On January 1, 20x1, Peanut acquired 80% of Salt for $ 200,000. On this
date, Salt had owners’ equity of $ 200,000 (including Retained earnings
of $ 100,000). Any excess cost over book value is attributable to
inventory (worth $ 12,500 over book value) equipment (worth $ 25,000
over book value, with a remaining life of 4 years) and to goodwill.
On January 1, 20x2, Peanut held merchandise acquired from Salt for $
20,000. During 20x2, Salt sold merchandise to Peanut for $ 40,000, $
10,000 of which is still held by Peanut on December 31, 20x2. Salt’s
usual gross profit is 50%
On January 1, 20x1, Peanut sold equipment to Salt at a gain of $
15,000. Depreciation is computed using the straight line method over 5
years.
This is the trial balance for the two companies on December 31, 20x2
Peanut Salt
Inventory 130,000 50,000
Other Current Assets 241,000 235,000
Investment in Salt 200,000
Other Investments 20,000
Land 140,000 80,000
Bldg and Equip (net) 255,000 170,000
Other intangible assets 20,000
Current Liabilities 150,000 70,000
Bonds Payable 100,000
Other Long term Liabilities 200,000 50,000
Common Stock 200,000 50,000
APIC 100,000 50,000
RE (1/1) 280,000 150,000
Sales 600,000 315,000
COGS 350,000 150,000
Operating expenses 150,000 60,000
Income from Salt 16,000
Dividends declared 60,000 20,000
Provide consolidated financial statements for 20x2.
Click here for the solution: On January 1, 20x1, Peanut acquired 80% of Salt for $ 200,000
