Let's break down the solution step by step based on the information provided. --- ### **Step 1: Acquisition Analysis** **Gibson purchased 60% of Davis for $528,000.** - Fair value of 40% NCI = $352,000 - Implied 100% value of Davis = $528,000 / 60% = $880,000 - Or: $528,000 (60%) + $352,000 (40%) = $880,000 #### **Book Value of Davis at Acquisition (April 1, 2024):** - Common Stock = $340,000 - Retained Earnings (Jan 1, 2024) = $400,000 - Add: 3 months of income before acquisition (Jan 1 - Mar 31): $100,000 (annual) x 3/12 = $25,000 - Less: Dividends before acquisition = $0 (as $40,000 was declared on Nov 1, after acquisition) - **Total Retained Earnings at acquisition = $400,000 + $25,000 = $425,000** - **Total Book Value = $340,000 + $425,000 = $765,000** #### **Fair Value Adjustments:** - Equipment overvalued by $30,000 (will be amortized over 5 years = $6,000 per year) **Excess of Fair Value over Book Value = $880,000 (FV) - $765,000 (BV) = $115,000** - $30,000 allocated to equipment (to be amortized) - Remainder to goodwill: $115,000 - $30,000 = $85,000 --- ### **Step 2: Consolidated Income Statement (2024)** **Combine both companies, eliminate intercompany investment income, adjust for fair value amortization, remove dividends from subsidiary to parent.** #### **Combined Income:** - Sales: $(600,000) + $(300,000) = $(900,000) - COGS: $300,000 + $140,000 = $440,000 - Operating Expenses: $174,000 + $60,000 = $234,000 - Dividend Income: Gibson's $24,000 from Davis **(eliminate in consolidation)** #### **Adjustments:** - Eliminate Gibson's investment income from Davis: **($24,000)** - Amortization of Equipment FV Adjustment: $6,000 per year - Davis's net income: $100,000 (from Jan 1 to Dec 31) - But only $75,000 (April 1 - Dec 31) is parent relevant for noncontrolling interest calc. #### **Consolidated Net Income:** - Combined Net Income (before adjustments): $(150,000) + $(100,000) = $(250,000) - Less: Amortization of equipment FV: $6,000 - Eliminate Gibson's dividend income: $24,000 Net income for consolidation: - Net income without dividend income: $(250,000) + $24,000 = $(226,000) - Less: FV amortization: $6,000 - **Consolidated Net Income: $(232,000)** #### **Net Income Attributable to NCI:** - Davis’s adjusted net income for 9 months (April 1 - Dec 31): $100,000 × 9/12 = $75,000 - Less: FV amortization for 9 months: $6,000 × 9/12 = $4,500 - Adjusted net income: $75,000 - $4,500 = $70,500 - NCI (40%): $70,500 × 40% = $28,200 --- ### **Step 3: Consolidated Balance Sheet Balances** #### **a. Goodwill** = Purchase Price + FV of NCI - FV Net Assets = $528,000 + $352,000 - ($765,000 + $30,000) = $880,000 - $795,000 = **$85,000** #### **b. Equipment (net)** - Gibson: $400,000 - Davis: $400,000 - **Add**: FV adjustment less one year amortization: $30,000 - $6,000 = $24,000 - **Total: $400,000 + $400,000 + $24,000 = $824,000** #### **c. Common Stock** - Only the parent’s stock remains: **$630,000** #### **d. Buildings (net)** - Gibson: $524,000 - Davis: $600,000 - **Total: $524,000 + $600,000 = $1,124,000** #### **e. Dividends Declared** - Only dividends declared to outside parties: - Davis’s $40,000, but 60% is eliminated (parent), so only $16,000 (40%) remains - Gibson’s $80,000 remains - **Total: $80,000 + $16,000 = $96,000** --- ## **Summary Table** | Account | Consolidated Amount | |-----------------------|--------------------| | **Goodwill** | $85,000 | | **Equipment (net)** | $824,000 | | **Common stock** | $630,000 | | **Buildings (net)** | $1,124,000 | | **Dividends declared**| $96,000 | --- ## **Consolidated Income Statement (Summary)** | Account | Amount | |-----------------------|-----------| | Sales | (900,000) | | COGS | 440,000 | | Operating Expenses | 234,000 | | Amortization (FV adj) | 6,000 | | Eliminate Div. Income | (24,000) | | **Net Income** | (232,000) | --- Let me know if you need the full statement formats or more details on any step.

Let's address the minor issues step by step and refine the calculations accordingly. --- ### **1. Equipment (net) adjustment** - Original equipment FV adjustment: $30,000 - Remaining useful life at acquisition: 5 years - Amortization for 9 months (April 1 – Dec 31): \( \frac{\$30,000}{5\, \text{years}} = \$6,000\, \text{per year} \) \( \$6,000 \times \frac{9}{12} = \$4,500 \) **Corrected equipment (net):** - Gibson: $400,000 - Davis: $600,000 - FV adjustment amortized for 9 months: $4,500 Total equipment (net): \[ \$400,000 + \$600,000 + \$4,500 = \$1,004,500 \] *Note:* The previous sum was incorrect; it should be **$1,004,500**. --- ### **2. Consolidated Net Income Calculation** - Combined net income before adjustments: \(-\$150,000 + (-\$100,000) = -\$250,000\) - Adjustments: - Amortization of FV adjustment: $4,500 (for 9 months) - Eliminate Gibson's dividend income from Davis: $24,000 (since it's intra-group) - Corrected net income after adjustments: \(-\$250,000 + \$24,000 - \$4,500 = -\$230,500\) - NCI share (40%) of Davis's income for 9 months: \( \$75,000 \times 40\% = \$30,000 \) - **Final consolidated net income:** \(-\$230,500\) --- ### **3. Summary of corrected balances** | Account | Amount | |------------------------------|--------------------| | **Equipment (net)** | **$1,004,500** | | **Consolidated Net Income** | **$-230,500** | --- ### **Final refined answers:** **a. Consolidated Income Statement (2024):** | Item | Amount | |----------------------------|------------| | Sales | $(900,000) | | Cost of Goods Sold | 440,000 | | Operating Expenses | 234,000 | | Amortization of FV Adjustment | 4,500 | | Elimination of Dividend Income | (24,000) | | **Net Income** | **$(230,500)** | **b. Consolidated Balance Sheet as of December 31, 2024:** | Account | Amount | |--------------------------------|--------------| | **Goodwill** | $85,000 | | **Equipment (net)** | $1,004,500 | | **Common Stock** | $630,000 | | **Buildings (net)** | $1,124,000 | | **Dividends Declared** | $96,000 | --- ### **Summary of corrections:** - Equipment (net): **$1,004,500** (not $824,000 or $825,500) - Consolidated net income: **-$230,500** (not -$232,000) - The calculation of equipment FV amortization is now based on 9 months at $4,500. If you need further clarification or full formatted statements, feel free to ask!