The document provides information for consolidating the financial statements of Turkey Corporation and its 70% owned subsidiary Stuffing Company for the year ended December 31, 2013. It includes details of various intercompany transactions during 2012-2013 and differences between book and fair values of Stuffing's assets and liabilities at acquisition date that require adjustments. The assistant is asked to prepare the required consolidation working papers, journal entries, and proofs to consolidate the two companies' 2013 financial statements.

1. Sheet1100% implied value90% interest at 1/1/11Cost of
Acquisition800,000600,000BV of Sub400,000300,000Excess
Cost over Book50,00045,000Excess Cost over Book -
Consolidation1/1/11 11 Adj12/31/11 12 Adj 12/31/12Upstream
TransactionGoodwill50,000050,000050,000Downstream
Trans11 Def Gross Profit-5,000-5,0005,000012 Def Gross
ProfitDeferred gain on land-3,000-3,00000Deferred gain on
equip-9000-9,000 Depr on equip (gain)30003,000Excess cost
over Bk50,000-8,00042,000-1,00044,000Excess Cost over Book
- Equity1/1/11 11 Adj12/31/11 12 Adj12/31/12Upstream
TransactionGoodwill45,000045,000045,000Downstream
Trans11 Def Gross Profit-5,000-5,0005,000012 Def Gross
Profit-4,000-4,000Deferred gain on land-3,000-3,0000-
3,000Deferred gain on equip-9,000-9,000 Depr on equip
(gain)30003,000Excess cost over Bk45,000-8,00037,000-
5,00032,000
Sheet2STEP 1: Errors and Omissions - N/A12/31/12Cash2000
A/R2,000Step 2: Eliminate our share of NI and Dividends of
Sub12/31/12Income from Sub31,000Dividends18,000Investment
in Sub13,000To eliminate income and dividends from Sue and
return the investment account to its beginning of the period
balanceStep 3: Establish NCI Share of Income and Eliminate
Dividends12/31/12NCI Share of
Income4,000Dividends2,000NCI Change2,000To enter
noncontrolling interest share of subsidiary income and
dividendsSTEP 4: Eliminate the Investment
Account12/31/12Investment in sub (boy)145,000Part 1Common
Stock - Sub50,000Part 2R/E - Sub - BOY70,000Part
2Inventory5,000Part 3Land3,000Part 3Goodwill50,000Part
4NCI - BOY17,000Part 5To eliminate reciprocal investment and
equity balances and record beginning noncontrolling
interestSTEP 5: Eliminate Inter-co profits or loss5a Inter-co
sales12/31/12Sales20,000Cogs20,000To recognize total inter-co
salesSTEP 6: FMV Adjustments (Per Cons CF

2. Sch)12/31/12Inventory5,000COGS5,000To recognize previously
11 deferred gross profit12/31/12COGS4,000Inventory4,000Gain
on sale9,000Equipment9,000Equipment, net (A/D)3,000Depr
Expense3,000To defer 12 gross profitSTEP 7: Eliminate
Reciprocals12/31/12Accounts payable30,000Accounts
receivable30,000Dividends payable9,000Dividends
receivable9,000To eliminate reciprocal receivable and payable
balances
Sheet3Pal Corporation and SubsidiaryConsolidation
Workpapersfor the year ended December 31, 2012(in
thousands)Adjustments andConsolidatedPalSim
90%EliminationsStatementsEliminationsIncome StatementDebit
CreditSales(300.0)(100.0)(400.0)Income from Sim(31.0)31.0-
0Gain on sale of equipment9.09.018.0Cost of
sales140.050.04.020.0169.05.0Depreciation
expense3.0(3.0)Operating expenses60.010.070.0Consolidated
NI(146.0)Noncontrolling share4.04.0Controlling share of
NI(122.0)(40.0)(142.0)Retained EarningsRetained earnings —
Par(157.0)(157.0)Retained earnings — Sul(70.0)70.0- 0Net
income(122.0)(40.0)(142.0)Dividends60.020.020.060.0Retained
earnings – Dec 31(219.0)(90.0)(239.0)Balance
SheetCash100.017.02.0119.0Accounts
receivable90.050.032.0108.0Dividends receivable9.09.0-
0Accumulated depr-
equipment3.03.0Inventories20.08.05.05.028.0Land40.015.03.05
2.0Buildings — net135.050.0185.0Equipment —
net165.060.09.0216.0Investment in Sim158.013.0-
0145.0Goodwill50.050.0717.0200.0761.0Accounts
payable(98.0)(30.0)30.0(98.0)Dividends
payable(15.0)(10.0)9.0(16.0)Other
liabilities(67.0)(20.0)(87.0)Capital
stock(300.0)(50.0)50.0(300.0)Retained
earnings(237.0)(90.0)(239.0)(717.0)(200.0)Noncontrolling
interest January 117.0Noncontrolling interest December
312.0(19.0)- 0- 0267.0283.0(759.0)
Sheet4Pig Corporation and SubsidiaryConsolidation Income

