Question

Following are the individual financial statements for Gibson and Davis for the year ending December 31, 2021: Sales Cost of goods sold Operating expenses Dividend income Net income Retained earnings, 1/1/21 Net income Dividends declared Retained earnings, 12/31/21 Cash and receivables Inventory Investment in Davis Buildings (net) Equipment (net) Total assets Liabilities Common stock Retained earnings, 12/31/21 Total liabilities and stockholders' equity Gibson $ (666,000) 308,000 181,000 (18,000) $ (195,000) $ (760,000) (195,000) 70,000 $ (885,000) $ 306,200 512,000 583,800 545,000 455,000 $ 2,402,000 $ (887,000) (630,000) (885,000) Davis $ (398,000) 177,000 61,000 0 $ (160,000) $ (415,000) (160,000) 30,000 $ (545,000) $ 148,000 113,000 0 632,000 496,000 $ 1,389,000 $ (504,000) (340,000) (545,000) $ (2,402,000) $(1,389,000) Gibson acquired 60 percent of Davis on April 1, 2021, for $583,800. On that date, equipment owned by Davis (with a five-year remaining life) was overvalued by $60,000. Also on that date, the fair value of the 40 percent noncontrolling interest was $389,200. Davis earned income evenly during the year but declared the $40,000 dividend on November 1, 2021. a. Prepare a consolidated income statement for the year ending December 31, 2021. b. Determine the consolidated balance for each of the following accounts as of December 31, 2021: Goodwill Equipment (net) Common stock Buildings (net)

Answer 1

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