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consolidation worksheet 8212 year of retirement straight line method tyler manufactu 733586

Consolidation Worksheet—Year of Retirement (Straight Line Method)

Tyler Manufacturing purchased 60 percent of the ownership of Brown Corporation stock on January 1, 20X1, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 40 percent of the book value of Brown Corporation. Tyler also purchased $50,000 of Brown bonds at par value on December 31, 20X3. Brown sold the bonds on January 1, 20X1, at 120; they have a stated interest rate of 12 percent. Interest is paid semiannually on June 30 and December 31. Assume Tyler uses the fully adjusted equity method.

On December 31, 20X1, Brown sold a building with a remaining life of 15 years to Tyler for $30,000. Brown had purchased the building 10 years earlier for $40,000. It is being depreciated based on a 25 year expected life.

Trial balances for the two companies on December 31 20X3, are as follows:

Tyler Manufacturing

Brown Corporation

Item

Debit

Credit

Debit

Credit

Cash

$ 68,000

$ 55,000

Accounts Receivable

100,000

75,000

Inventory

120,000

110,000

Investment in Brown Bonds

50,000

Investment in Brown Stock

101,545

Depreciable Assets (net)

360,000

210,000

Interest Expense

20,000

20,000

Operating Expenses

302,200

150,000

Dividends Declared

40,000

10,000

Accounts Payable

$ 94,200

$ 52,000

Bonds Payable

200,000

200,000

Bond Premium

28,000

Common Stock

300,000

100,000

Retained Earnings

146,640

50,000

Sales

400,000

200,000

Income from Brown Corp.

22,440

Total

$1,163,280

$1,163,280

$630,000

$630,000

Required

a. Prepare a consolidation worksheet for 20X3 in good form.

b. Prepare a consolidated balance sheet, income statement, and statement of changes in retained earnings for 20X3.

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