On April 1 2015 Benton Corporation purchased 80 of the outst

On April 1, 2015, Benton Corporation purchased 80% of the outstanding stock of Crandel Company for $425,000. A condensed balance sheet of Crandel Company at the purchase date is shown below.

Problem 4-2 (LO2) 80%, cost, beginning and ending inventory. On April 1, 2015. Benton Corporation purchased 80% of the outstanding stock of for $425,000. A condensed balance sheet of Cra del Company at the purchase date is shown below Company Assets Liabilities and Eq $180,000 Liabilities.. Current assets Long-lived assets (net) ....-.$100,000 200,000 Paid-in capital in excess of par 100,000 Retained earnings.. 100,000 Total liabilities and equity $500,000 Total assets. $500,000 All book values approximated fair values on the purchase date. Any excess cost was attribu- ted to goodwill. The following information was gathered pertaining to the first two years of operation since Benton\'s purchase of Crandel Company stock: a. Intercompany merchandise sales were summarized as follows: Remaining in Purchaser\'s Transaction Benton to Crandel Crandel to Benton Benton to Crandel Crandel to Benton Sales Gross Profit Ending Inventory $40,000 20,000 32,000 30,000 Date $9,000 4,000 6,000 3,000 April 1, 2015 to March 31, 2016 April 1, 2016 to 20% 25 20 25 March 31, 2017 b. On March 31, 2017, Benton owed Crandel $10,000, and Crandel owed Benton $5,000 as a result of the intercompany sales.

Solution

Answer: Working Sheet for Consolidated Financial Statement 1 Share of Holding Pattern: Total outstanding stock purchased by Benton Corporation = 80%. The Minority Interest = (100-80)% = 20%. 2 Analysis of Profit and Loss: Particulars Pre Acqusition Post Acquisition Total Paid in capital excess of par        1,00,000.00                               -   1,00,000.00 Retained Earnings        1,00,000.00               40,000.00 1,40,000.00        2,00,000.00               40,000.00 2,40,000.00 Less: Unrealised Profit                -1,000.00       -1,000.00 (4000*25%) Less: Unrealised Profit                    -750.00          -750.00 (3000*25%)        2,00,000.00               38,250.00 2,38,250.00 Share of Benton        1,60,000.00               30,600.00 Share of Minority            40,000.00                  7,650.00 3 Cost of Control: Particulars Amount($) Investment        4,25,000.00 Less: Face value of common stock        1,60,000.00 Less: Preacqusistion Profit        1,60,000.00 Goodwill        1,05,000.00 4 Minority Interest Particulars Amount($) Face Value of common stock            40,000.00 Add: Preacquisition Profit            40,000.00 Add: Post Acquisition Profit              7,650.00            87,650.00 5 Combine Profit and Loss account: Particulars Amount($) Retained Earnings      11,05,000.00 Less: Unrealised Profit on March 2016            18,000.00 (9000*20%) Less: Unrealised Profit on March 2017            12,000.00 (6000*20%)      10,75,000.00