3. Statementfor the year 2011(in thousands)Adjustments
andConsolidatedPigSal
90%EliminationsStatementsEliminationsIncome StatementDebit
CreditSales(300.0)(100.0)(400.0)Income from Sal(31.0)31.0-
0Gain on building9.09.018.0Cost of
sales140.050.04.020.0169.05.0Depreciation
expense3.0(3.0)Operating expenses60.010.070.0Consolidated
NI(146.0)Noncontrolling share4.04.0Controlling share of
NI(122.0)(40.0)(142.0)Retained EarningsRetained earnings —
Par(157.0)(157.0)Retained earnings — Sul(70.0)70.0- 0Net
income(122.0)(40.0)(142.0)Dividends60.020.020.060.0Retained
earnings – Dec 31(219.0)(90.0)(239.0)Balance
SheetCash100.017.02.0119.0Accounts
receivable90.050.032.0108.0Dividends receivable9.09.0-
0Accumulated depr-
equipment3.03.0Inventories20.08.05.05.028.0Land40.015.03.05
2.0Buildings — net135.050.0185.0Equipment —
net165.060.09.0216.0Investment in Sim158.013.0-
0145.0Goodwill50.050.0717.0200.0761.0Accounts
payable(98.0)(30.0)30.0(98.0)Dividends
payable(15.0)(10.0)9.0(16.0)Other
liabilities(67.0)(20.0)(87.0)Capital
stock(300.0)(50.0)50.0(300.0)Retained
earnings(237.0)(90.0)(239.0)(717.0)(200.0)Noncontrolling
interest January 117.0Noncontrolling interest December
312.0(19.0)- 0- 0267.0283.0(759.0)
THE PROBLEM
Part 1 THE PROBLEM: (70 Pts)
Thomas, the President of "Thomas' Turkey Corporation"
(Turkey), a fabric material company, gobbled up "The Best
Stuffing Company "(Stuffing), a pillow manufacturer, when
Turkey paid $33,600 cash for a 70% interest in Stuffing on
January 1, 2012, when Stuffing's stockholders’ equity consisted
of $20,000 Capital Stock and $10,000 of Retained Earnings.

4. Stuffing' s Assets and Liabilities were tailored specifically for
this acquisition and had total Fair Market Value differentials as
follows at the time of acquisition:
Inventory was undervalued by $3,000 and were sold evenly
over a three year period starting at the date of acquisition
Plant Assets with a 5 yr life were overvalued by $5,000
Trade Marks with a 20 yr life and $6,000 in value were not
recorded
A mortgage with 10 yrs of remaining payments were
overvalued by $1,000
Any remaing difference in Cost vs Book was attributed to
Goodwill
Additional information:
1. Turkey sold feathers that cost $6,000 to Stuffing for $8,000
during 2012 and one-half of these feathers remained in stock by
Stuffing on December 31, 2012.
2. During 2013 Turkey Corporation sold feathers that cost
$8,000 to Stuffing for $10,000 and 30% of these feathers
remained unsold by Stuffing on December 31, 2013. Stuffing
Company owed Turkey $2,000 on account at year-end 2013.
3. Turkey Corporation sold a plucking machine with a 5-year
remaining life and a book value of $4,000 to Stuffing for $5,000
on July 1, 2013. Straight-line depreciation is used.
4. On Sept 1, 2013 Stuffing shaved the price to $5,000 on a
turkey feather trimming machine it sold to Turkey when the

