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Overview

On January $1,2020,$ Winter Corporation acquired a $100\%$ interest in Summer, Inc. Winter paid $$128,000$ cash. At the time of the acquisition, Summer$$s book value was $$92,000.$ At that date, the fair value of Summer$$s buildings and equipment was $$20,000$ more than the book value. Buildings and equipment are depreciated on a $10-$year basis.

For internal reporting purposes, Winter employed the equity method to account for this investment.

The following account balances are for the year ending December $31,2020,$ for both companies.

Winter Corporation Summer Inc.

Sales $$(260,000)$ $$(180,000)$

Equity Income from Summer Inc. $(22,000)-$

Cost of goods sold $125,000110,000$

Salaries and wages expense $42,00027,000$

Depreciation expense $25,00010,000$

Interest expense $12,0004,000$

Other expense $13,5005,000$

Net income $(64,500)(24,000)$

Retained earnings, Jan. $1(102,000)(32,000)$

Net income $($above$)(64,500)(24,000)$

Dividends paid $30,00016,000$

Retained earnings, Dec. $31(136,500)(40,000)$

Cash $19,50021,000$

Accounts receivable $70,00012,000$

Inventory $90,00025,000$

Land $30,00015,000$

Buildings and Equipment $($net$)205,000120,000$

Investment in Summer Inc. $134,000-$

Total assets $548,500193,000$

Accounts payable $(45,000)(16,000)$

Wages payable $(17,000)(9,000)$

Notes payable $(150,000)(68,000)$

Common stock $(200,000)(60,000)$

Retained earnings, Dec. $31(136,500)(40,000)$

Total liabilities & stockholders$$ equity $(548,500)(193,000)$

Note: Parentheses indicate a credit balance.

Directions

$1.$ Use Excel to prepare a consolidation worksheet for this business combination on December $31,2020.$

$2.$ Create a second worksheet listing the consolidation entries posted on the first worksheet. Assume goodwill has been reviewed and there is no goodwill impairment.

$3.$ Provide supporting computations on a third worksheet.

$4.$ Clearly label all work and worksheets.

$5.$ Submit your spreadsheet in the assignment.

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