Week 11 Individual Work guidelines and templates

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Problem 11-3 (LO 3, 5) Translate a trial balance and prepare a consolidation worksheet with excess of cost over book value traceable to equipment. Due to increasing pressures to expand globally, Pueblo Corporation acquired a 100% interest in Sorenson Company, a foreign company, on January 1, 2016. Pueblo paid 12,000,000 FC, and Sorenson’s equity consisted of the following:

Common stock......................................              3,000,000FC

Paid-in capital in excess of par .........................             2,000,000

Retained earnings ..................... ........... ...       4,200,000

Total.............. ........... ........... ..........    9,200,000FC

On the date of acquisition, equipment with a 10-year life was undervalued by 500,000 FC. Any remaining excess of cost over book value is attributable to additional equipment with a 20-year life. The trial balances for Pueblo and Sorenson as of December 31,2018, are as follows:

Pueblo Corporation       Sorenson Company

Cash .................... ........... ........               4,050,000          2,840,000 FC

Accounts Receivable ........ ........... ........             5,270,000          3,990,000

Inventory ...... ........... ........... ........       5,540,000          5,800,000

Investment in Sorenson ...... ........... ........         20,969,000

Fixed Assets.......... ........... ........... ..     21,000,000       15,000,000

Accumulated Depreciation ..... ........... ......      (12,560,000)    (6,800,000)

Accounts Payable .............................  (3,450,000)       (1,580,000)

Long-Term Debt ....... ........... ........... ..                  (10,000,000)    (5,000,000)

Common Stock ...............................      (4,000,000)       (3,000,000)

Paid-In Capital in Excess of Par .. ........... ......   (6,500,000)       (2,000,000)

Retained Earnings ,January 1,2018... ............                  (12,180,000)    (7,950,000)

Sales ......... ........... ........... ........             (26,000,000)    (10,000,000)

Cost of Goods Sold ............................  16,380,000       7,500,000

Operating Expenses ...........................                 3,210,000          1,200,000

Subsidiary Income............................. (1,729,000)

Totals ....... ........... ........... ........              0              0 FC

The investment in Sorenson consists of the following:

Initial investment (12,000,000 FC Â$1.20) ....... .........  $14,400,000

2016Income (1,750,000 FC Â$1.28)....................           2,240,000

2017Income (2,000,000 FC Â$1.30)....................           2,600,000

2018Income.............. ........... ........... .....           1,729,000

Total.. ........... ........... ......................  $20,969,000

Relevant exchange rates are as follows:

1FC ¼

January 1,2016 .. ........... ......   $1.20

2016Average......... ........... .      1.28

January 1,2017 .. ........... ......   1.25

2017Average......... ........... .      1.30

December 31,2018................ 1.31

2018Average......... ........... .      1.33

Required:

Assuming the FC is Sorenson’s functional currency, prepare a consolidated worksheet.