5. trimming machine had a book value of $7,000 with a 10 year
remaining life.
5. Turkey and Stuffing declared annual dividends in 2013 of
$10,000 and $4,000, respectively so that their shareholders
could share in the gravy.
6. Separate financial statements for Turkey and Stuffing appear
on partially completed consolidation working papers.
7. In 2012, Stuffing made net income of $10,000 and paid
dividends of $2,000
Required:
So before you start, since you are doing 20"13", make a wish
using a "Turkey Wishbone" and then:
Please prepare all the required carryforward schedules for the
above Consolidation
We need to put the Stuffing back into the Turkey as a
consolidated group as of December 31, 2013. So please
complete the working papers to consolidate the financial
statements for 2013 including all entries required in good
journal form. Also prepare all proofs that you deem necessary
(please note I am looking for your discretion on what you
should prove but I believe there is a minimum that you need to
do, so use your professional judgment and hopefully you will
do all the right ones). If you believe there is an error in the
underlying accounting of the parent's equity accounting please
make the appropriate correcting entry.
Part 2 (30 Pts):
Explain the 7 major classes of Eliminating entries. Just dont

6. state what we do, I can see that by looking at the entry, tell me
the theory of why you are doing it. Also if there is a major
class that we dont have any entries for explain that major class
anyways.
Extra Credit:
On January 1, 2012, Tidal Wave, Co. purchased 70% of the
outstanding voting common stock of Colony, Inc., for
$2,100,000. The book value of Colony's net equity on that date
was $3,000,000. Book values were equal to fair values except as
follows:
Assets & Liabilities Book Values
Fair Values
Inventory (sold current year) $200,000
$225,000
Building (10 year life Straight line) 850,000
750,000
Note payable (Due in 5 years) 300,000
320,000
Do all the underlying accounting of the Parent for both years
including but not limited to all the general journal entries in
good form, and the T accounts for both the "investment"
accounting and "the income from Sub". Also include anything
else as a good accountant would!!!
CONS WORKSHEETTurkey with Stuffing Consolidated
GroupConsolidation Working Papersat December 31,
2013TurkeyStuffingEliminationsConsolidated Db (Cr) Db
(Cr)DebitCredit Db (Cr)INCOME
STATEMENTSales(90,000)(50,000)Income from
Stuffing(13,220)Gain on Sale of Plucking Mach(1,000)Loss on

7. Feather Trimming Mach2,000Cost of
sales40,00020,000Depreciation exp6,0002,000Other
Expenses24,5008,000Net income(33,720)(18,000)Retained
Earnings 1/1(24,170)(18,000)Add: Net
income(33,720)(18,000)Dividends10,0004,000Retained
Earnings 12/31(47,890)(32,000)BALANCE
SHEETCash6,40015,000Receivables1,5008,200Dividends
Rec5,000Inventories12,0006,000Plant/Equipment-
net41,00030,000Investment in Stuffing48,340TOTAL
ASSETS114,24059,200LIAB. & EQUITYAccounts
payable(6,350)(2,200)Dividend payable(10,000)(4,000)Other
Debt(10,000)(1,000)Capital stock(40,000)(20,000)Retained
Earnings(47,890)(32,000)TOTAL LIAB. &
EQUITY(114,240)(59,200)- 0
ENTRIES0
YOUR WORKPAPERS
EXTRA CREDIT