Reference no: EM131324620

Comprehensive Problem: Differential Apportionment

Mortar Corporation acquired 80 percent ownership of Granite Company on January 1, 20x7, for $173,000. At that date, the fair value of the non-controlling interest was $43,250. The trial balances for two companies on December 31, 20x7, included the following amounts:

	Mortar corporation		Granite Company
Item	Debit	Credit	Debit	Credit
Cash	38,000		25,000
Accounts Receivable	50,000		55,000
Inventory	240,000		100,000
Land	80,000		20,000
buildings & Equipment	500,000		150,000
Investment in Granite Company Stock	202,000
cost of Goods Sold	500,000		250,000
Depreciation Expense	25,000		15,000
other expenses	75,000		75,000
Dividends declared	50,000		20,000
Accumulated Depreciation		155,000		75,000
Accounts Payable		70,000		35,000
Mortgages Payable		200,000		50,000
Common Stock		300,000		50,000
Retained Earnings		290,000		100,000
Sales		700,000		400,000
Income for Subsidiary		45,000
	1,760,000	1,760,000	710,000	710,000

Additional information

1. On January 1, 20x7, Granite reported net assets with a book value of $150,000 and a fair value of $191,250.

2. Granite's depreciable assets had an estimated economic life of 11 years on the date of combination. The difference between fair value and book value of Granite's net assets is related entirely to buildings and equipment.

3. Mortar used the equity method in accounting for its investment in Granite.

4. Detailed analysis of receivables and payables showed that Granite owed Mortar $16,000 on December 31,20x7.

5. Assume that any goodwill impairment should be recorded as an adjustment in Mortar's equity method accounts along with the amortization of other differential components.

Required

Give all journal entries recorded by Mortar with regard to its investment in Granite during 20x7. Give all eliminating entries needed to prepare a full set of consolidated financial statements for 20x7. Prepare a three- part consolidation worksheet as of December 31,20x7.