Record equity method 400 000 250 000 15 000 75 000 x 80 48 000 P 5 38 A Record purchase Granite Company Investment in Granite Company 173 000 Cash 173 000 Record dividend declared 20 000 x80 16 000 Cash 16 000 Investment in Granite company 16 000 Investment in Granite Company stock 48 000 Income from subsidiary 48 000 Amortize differential 191 250 150 000 x 80 11 3 000 Income from subsidiary 48 000 45 000 3 000 Income from subsidiary 3 000 Investment in Granite Company stock 3 000 B Eliminate Income from Subsidiary Income from subsidiary 45 000 Dividends Declared Investments in Granite Stock 16 000 29 000 4 000 7 250 Income to Non controlling interest 60 000 41 250 11 x20 11 250 Income to Non controlling interest 11 250 Dividends declared Non controlling interest Eliminate Beginning investment Balance 173 000 43 250 150 000 66 250 Common stock Granite Co 50 000 Retained Earnings beginning 100 000 Differential 66 250 Investment in Granite Common Stock 173 000 Non controlling interest 43 250 Beginning differential 191 250 150 000 41 250 66 250 41 250 25 000 Goodwill 25 000 Building Equipment 41 250 Differential 66 250 Depreciable assets 41 250 11 3 750 Depreciation Expense 3 750 Accumulated Depreciation 3 750 Eliminate interoperate Accounts payable 16 000 Account receivable 16 000 C Mortar Corporation and Granite Company Consolidation Worksheet December 31 20X7 Elimination Entries DR CR Consolidate d Income Statement Sales Less COGS Less Depreciation Expense Less Other Expenses Income from Granite Co Consolidated Net Income NCI in Net Income Mortar Corp Granite Co 700 000 400 000 500 000 250 000 25 000 75 000 45 000 15 000 75 000 3 750 145 000 60 000 48 750 45 000 11 250 Controlling Interest in Net Income 145 000 60 000 60 000 Statement of Retained Earnings Beginning Balance Net Income 290 000 100 000 145 000 60 000 60 000 Less Dividends Declared 50 000 20 000 20 000 1 100 000 750 000 43 750 150 000 0 156 250 11 250 145 000 290 000 145 000 50 000 63 000 89 000 340 000 100 000 691 250 233 750 0 25 000 89 000 250 000 300 000 385 000 50 500 0 0 0 16 000 3 750 202 00 0 221 75 0 20 000 50 500 100 00 0 160 00 0 25 000 50 000 160 00 0 226 00 0 385 000 140 000 20 000 385 000 38 000 50 000 25 000 55 000 240 000 100 000 80 000 20 000 955 000 275 000 66 250 1 074 500 70 000 35 000 16 000 200 000 300 000 50 000 50 000 385 000 140 000 Ending Balance Balance Sheet Cash Accounts Receivable Inventory Land Goodwill Total Assets Accounts Payable Mortgage Payable Common Stock Retained Earnings NCI in NA of Granite Co Buildings Equipment 500 000 150 000 41 250 Less Accumulated Depreciation 155 000 75 000 Investment in Granite Co 202 000 Total Liabilities Equity 955 000 275 000 70 500 1 074 500 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 non controlling interest was 43 250 The trial balances for two companies on December 31 20x7 included the following amounts Mortar corporation Debit Credit 38 000 50 000 240 000 80 000 500 000 202 000 500 000 25 000 75 000 50 000 155 000 70 000 200 000 300 000 290 000 Credit Granite Company Debit 25 000 55 000 100 00 0 20 000 150 00 0 250 00 0 15 000 75 000 20 000 75 000 35 000 50 000 50 000 100 00 0 400 00 0 700 000 45 000 1 760 00 0 1 760 00 0 710 00 0 710 00 0 Item Cash Accounts Receivable Inventory Land buildings Equipment Investment in Granite Company Stock cost of Goods Sold Depreciation Expense other expenses Dividends declared Accumulated Depreciation Accounts Payable Mortgages Payable Common Stock Retained Earnings Sales Income for Subsidiary Additional information value of 191 250 1 On January 1 20x7 Granite reported net assets with a book value of 150 000 and a fair 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