Exam 5: Allocation and Depreciation of Differences Between Implied and Book Value

Pennington Corporation purchased 80% of the voting common stock of Stafford Corporation for $3,200,000 cash on January 1, 2013.On this date the book values and fair values of Stafford Corporation's assets and liabilities were as follows: Required: Prepare a schedule showing how the difference between Stafford Corporation's implied value and the book value of the net assets acquired should be allocated.

Primer Company acquired an 80% interest in SealCoat Company on January 1, 2013, for $450,000 cash when SealCoat Company had common stock of $250,000 and retained earnings of $250,000.All excess was attributable to plant assets with a 10-year life.SealCoat Company made $50,000 in 2013 and paid no dividends.Primer Company's separate income in 2013 was $625,000.The controlling interest in consolidated net income for 2013 is:

On January 1, 2013, Pilsner Company acquired an 80% interest in Smalley Company for $3,600,000.On that date, Smalley Company had retained earnings of $800,000 and common stock of $2,800,000.The book values of assets and liabilities were equal to fair values except for the following: Book Value Fair Value Inventory \ 50,000 \ 85,000 Equipment (net) 540,000 720,000 Land 300,000 660,000 The equipment had an estimated remaining useful life of 8 years.One-half of the inventory was sold in 2013 and the remaining half was sold in 2014.Smalley Company reported net income of $240,000 in 2013 and $300,000 in 2014.No dividends were declared or paid in either year.Pilsner Company uses the cost method to record its investment in Smalley Company. Required: Prepare, in general journal form, the workpaper eliminating entries necessary in the consolidated statements workpaper for the year ending December 31, 2014.

Pullman Corporation acquired a 90% interest in Sleeter Company for $6,500,000 on January 1 2013.At that time Sleeter Company had common stock of $4,500,000 and retained earnings of $1,800,000.The balance sheet information available for Sleeter Company on January 1, 2013, showed the following: The equipment had a remaining useful life of ten years.Sleeter Company reported $240,000 of net income in 2013 and declared $60,000 of dividends during the year. Required: Prepare the workpaper entries assuming the cost method is used, to eliminate dividends, eliminate the investment account, and to allocate and depreciate the difference between implied and book value for 2013.

On November 30, 2013, Piani Incorporated purchased for cash of $25 per share all 400,000 shares of the outstanding common stock of Surge Company.Surge 's balance sheet at November 30, 2013, showed a book value of $8,000,000.Additionally, the fair value of Surge's property, plant, and equipment on November 30, 2013, was $1,200,000 in excess of its book value.What amount, if any, will be shown in the balance sheet caption "Goodwill" in the November 30, 2013, consolidated balance sheet of Piani Incorporated, and its wholly owned subsidiary, Surge Company?

The excess of fair value over implied value must be allocated to reduce proportionally the fair values initially assigned to

Simple Company, a 70%-owned subsidiary of Punter Corporation, reported net income of $240,000 and paid dividends totaling $90,000 during Year 3.Year 3 amortization of differences between current fair values and carrying amounts of Simple's identifiable net assets at the date of the business combination was $45,000.The noncontrolling interest in net income of Simple for Year 3 was

If the fair value of the subsidiary's identifiable net assets exceeds both the book value and the value implied by the purchase price, the workpaper entry to eliminate the investment account

Pruin Corporation acquired all of the voting stock of Satto Corporation on January 1, 2013, for $210,000 when Satto had common stock of $150,000 and retained earnings of $24,000.The excess of implied over book value was allocated $9,000 to inventories that were sold in 2013, $12,000 to equipment with a 4-year remaining useful life under the straight-line method, and the remainder to goodwill. Financial statements for Pruitt and Satto Corporations at the end of the fiscal year ended December 31, 2014 (two years after acquisition), appear in the first two columns of the partially completed consolidated statements workpaper.Pruin Corp.has accounted for its investment in Satto using the partial equity method of accounting. Required: Complete the consolidated statements workpaper for Pruin Corporation and Satto Corporation for December 31, 2014. Pruin Corporation and Satto Corporation Consolidated Statements Workpaper at December 31, 2014

In preparing consolidated working papers, beginning retained earnings of the parent company will be adjusted in years subsequent to acquisition with an elimination entry whenever:

Sleepy Company, a 70%-owned subsidiary of Pickle Corporation, reported net income of $600,000 and paid dividends totaling $225,000 during Year 3.Year 3 amortization of differences between current fair values and carrying amounts of Sleepy's identifiable net assets at the date of the business combination was $112,500.The noncontrolling interest in consolidated net income of Sleepy for Year 3 was

The SEC requires the use of push down accounting when the ownership change is greater than

Phillips Company purchased a 90% interest in Standards Corporation for $2,340,000 on January 1, 2013.Standards Corporation had $1,650,000 of common stock and $1,050,000 of retained earnings on that date. The following values were determined for Standards Corporation on the date of purchase: Required: A.Prepare a computation and allocation schedule for the difference between the implied and book value in the consolidated statements workpaper. B.Prepare the January 1, 2013, workpaper entries to eliminate the investment account and allocate the difference between implied and book value.

Pinta Company acquired an 80% interest in Strummer Company on January 1, 2013, for $270,000 cash when Strummer Company had common stock of $150,000 and retained earnings of $150,000.All excess was attributable to plant assets with a 10-year life.Strummer Company made $30,000 in 2013 and paid no dividends.Pinta Company's separate income in 2013 was $375,000.Controlling interest in consolidated net income for 2013 is:

Use the following information to answer questions On January 1, 2013, Poole Company purchased 75% of the common stock of Swimmer Company.Separate balance sheet data for the companies at the combination date are given below: Determine below what the consolidated balance would be for each of the requested accounts on January 2, 2013. -What amount of goodwill will be reported?

Use the following information to answer questions On January 1, 2013, Pamela Company purchased 75% of the common stock of Snicker Company.Separate balance sheet data for the companies at the combination date are given below: Determine below what the consolidated balance would be for each of the requested accounts on January 2, 2013. -What amount of inventory will be reported?

Under push down accounting, the workpaper entry to eliminate the investment account includes a

What are the arguments for and against the alternatives for the handling of bargain acquisitions? Why are such acquisitions unlikely to occur with great frequency?

Plain Corporation acquired a 75% interest in Swampy Company on January 1, 2013, for $2,000,000.The book value and fair value of the assets and liabilities of Swampy Company on that date were as follows: The property and equipment had a remaining life of 6 years on January 1, 2013, and the deferred charge was being amortized over a period of 5 years from that date.Common stock was $1,500,000 and retained earnings was $900,000 on January 1, 2013.Plain Company records its investment in Swampy Company using the cost method. Required: Prepare, in general journal form, the December 31, 2013, workpaper entries necessary to: A.Eliminate the investment account. B.Allocate and amortize the difference between implied and book value.

How do you determine the amount of "the difference between book value and the value implied by the purchase price" to be allocated to a specific asset of a less than wholly owned subsidiary?