Question: Powder Corporation acquired 70 percent of Solid
Powder Corporation acquired 70 percent of Solid Company’s stock on December 31, 20X7, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 30 percent of Solid Company’s book value. The two companies’ balance sheets on December 31, 20X9, are as follows:
On December 31, 20X9, Powder holds inventory purchased from Solid for $70,000. Solid’s cost of producing the merchandise was $50,000. Solid also had purchased inventory from Powder. Solid’s ending inventory contains $85,000 of purchases that had cost Powder $60,000 to produce.
On December 30, 20X9, Solid sells equipment to Powder for $90,000. Solid had purchased the equipment for $120,000 several years earlier. At the time of sale to Powder, the equipment had a book value of $40,000. The two companies file separate tax returns and are subject to a 40 percent tax rate. Powder does not record tax expense on its share of Solid’s undistributed earnings.
Required:
a. Complete a consolidated balance sheet worksheet as of December 31, 20X9.
b. Prepare a consolidated balance sheet as of December 31, 20X9.
Transcribed Image Text:
POWDER CORPORATION AND SOLID COMPANY Balance Sheets December 31, 20X9 Powder Solid Corporation Company Cash $ 44,400 $ 20,000 Accounts Receivable 120,000 60,000 Inventory 170,000 120,000 Land 90,000 30,000 Buildings & Equipment 500,000 300,000 Less: Accumulated Depreciation (180,000) (80,000) Investment in Solid Company Stock 235,600 Total Assets $980,000 $450,000 Accounts Payable $ 70,000 $ 20,000 Wages Payable 80,000 30,000 Bonds Payable 200,000 Common Stock 100,000 150,000 Retained Earnings 530,000 250,000 Total Liabilities & Equity $980,000 $450,000
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