Week 3 – Assignment Comprehensive Problem: Differential Apportionment
Mortar Corporation acquired 80 percent ownership of Granite Company on January 1, 20×7, for $173,000. At that date, the fair value of the non-controlling interest was $43,250. The trial balances for two companies on December 31, 20×7, included the following amounts:
Mortar corporation Granite Company
Item Debit Credit Debit Credit
Cash 38,000 25,000
Accounts Receivable 50,000 55,000
Inventory 240,000 100,000
Land 80,000 20,000
buildings & Equipment 500,000 150,000
Investment in Granite Company Stock 202,000
cost of Goods Sold 500,000 250,000
Depreciation Expense 25,000 15,000
other expenses 75,000 75,000
Dividends declared 50,000 20,000
Accumulated Depreciation 155,000 75,000
Accounts Payable 70,000 35,000
Mortgages Payable 200,000 50,000
Common Stock 300,000 50,000
Retained Earnings 290,000 100,000
Sales 700,000 400,000
Income for Subsidiary 45,000
1,760,000 1,760,000 710,000 710,000
1. On January 1, 20×7, Granite reported net assets with a book value of $150,000 and a fair value of $191,250.
2. Granite’s depreciable assets had an estimated economic life of 11 years on the date of combination. The difference between fair value and book value of Granite’s net assets is related entirely to buildings and equipment.
3. Mortar used the equity method in accounting for its investment in Granite.
4. Detailed analysis of receivables and payables showed that Granite owed Mortar ,000 on December 31,20×7.
5. Assume that any goodwill impairment should be recorded as an adjustment in Mortar’s equity method accounts along with the amortization of other differential components.
Give all journal entries recorded by Mortar with regard to its investment in Granite during 20×7. Give all eliminating entries needed to prepare a full set of consolidated financial statements for 20×7. Prepare a three- part consolidation worksheet as of December 31,20×7.
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