P5-38) 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 noncontrolling interest was $43,250.
The trial balances for the two companies on December 31, 20X7, included
the following amounts:

Item

Mortar Corporation

Granite Company

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 Expenses

$25,000

$20,000

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
from Subsidiary

$45,000

$1,760,0000

$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) Granites depreciable assets had an estimated
economic life of 11 years on the date of combination. The difference between fair value and book
value of granites 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 Mortars equity method accounts along with the
amortization of other differential components.

REQUIRED
a. Give all journal
entries recorded by Mortar with regard to its investment in Granite during
20X7.
b. Give all eliminating
entries needed to prepare a full set of consolidated financial statements for
20X7.
c. Prepare a three-part consolidation worksheet as of December
31, 20X7.P5-38) Comprehensive Problem: Differential
ApportionmentMortar Corporation
acquired 80 percent ownership of Granite Company on January 1, 20X7, for
$173,000. At that date, the fair value
of the noncontrolling interest was $43,250.
The trial balances for the two companies on December 31, 20X7, included
the following amounts:ItemMortar CorporationGranite CompanyDebitCreditDebitCreditCash$38,000$25,000Accounts Receivable$50,000$55,000Inventory$240,000$100,000Land$80,000$20,000Buildings & Equipment$500,000$150,000Investment in Granite Company Stock$202,000Cost of Goods Sold$500,000$250,000Depreciation Expenses$25,000$20,000Other Expenses$75,000$75,000Dividends 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
from Subsidiary$45,000$1,760,0000$1,760,000$710,000$710,000Additional Information1) On January 1, 20X7,
Granite reported net assets with a book value of $150,000 and a fair value of
$191,250.2) Granites depreciable assets had an estimated
economic life of 11 years on the date of combination. The difference between fair value and book
value of granites 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 Mortars equity method accounts along with the
amortization of other differential components.REQUIREDa. Give all journal
entries recorded by Mortar with regard to its investment in Granite during
20X7.b. Give all eliminating
entries needed to prepare a full set of consolidated financial statements for
20X7.c. Prepare a three-part consolidation worksheet as of December
31, 20X7.