Mill Corporation acquired 100 percent ownership of Roller Co

Mill Corporation acquired 100 percent ownership of Roller Company on January 1, 20X8, for $125,000. At that date, the fair value of Roller’s buildings and equipment was $19,000 more than the book value. Buildings and equipment are depreciated on a 5-year basis. Although goodwill is not amortized, Mill’s management concluded at December 31, 20X8, that goodwill involved in its acquisition of Roller shares had been impaired and the correct carrying value was $2,600.

Prepare the following consolidating entries needed to prepare a three-part consolidation worksheet as of December 31, 20X8. (If no entry is required for a transaction/event, select \"No journal entry required\" in the first account field.)

Trial balance data for Mill and Roller on December 31, 20X8, are as follows:

Solution

a) Preparing all consolidating entries needed to prepare a three-part consolidation worksheet as of December 31, 20X8: General Journal Debit Credit Equity Method Entries on Mill Corp.\'s Books: Investment in Roller Co. ($183000-$152000) $31,000 Income from Roller Co $31,000 Record Mill Corp.\'s 100% share of Roller Co.\'s 20X8 income Cash $21,300 Investment in Roller Co. $21,300 Record Mill Corp.\'s 100% share of Roller Co.\'s 20X9 dividend Income from Roller Co. $2,000 Investment in Roller Co. $2,000 Record amortization of excess acquisition price Book Value Calculations: Total Book Value = Common Stock + Retained Earnings Original book value $98,000 $59,000 $39,000 + Net Income $31,000 $31,000 - Dividends ($21,300) ($21,300) Ending book value $107,700 $59,000 $48,700 Basic elimination entry: General Journal Debit Credit Common stock $59,000 Retained earnings $39,000 Income from Roller Co. $31,000 Dividends declared $21,300 Investment in Roller Co. $107,700 Excess Value (Differential) Calculations: Total = Buildings & Equipment Acc. Depr. Goodwill Beginning balance $17,800 $19,000 ($3,800) $2,600 Changes ($3,800) ($3,800) Ending balance $14,000 $19,000 ($7,600) $2,600 Amortized excess value reclassification entry: General Journal Debit Credit Depreciation expense $3,800 Income from Roller Co. $3,800 Excess Value (differential) reclassification entry: General Journal Debit Credit Buildings & Equipment $19,000 Goodwill $2,600 Accumulated depreciation $7,600 Investment in Roller Co. $14,000 Optional accumulated depreciation elimination entry: General Journal Debit Credit Accumulated depreciation Nil Building & equipment Nil