ACC 405 Final Project One Scenario
Posey Company
Overview
You are a financial accountant for Posey Company tasked with preparing consolidation documentation
at year end. You have the following information:
December 31, 20X5
Posey Company acquired 90% of Stargell Corporation’s outstanding common stock for $1,116,900. On
that date:
 The fair value of the noncontrolling interest was $124,100;
 Stargell reported common stock outstanding of $487,000, premium on common stock of
$267,000, and retained earnings of $407,000; the book values and fair values of Stargell’s assets
and liabilities were equal except for land, which was worth $30,000 more than its book value.
On April 1, 20X6
 Posey issued at par $200,000 of 10% bonds directly to Stargell; interest on the bonds is payable
March 31 and September 30.
On January 2, 20X7
 Posey purchased all of Stargell’s outstanding 10-year, 12% bonds from an unrelated institutional
investor at 98. The bonds originally had been issued on January 2, 20X1, for 101. Interest on the
bonds is payable December 31 and June 30.
Since the date it was acquired by Posey
 Stargell has sold inventory to Posey on a regular basis. The amount of such intercompany sales
totaled $67,000 in 20X6 and $83,000 in 20X7, including a 30% gross profit.
 All inventory transferred in 20X6 had been resold by December 31, 20X6, except inventory for
which Posey had paid $18,000 and did not resell until January 20X7.
 All inventory transferred in 20X7 had been resold at December 31, 20X7, except merchandise
for which Posey had paid $16,667.
As of December 31, 20X7
 Stargell had declared but not yet paid its fourth-quarter dividend of $12,750.
 Both Posey and Stargell use straight-line depreciation and amortization, including the
amortization of bond discount and premium.
 On December 31, 20X7, Posey’s management reviewed the amount attributed to goodwill as a
result of its purchase of Stargell common stock and concluded that an impairment loss in the
amount of $25,000 had occurred during 20X7 and should be shared proportionately between
the controlling and noncontrolling interests.
 Posey uses the fully adjusted equity method to account for its investment in Stargell.
On December 31, 20X7, trial balances for Posey and Stargell appeared as follows:
Item
Cash
Current Receivables
Inventory
Investment in Stargell Stock
Investment in Stargell Bonds
Investment in Posey Bonds
Land
Buildings and Equipment
Cost of Goods Sold
Depreciation & Amortization
Other Expenses
Dividends Declared
Accumulated Depreciation
Current Payables
Bonds Payable
Premium on Bonds Payable
Common Stock
Premium on Common Stock
Retained Earnings, January 1
Sales
Other Income
Income from Stargell Corp.
Total
$
Posey Company
Debit
Credit
49,500
121,500
317,000
1,243,800
985,000
$
200,000
518,000
1,915,000
426,000
65,000
206,000
51,000
1,241,000
2,940,000
1,829,000
184,000
632,000
61,000
$
$
9,603,800
Stargell Corporation
Debit
Credit
39,000
90,100
364,900
$
1,050,000
699,190
200,000
910,000
610,000
2,848,950
3,010,000
143,000
132,660
9,603,800
$
3,875,000
$
597,000
213,000
1,000,000
3,000
487,000
267,000
457,000
801,000
50,000
$
3,875,000