Reference no: EM131797877
Problem - On December 31, 2002, Podil Corp. purchased 75% of the common stock of Sumy Co. for $2,317,500. On that date, the fair value of the noncontrolling interest was $772,500, and Sumy had common stock with a par value of $800,000, APIC of $1,550,000, and retained earnings of $620,000. Podil has used the fully adjusted equity method in accounting for its investment in Sumy.
1. On the date of acquisition, Sumy's land had a fair value that was $56,000 more than the book value and the rest of the differential was attributable to goodwill.
2. In June and July 2009 Podil sold inventory to Sumy for $50,000, all of which was sold to a third party by Sumy in September and October 2009. The inventory had cost Podil $30,000 to produce.
3. Podil provided consulting services to Sumy. In 2009 Podil booked $80,000 of these services to Sumy. As of December 31, 2009 Sumy had paid $60,000 for these services.
4. On December 31, 2003 Podil sold a parcel of land to Sumy for $100,000. Podil had purchased this property two years earlier for $77,000. Sumy still holds the deed to the land.
5. On January 1, 2009 Podil paid $250,000 to Sumy for equipment that Sumy had purchased on December 31, 2003 for $435,000. The equipment has no salvage value and was expected to have a useful life of 15 years from the time of purchase on December 31, 2003.
Trial balances for the two companies on December 31, 2009, are as follows:
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Podil Corporation
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Sumy Company
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Debits
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Credits
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Debits
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Credits
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Cash
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40,700
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40,000
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Receivables
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91,800
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87,400
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Note recevable
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26,000
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Inventory
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280,000
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218,900
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Land
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500,000
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1,200,000
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Bldg & Equip.
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2,300,000
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2,990,000
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Investment in Sumy
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2,974,000
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Cost of Goods Sold
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2,193,000
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530,000
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Other Operating Expenses
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1,300,000
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212,000
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Deprec.& Amort. Expense
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202,000
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88,000
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Interest Expense
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70,000
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15,000
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Miscellaneous Expenses
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11,000
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35,000
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Dividends Declared
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50,000
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20,000
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Acc. Deprec.
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1,105,000
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420,000
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Accounts Payable
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66,200
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76,300
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Note Payable
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1,020,000
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200,000
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Common Stock
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300,000
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800,000
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APIC
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1,072,000
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1,550,000
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RE
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1,474,800
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1,400,000
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Sales
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4,891,000
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990,000
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Income from Sub
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109,500
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$10,038,500
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$10,038,500
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$5,436,300
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$5,436,300
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Required:
a. Give the journal entries that Podil recorded during 2009 related to its investment in Sumy.
b. Give all eliminating entries needed to prepare consolidated statements for 2009.
c. Prepare a three-part worksheet as of December 31, 2009.
d. Prepare a consolidated balance sheet, income statement, and retained earnings statement for 2009.
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