020

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