See Guidelines and Rubric. Excel spreadsheet Consolidation Entries and Consolidation Tabs has some errors that are identified by Red Highlight that needs to be corrected. Also, a 1 page memo, see guidelines, highlighted portion, for details on the memo.
ACC 405 Final Project One Scenario Posey Company Overview You are a financial accountant for Posey Company tasked with preparing consolidation documentation at year end. You have the following information: December 31, 20X5 Posey Company acquired 90% of Stargell Corporation’s outstanding common stock for $1,116,900. On that date: The fair value of the noncontrolling interest was $124,100; Stargell reported common stock outstanding of $487,000, premium on common stock of $267,000, and retained earnings of $407,000; the book values and fair values of Stargell’s assets and liabilities were equal except for land, which was worth $30,000 more than its book value. On April 1, 20X6 Posey issued at par $200,000 of 10% bonds directly to Stargell; interest on the bonds is payable March 31 and September 30. On January 2, 20X7 Posey purchased all of Stargell’s outstanding 10-year, 12% bonds from an unrelated institutional investor at 98. The bonds originally had been issued on January 2, 20X1, for 101. Interest on the bonds is payable December 31 and June 30. Since the date it was acquired by Posey Stargell has sold inventory to Posey on a regular basis. The amount of such intercompany sales totaled $67,000 in 20X6 and $83,000 in 20X7, including a 30% gross profit. All inventory transferred in 20X6 had been resold by December 31, 20X6, except inventory for which Posey had paid $18,000 and did not resell until January 20X7. All inventory transferred in 20X7 had been resold at December 31, 20X7, except merchandise for which Posey had paid $16,667. As of December 31, 20X7 Stargell had declared but not yet paid its fourth-quarter dividend of $12,750. Both Posey and Stargell use straight-line depreciation and amortization, including the amortization of bond discount and premium. On December 31, 20X7, Posey’s management reviewed the amount attributed to goodwill as a result of its purchase of Stargell common stock and concluded that an impairment loss in the amount of $25,000 had occurred during 20X7 and should be shared proportionately between the controlling and noncontrolling interests. Posey uses the fully adjusted equity method to account for its investment in Stargell. On December 31, 20X7, trial balances for Posey and Stargell appeared as follows: Posey Company Stargell Corporation Item Debit Credit Debit Credit Cash $ 49,500 $ 39,000 Current Receivables 121,500 90,100 Inventory 317,000 364,900 Investment in Stargell Stock 1,243,800 Investment in Stargell Bonds 985,000 Investment in Posey Bonds 200,000 Land 1,241,000 518,000 Buildings and Equipment 2,940,000 1,915,000 Cost of Goods Sold 1,829,000 426,000 Depreciation & Amortization 184,000 65,000 Other Expenses 632,000 206,000 Dividends Declared 61,000 51,000 Accumulated Depreciation $ 1,050,000 $ 597,000 Current Payables 699,190 213,000 Bonds Payable 200,000 1,000,000 Premium on Bonds Payable 3,000 Common Stock 910,000 487,000 Premium on Common Stock 610,000 267,000 Retained Earnings, January 1 2,848,950 457,000 Sales 3,010,000 801,000 Other Income 143,000 50,000 Income from Stargell Corp. 132,660 Total $ 9,603,800 $ 9,603,800 $ 3,875,000 $ 3,875,000 ACC 405 Final Project One Student Workbook Instructions Southern New Hampshire University ACC 405: Advanced Accounting MILESTONE ONE (Due in Module Four)FINAL PROJECT ONE (Due in Module Six) Make corrections to Milestone One 1Prepare memo Calculate goodwill Calculate investment balance Calculate income assigned to the noncontrolling interest Calculate noncontrolling interest Calculate the gain or loss on retirement of bonds 2 Create consolidation entries 3 Prepare consolidation worksheet Consolidating Entries /xl/drawings/drawing1.xml#'Consolidation%20Entries'!A1Instructions Milestone One /xl/drawings/drawing1.xml#'Instructions%20-%20Milestone%201'!A1Instructions Final Project /xl/drawings/drawing1.xml#'Instructions%20-%20final'!A1Supporting Calculations /xl/drawings/drawing1.xml#'Supporting%20Calculations'!A1Consolidation Worksheet /xl/drawings/drawing1.xml#'Consolidation%20Worksheet'!A1 Instructions - Milestone One Southern New Hampshire University ACC 405 Advanced Accounting INSTRUCTIONS FOR MILESTONE ONE (Due in Module Four) IMPORTANT NOTE: Make sure to completely review the rubric for Milestone One You might want to print out the financial information Show your work Use the data from this milestone and begin working on your final project due in Module Six ITEMS TO COMPLETE FOR THIS MILESTONE: GENERAL You are the accountant for Posey Company. Prepare computations, consolidation entries, and consolidation entries for the preparation of consolidated financial statements for 20X7. Show your calculations. SUPPORTING COMPUTATIONS a. Compute the amount of the goodwill as of January 1, 20X7. b. Compute the balance of Posey’s Investment in Stargell Stock account as of January 1, 20X7. (Do not round your intermediate calculations. Round your final answer to nearest whole dollar.) c. Compute the income that should be assigned to the noncontrolling interest in the 20X7 consolidated income statement. (Do not round your intermediate calculations. Round your final answer to nearest whole dollar.) d. Compute the total noncontrolling interest as of December 31, 20X6. (Do not round your intermediate calculations. Round your final answer to nearest whole dollar.) e. Compute the gain or loss on the constructive retirement of Stargell’s bonds that should appear in the 20X7 consolidated income statement. (Do not round your intermediate calculations. Round your final answer to nearest whole dollar.) f. Present all consolidation entries that would appear in a three-part consolidation worksheet as of December 31, 20X7. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round your intermediate calculations. Round your final answers to nearest whole dollar.) g. Prepare and complete a three-part worksheet for the preparation of consolidated financial statements for 20X7. (Values in the first two columns (the "parent" and "subsidiary" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Consolidation Entries" columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.) FINANCIAL INFORMATION FOR THIS MILESTONE Refer to Trial Balance 2017 information (red tab) Posey Manufacturing Company acquired 90% of Stargell Corporation’s outstanding common stock on December 31, 20X5, for $1,116,900. At that date, the fair value of the noncontrolling interest was $124,100, and Stargell reported common stock outstanding of $487,000, premium on common stock of $267,000, and retained earnings of $407,000. The book values and fair values of Stargell’s assets and liabilities were equal except for land, which was worth $30,000 more than its book value. On April 1, 20X6, Posey issued at par $200,000 of 10% bonds directly to Stargell; interest on the bonds is payable March 31 and September 30. On January 2, 20X7, Posey purchased all of Stargell’s outstanding 10-year, 12% bonds from an unrelated institutional investor at 98. The bonds originally had been issued on January 2, 20X1, for