Question

The following are selected accounts and balances for Mergaronite Company and Hill, Inc., as of December 31, 2021. Several of Mergaronite's accounts have been omitted. Credit balances are indicated by parentheses. Dividends were declared and paid in the same period. Revenues Cost of goods sold Depreciation expense Investment income Retained earnings, 1/1/21 Dividends declared Current assets Land Buildings (net) Equipment (net) Liabilities Common stock Additional paid-in capital Mergaranite Hill $ (620, eee) $ (254,000) 282,000 114,000 114, eee 60, eee NA NA (896, eee) (590,000) 136, eee 38,000 188,000 664, eee 298, eee 82,eee 520, eee 130, eee 192,000 254,00 (488,eee) (318,000) (304, eee) (38,000) (44, eee) (894, 000) Assume that Mergaronite acquired Hill on January 1, 2017, by Issuing 6,000 shares of common stock having a par value of $10 per share but a fair value of $100 each. On January 1, 2017, Hill's land was undervalued by $19,400, its buildings were overvalued by $29,600, and equipment was undervalued by $61,000. The buildings had a 10-year remaining life; the equipment had a 5-year remaining life. A customer list with an appraised value of $94,000 was developed Internally by Hill and was estimated to have a 20- year remaining useful life. a. Determine the December 31, 2021, consolidated totals for the following accounts: b. In requirement (a), can the consolidated totals be determined without knowing which method the parent used to account for the subsidiary? c. If the parent uses the equity method, what consolidation entries would be used on a 2021 worksheet? Complete this question by entering your answers in the tabs below. Required A Required B Required Determine the December 31, 2021, consolidated totals for the following accounts: (Input all amounts as positive values.) Consolidated Totals Revenues Cost of goods sold Depreciation expense Amortization expense Buildings Equipment Customer list Common stock Additional paid-in capital

Answer 1

(A). Workings to determine the consolidated totals as on December 31 2021

Revenues

Particulars	Amount
Revenues of Mergaronite	$ 6,20,000
Revenues of Hill	$2,54,000
Total	$8,74,000

Amortization Expense

Particulars	Amount
Amortization Expense for 2021 ($ 94000/20 = $ 5,000)	$4,700
Total	$4,700

Building

Particulars	Amount
Building of Mergaronite	$5,20,000
Building of Hill	$1,30,000
Over Valuation of Building	$29,600
Total	$6,79,600

Depreciation Expense

Particulars	Amount
Depreciation Expense of Mergaronite	$1,14,000
Depreciation Expense of Hill	$60,000
Depreciation on the over Valuation of Building(29600/10)	$2,960
Depreciation on undervalued Equuipment (61000/5)	$12,200
Total	$189,160

Additional paid in capital

Particular	Amount
Additional paid in capital of Mergaronite	$44,000
Total	$44,000

Note: Here we consider the additional paid in capital of parent company only. Because the Mergaronite tool over hill by issuing additional paid in capital in Mergaronite company.

Patent

Particulars	Amount
Patent value as on 2017	$94,000
Less : Amortization 2021	$4,700
Less : Amortization for 4 years	$18,800
Total	$70,500

Customer list development by Hill Inc, is consider as patent each year Amortization expense is ($94000 /20) Amortization expense for ( 2017 , 2018,2019,2020 )Value of customer list as on 31st December 2021.

Cost of Goods sold

Particulars	Amount
Cost of Goods sold of Mergaronite	$2,82,000
Cost of Goods sold of Hill	$1,14,000
Total	$3,96,000

Common Stock

Particulars	Amount
Common Stock of Mergaronite	$3,04,000
Total	$3,04,000

Note: Here we consider the common stock of parent company only. Because the Mergaronite took over hill by issuing common stock in Mergaronite company.

Equipment

Particulars	Amount
Equipment of Mergaronite	$1,92,000
Equipment of Hill	$2,54,000
Total	$4,46,000

Equipment that was undervalued by $61,000 need not do any adjustment. Equipment was undervalued on January 2017 and by the end of 2021 the 5 years period is completed.