80%, cost method, straight-line bonds, fixed asset sale. On January 1, 2013, Appliance Outlets had the following balances in its stockholders’ equity accounts: Common Stock ($10 par), $800,000; Paid-In Capital in Excess of Par, $625,000; and Retained Earnings, $450,000. General Appliances acquired 64,000 shares of Appliance Outlets’ common stock for $1,700,000 on that date. Any excess of cost over book value was attributed to goodwill.
Appliance Outlets issued $500,000 of 8-year, 11% bonds on December 31, 2012. The bonds sold for $476,000. General Appliances purchased one-half of these bonds in the market on January 1, 2015, for $256,000. Both companies use the straight-line method of amortization of premiums and discounts.
On July 1, 2016, General Appliances sold to Appliance Outlets an old building with a book value of $167,500, remaining life of 10 years, and $30,000 salvage value, for $195,000. The building is being depreciated on a straight-line basis. Appliance Outlets paid $20,000 in cash and signed a mortgage note with its parent for the balance. Interest, at 11% of the unpaid balance, and principal payments are due annually beginning July 1, 2017. (For convenience, the mortgage balances are not divided into current and long-term portions.)
The trial balances of the two companies at December 31, 2016, were as follows:
Prepare the worksheet necessary to produce the consolidated financial statements of General Appliances and its subsidiary for the year ended December 31, 2016. Include the determination and distribution of excess and income distribution schedules.