Comprehensive Problem: Differential Apportionment
Mortar Corporation acquired 80 percent ownership of Granite
Company on January 1, 20×7, 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, 20×7, included the
buildings & Equipment
Investment in Granite Company Stock
cost of Goods Sold
Income for Subsidiary
On January 1, 20×7, Granite reported net assets with a book
value of $150,000 and a fair value of $191,250.
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.
Mortar used the equity method in accounting for its investment
Detailed analysis of receivables and payables showed that
Granite owed Mortar $16,000 on December 31,20×7.
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.
Give all journal entries recorded by Mortar with regard to its
investment in Granite during 20×7. Give all eliminating entries
needed to prepare a full set of consolidated financial statements
for 20×7. Prepare a three- part consolidation worksheet as of