Consolidated Workpaper (Intercompany sales of inventory, plant assets) (100 Points)
On October 2, 2021, Monian Corporation acquired 90 percent of Mathilda Company’s outstanding common stock. In exchange for Mathilda’s stock, Monian issued bonds payable with a par value of 720,000 and fair value of $750,000 directly to the selling stockholders of Mathilda. At that date, the fair value of the noncontrolling interest was $150,000. The two companies continued to operate as separate entities subsequent to the combination.
Immediately prior to the combination, the book values and fair values of the companies’ assets
and liabilities were as follows:
Monian
Mathilda
|
BookValue
|
FairValue
|
|
BookValue
|
FairValue
|
Cash
|
$ 120,000
|
$ 120,000
|
|
$ 90,000
|
$ 90,000
|
Receivables
|
410,000
|
390,000
|
|
310,000
|
300,000
|
AllowanceforBadDebts
|
(20,000)
|
|
|
(10,000)
|
|
Inventory
|
860,000
|
890,000
|
|
680,000
|
720,000
|
Land
|
550,000
|
2,000,000
|
|
500,000
|
700,000
|
Buildings&Equipment
|
9,600,000
|
6,500,000
|
|
6,700,000
|
5,000,000
|
Accumulated Depreciation
|
(4,110,000)
|
|
|
(2,200,000)
|
|
Patent
|
|
|
|
|
400,000
|
MonianAssets
|
$7410,000
|
$9,900,000
|
|
$6,070,000
|
$7,210,000
|
CurrentPayables
|
$ 380,000
|
$ 380,000
|
|
$ 290,000
|
$ 290,000
|
BondsPayable
|
2,000,000
|
2,100,000
|
|
1,000,000
|
1,000,000
|
CommonStock
|
3,000,000
|
|
|
2,000,000
|
|
AdditionalPaid-inCapital
|
1,000,000
|
|
|
1,300,000
|
|
RetainedEarnings
|
1,030,000
|
|
|
1,480,000
|
|
MonianLiabilities&Equity
|
$,7410,000
|
|
|
$6,070,000
|
|
|
At the date of combination, Mathilda owed Monian $6,000 plus accrued interest of $500 on a short- term note. Both companies have properly recorded these amounts.
There is following month transaction are as follow:
October 5 Mathilda purchase inventory from Flames Inc. for $ 15,000 to fulfill Monian needs.
October 8 Monian purchase that item for $ 25,000
October 10 Monian sells equipment to Mathilda which has been bought in October 10, 2019 for $ 10,000 that projected to be used for 4 years. Monian sells the equipment for $ 6,000
October 20 Max sells the only land to Monian for $65,000
October 31 Below is the income statement for Mathilda dan Monian
Monian Mathilda
Sales 700.000 550.000
COGS (220.000) (180.000)
Depreciation Expense (125.000) (90.000)
Other Expenses (225.000) (125.000)
October 31 Monian paid dividen for $ 60.000 and Max paid dividen for $ 45.000
Required
a.
Record the business combination on the books of Monian Corporation!
b.
Present in general journal form all elimination entries needed in a worksheet to prepare a con- solidated balance sheet immediately following the business combination on October 2, 2021.
c.
Prepare and complete a consolidated balance sheet worksheet as of October 2, 2021, immediately following the business combination.
d.
Present a consolidated balance sheet for Monian and its subsidiary as of October 2, 2021.