Consolidation Worksheet with Differential
Kennelly Corporation acquired all of Short Company’s common shares on January 1, 20X5, for $180,000. On that date, the book value of the net assets reported by Short was $150,000. The entire differential was assigned to depreciable assets with a six-year remaining economic life from January 1, 20X5. The adjusted trial balances for the two companies on December 31, 20X5, are as follows:
Kennelly Corporation
Short Company
Item
Debit
Credit
Cash
$ 15,000
$ 5,000
Accounts Receivable
30,000
40,000
Inventory
70,000
60,000
Depreciable Assets (net)
325,000
225,000
Investment in Short Company Stock
195,000
Depreciation Expense
25,000
15,000
Other Expenses
105,000
75,000
Dividends Declared
10,000
Accounts Payable
$ 50,000
$ 40,000
Notes Payable
100,000
120,000
Common Stock
200,000
Retained Earnings
230,000
50,000
Sales
Income from Subsidiary
$805,000
$430,000
Kennelly uses the equity method in accounting for its investment in Short. Short declared and paid dividends on December 31, 20X5.
Required
a. Prepare the elimination entries needed as of December 31, 20X5, to complete a consolidation worksheet.
b. Prepare a three-part consolidation worksheet as of December 31, 20X5.
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