80%, equity, excess distributions, merchandise, equipment sales. On January 1, 2015, Peanut Company acquired 80% of the common stock of Salt Company for $200,000. On this date, Salt had total owners’ equity of $200,000 (including retained earnings of $100,000). During 2015 and 2016, Peanut appropriately accounted for its investment in Salt using the simple equity method. Any excess of cost over book value is attributable to inventory (worth $12,500 more than cost), to equipment (worth $25,000 more than book value), and to goodwill. FIFO is used for inventories. The equipment has a remaining life of four years, and straight-line depreciation is used. On January 1, 2016, Peanut held merchandise acquired from Salt for $20,000. During 2016, Salt sold merchandise to Peanut for $40,000, $10,000 of which was still held by Peanut on December 31, 2016. Salt’s usual gross profit is 50%.
On January 1, 2015, Peanut sold equipment to Salt at a gain of $15,000. Depreciation is being computed using the straight-line method, a 5-year life, and no salvage value.
The following trial balances were prepared for the Peanut and Salt companies for December 31, 2016:
Complete the worksheet for consolidated financial statements for the year ended December 31, 2016. Include the necessary determination and distribution of excess schedule and income e distribution schedules.