On January 1 2016 Mitta Corporation acquires a 60 interest

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On January 1, 2016, Mitta Corporation acquires a 60% interest (12,000 shares) in Train
Company for $156,000. Train stockholders' equity on the purchase date is as follows:Common
stock ($5 par). . . . . . . . . . . . . . . . . . . . . . . . . $100,000Paid-in capital in excess of par . . . . . . . .
. . . . . . . . . . . . . 50,000Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000Total
stockholders' equity. . . . . . . . . . . . . . . . . . . . . . . $230,000At the purchase date, Train's book
values for assets and liabilities closely approximate fair values. Any excess of cost over book
value is attributed to goodwill.On January 1, 2017, Train Company sells 5,000 shares of
common stock in a public offering at $20 per share. Mitta Corporation purchases 4,000
shares.During 2017, Mitta sells $30,000 of goods to Train at a gross profit of 25%. There are
$6,000 of Mitta goods in Train's beginning inventory and $8,000 of Mitta goods in Train's ending
inventory.Merchandise sales by Train to Mitta are $20,000 during 2017 at a gross profit of 30%.
There are $6,000 of Train goods in Mitta's beginning inventory and $2,000 of Train goods in
Mitta's ending inventory.Intercompany gross profit rates have been constant for many years.
There are no intercompany payables/receivables.Mitta's investment in Train Company balance
is determined as follows:Original cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . $156,00060% of Train 2016 income ($40,000 x 60%). . . . . . . . . . . . . . . . . . . . . . . . . . . .
. 24,000Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$180,000Less 60% of Train dividends declared in 2016 (60% x $8,000) . . . . . . . . . . . . . .
(4,800)Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$175,200Cost to acquire additional shares (new issue) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
80,00064% of Train 2017 income ($50,000 x 64%). . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32,000Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$287,200Less 64% of Train dividends declared in 2017 (64% x $10,000) . . . . .. . . . . . . .
(6,400)Investment balance, December 31, 2017. . . . . . . . . . . . . . . . .. . . . . . . . . . . . . .
$280,800The trial balances of the two companies as of December 31, 2017, are as
follows:RequiredPrepare the worksheet necessary to produce the consolidated financial
statements of Mitta Corporation and its subsidiary as of December 31, 2017. Include the
determination and distribution of excess and income distribution schedule.View Solution:
On January 1 2016 Mitta Corporation acquires a 60 interest

ANSWER
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