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    Consolidated Financial Worksheet

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    Crane Mechanics acquired 75 percent of Downey Enterprises on March 31, 2005, for $3,645,000. Downey's book value at that date totaled $4,000,000. Appraisal values were greater than book values for identifiable assets in the following amounts: Inventory ($300,000) and Plant and Equipment ($700,000). The purchase differential for Inventory is to be amortized over five months and Plant and Equipment over ten years. For the remainder of 2005 Downey reports $635,000 of income and pays $100,000 in dividends. The following balances exist for Crane at December 31, 2005, and Downey at March 31 and December 31.

    Crain Downey
    12/31 3/31 12/31
    Cash $730,000 $175,000 $180,000
    Inventory 1,950,000 260,000 340,000
    Plant and Equipment 17,650,000 5,150,000 5,765,000
    Accumulated Depreciation (4,655,000) (935,000) (1,250,000)
    Investment in Downey 3,886,875
    Expenses 6,400,000 1,000,000 4,265,000
    Dividends 1,275,000 150,000 250,000
    Total Debits $27,236,875 $5,800,000 $9,550,000
    Liabilities $3,550,000 $650,000 $500,000
    Common Stock 350,000 100,000 100,000
    Additional Paid-In Capital 2,650,000 850,000 850,000
    Retained Earnings 9,720,000 2,800,000 2,800,000
    Sales 10,650,000 1,400,000 5,300,000
    Total Credits $27,236,875 $5,800,000 $9,550,000

    Extraordinary Gain From Acquisition of Downey 105,000
    Investment Income 211,875

    Required:

    a) Record the journal entries necessary on Crain's books for 2005 assuming that Crain uses the equity method to account for its investment in Downey.
    b) Prepare all worksheet eliminations in journal entry form necessary to consolidate Crain and Downey at December 31, 2005.
    c) Prepare the consolidation worksheet for Crain and Downey at December 31, 2005.

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    https://brainmass.com/business/consolidated-financial-statements/consolidated-financial-worksheet-321317

    Solution Summary

    The journal entries are recorded and consolidated in an Excel attachment.

    $2.19

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