On January 1,2011,John Doe Enterprises (JDE)acquired a 55% Interest in Bubba

Essay

On January 1,2011,John Doe Enterprises (JDE)acquired a 55% interest in Bubba Manufacturing,Inc.(BMI).JDE paid for the transaction with $3 million cash and 500,000 shares of JDE common stock (par value $1.00 per share).At the time of the acquisition,BMI's book value was $16,970,000.
On January 1,JDE stock had a market value of $14.90 per share and there was no control premium in this transaction.Any consideration transferred over book value is assigned to goodwill.BMI had the following balances on January 1,2011. $\begin{array}{c}\begin{array}{lll}\\\\ \text {Land}\\ \text {Buildings (seven-year remaining life)}\\ \text {Equipment (five-year remaining life)}\end{array}\begin{array}{c}\text { Book }\\\underline{\text { Value }}\\{\$ 1,700,000} \\2,700,000 \\3,700,000 \end{array}\begin{array}{c}\text { Fair }\\\underline{\text { Value }}\\\$ 2,550,000 \\3,400,000 \\3,300,000\end{array}\end{array}$

For internal reporting purposes,JDE employed the equity method to account for this investment.

-The following account balances are for the year ending December 31,2011 for both companies. $\begin{array}{lcc}&\text { John Doe } & \text { Bubba } \\&\underline{\text { Enterprises } }& \underline{\text { Manufacturing }}\\ \text { Revenues } & \$(298,000,000) & \$(103,750,000) \\ \text { Expenses } & 271,000,000 & 95,800,000 \\ \text { Equity in income of Bubba Manufacturing } & (4,361,500) & \underline{0} \\ \text { Net income } & \$(31,361,500) & \$(7,950,000) \\\\ \text { Retained earnings, January 1, } 2011 & \$(2,500,000) & \$( 100,000) \\ \text { Net income (above) } & (31,361,500) & ( 7,950,000) \\ \text { Dividends paid } & 5.000 .000 & 3,000.000 \\ \text { Retained earnings, December } 31,2011 & \$(28,861,500) & \$( 5,050,000) \\\\\text { Current Assets } & \$ 30,500,000 & \$ 20,800,000 \\\text { Investment in Bubba Manufacturing } & 13,161,500 & \\\text { Land } & 1,500,000 & 1,700,000 \\\text { Buildings } & 5,600,000 & 2,360,000 \\\text { Equipment (net) } & 3,100,000 & 2,960,000 \\\text { Total assets } & \$ 53,861,500 & \$ 27,820,000 \\\\\text { Accounts payable } & \$(3,100,000) & (4,900,000) \\ \text { Notes payable } & & 1,000,000) \\\text { Common stock } & 2,900,000) & 6,000,000) \\ \text { Additional paid-in capital } & (19,000,000) & (10,870,000) \\ \text { Retained earnings, Dec. 31,2011 ( above) } & (28,861,500) & 5.050 .000) \\\text { Total liabilities and stockholders' equity } & \$(53,861,500) & \$(27,820,000) \\\end{array}$

Required:
Prepare a consolidation worksheet for this business combination.Assume goodwill has been reviewed and there is no goodwill impairment.