The individual financial statements for Gibson Company and Keller Company for the year ending December 31, 2018, follow. Gibson acquired a 60 percent interest in Keller on January 1, 2017, in exchange for various considerations totaling $570,000. At the acquisition date, the fair value of the noncontrolling interest was $380,000 and Keller’s book value was $850,000. Keller had developed internally a customer list that was not recorded on its books but had an acquisition-date fair value of $100,000. This intangible asset is being amortized over 20 years. Gibson sold Keller land with a book value of $60,000 on January 2, 2017, for $100,000. Keller still holds this land at the end of the current year. Keller regularly transfers inventory to Gibson. In 2017, it shipped inventory costing $100,000 to Gibson at a price of $150,000. During 2018, intra-entity shipments totaled $200,000, although the original cost to Keller was only $140,000. In each of these years, 20 percent of the merchandise was not resold to outside parties until the period following the transfer. Gibson owes Keller $40,000 at the end of 2018. Gibson Keller Company CompanySales $ (800,000)$ (500,000)Cost of goods sold 500,000 300,000Operating expenses 100,000 60,000Income of Keller Company (84,000) -Net income $ (284,000)$ (140,000) Retained earnings, 1/1/18 $ (1,116,000)$ (620,000)Net income (284,000) (140,000)Dividends paid 115,000 60,000Retained earnings, 12/31/18$ (1,285,000)$ (700,000)Cash $ 177,000 $ 90,000Accounts receivable 316,000 410,000Inventory 440,000 320,000Investment in Keller Company 766,000 -Land 180,000 390,000Buildings and equipment (net) 496,000 300,000Total assets $ 2,375,000 1,510,00 Liabilities $ (480,000) (400,000)Common stock (610,000) (320,000)Additional paid-in capital - (90,000)Retained earnings, 12/31/18 (1,285,000) (700,000)Total liabilities and equities$ (2,375,000)(1,510,000)
Requirement:
a. Prepare a worksheet to consolidate the separate 2018 financial statements for Gibson and Keller. b. How would the consolidation entries in requirement (a) have differed if Gibson had sold a building with a $60,000 book value (cost of $140,000) to Keller for $100,000 instead of land, as the problem reports? Assume that the building had a 10-year remaining life at the date of transfer.