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On January 1, 2009, Father Company acquired an 80 percent interest in Sun Company for $425,000. The acquisition-date fair value of the 20 percent noncontrolling interest’s ownership shares was $102,500. Also as of that date, Sun reported total stockholders’ equity of $400,000:
$100,000 in common stock and $300,000 in retained earnings. In setting the acquisition price, Father appraised four accounts at values different from the balances reported within Sun’s financial records.
Buildings (8-year life)
Undervalued by $20,000
Land
Undervalued by $50,000
Equipment (5-year life)
Undervalued by $12,500
Royalty agreement (20-year life)
Not recorded, valued at $30,000
As of December 31, 2013, the trial balances of these two companies are as follows:
Father Company
Sun Company
Debits
Current assets
$605,000
$280,000
Investment in Sun Company
425,000
–0–
Land
200,000
300,000
Buildings (net)
640,000
290,000
Equipment (net)
380,000
160,000
Expenses
550,000
190,000
Dividends
90,000
20,000
Total debits
$2,890,000
$1,240,000
Credits
Liabilities
$910,000
$300,000
Common stock
480,000
100,000
Retained earnings, 1/1/13
704,000
480,000
Revenues
780,000
360,000
Dividend income
16,000
–0–
Total credits
$2,890,000
$1,240,000
Included in these figures is a $20,000 debt that Sun owes to the parent company. No goodwill impairments have occurred since the Sun Company acquisition.
Required
a. Determine consolidated totals for Father Company and Sun Company for the year 2013.
b. Prepare worksheet entries to consolidate the trial balances of Father Company and Sun Company for the year 2013.
c. Assume instead that the acquisition-date fair value of the noncontrolling interest was $112,500. What balances in the December 31, 2013, consolidated statements would change?

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