Answer Happy

Additional information:
1) Western acquired its 40% interest in Mustangs for
$352,000 in 2015, when Mustangs’ retained earnings were $170,000
and common shares were $450,000. The acquisition
differential on that date was fully amortized by
the end of 2019.
2) In 2018, Western sold land to Mustangs and recorded a
gain of $60,000 on the transaction. The land is still
being used by Mustangs.
3) The December 31, 2019, inventory for Western contained a
profit recorded by Mustangs amounting to $35,000.
4) On December 31, 2019, Mustangs owes Western
$29,000.
5) Western has used the cost method to account for
its investment in Mustangs.
6) Both companies have a 40% income tax rate.
REQUIRED:
Prepare the consolidated balance sheet for Western as at
December 31, 2019, in accordance with GAAP, assuming that the
investment in Mustangs is a joint venture investment and
is reported using proportionate consolidation. (proportionately
adjusted financial statements)
a) Calculate
acquisition differential at acquisition date
b) Summarize
Intercompany Eliminations and Gains/Losses
c) Prepare
a balance sheet at December 31, 2019
The following balance sheets have been prepared as at December 31, 2019, for Western Corp. and Mustangs Co. Ltd. Western Mustangs Cash $ 68,000 30,000 Accounts Receivable 80,000 170,000 Inventory 600,000 400,000 Property and plant (net) 1,400,000 900,000 Investments in Mustangs 352,000 $2,500,000 $1,500,000 Current liabilities Bonds payable Common Shares Retained earnings $ 400,000 500,000 900,000 700,000 $2,500,000 $ 150,000 600,000 450,000 300,000 $1,500,000