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

On January 1, 2016, 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, 2016. What amount of inventory will be reported?

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:

Under which set of circumstances would it not be appropriate to assume the value the noncontrolling shares is the same as the controlling shares?

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

On January 1, 2016, Lester Company purchased 70% of Stork Corporation's $5 par common stock for $600,000. The book value of Stork net assets was $640,000 at that time. The fair value of Stork's identifiable net assets were the same as their book value except for equipment that was $40,000 in excess of the book value. In the January 1, 2016, consolidated balance sheet, goodwill would be reported at:

In a business combination accounted for as an acquisition, how should the excess of fair value of identifiable net assets acquired over implied value be treated?

Primer Company acquired an 80% interest in SealCoat Company on January 1, 2016, 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 2016 and paid no dividends. Primer Company's separate income in 2016 was $625,000. The controlling interest in consolidated net income for 2016 is:

On January 1, 2016, 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, 2016. What is the amount of total assets?

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

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:

Dividends declared by a subsidiary are eliminated against dividend income recorded by the parent under the:

Push down accounting is an accounting method required for the subsidiary in some instances such as the banking industry. Briefly explain the concept of push down accounting.

On January 1, 2016, Phoenix Company acquired 80% of the outstanding capital stock of Skyler Company for $570,000. On that date, the capital stock of Skyler Company was $150,000 and its retained earnings were $450,000. On the date of acquisition, the assets of Skyler Company had the following values: All other assets and liabilities had book values approximately equal to their respective fair market values. The plant and equipment had a remaining useful life of 10 years from January 1, 2016, and Skyler Company uses the FIFO inventory cost flow assumption. Skyler Company earned $180,000 in 2016 and paid dividends in that year of $90,000. Phoenix Company uses the complete equity method to account for its investment in S Company. Required: A. Prepare a computation and allocation schedule. B. Prepare the balance sheet elimination entries as of December 31, 2016. C. Compute the amount of equity in subsidiary income recorded on the books of Phoenix Company on December 31, 2016. D. Compute the balance in the investment account on December 31, 2016.

Pinta Company acquired an 80% interest in Strummer Company on January 1, 2016, 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 2016 and paid no dividends. Pinta Company's separate income in 2016 was $375,000. Controlling interest in consolidated net income for 2016 is:

Pulman Company acquired 90% of the stock of Spectrum Company for $6,300,000 on January 1, 2016. On this date, the fair value of the assets and liabilities of Spectrum Company was equal to their book value except for the inventory and equipment accounts. The inventory had a fair value of $2,300,000 and a book value of $1,900,000. The equipment had a fair value of $3,300,000 and a book value of $2,800,000. The balances in Spectrum Company's capital stock and retained earnings accounts on the date of acquisition were $3,700,000 and $1,900,000, respectively. Required: In general journal form, prepare the entries on Spectrum Company's books to record the effect of the pushed down values implied by the acquisition of its stock by Pulman Company assuming that: A values are allocated on the basis of the fair value of Spectrum Company as a whole imputed from the transaction. B values are allocated on the basis of the proportional interest acquired by Pulman Company.

On January 1, 2016, 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, 2016. What is the amount of total assets?

The entry to amortize the amount of difference between implied and book value allocated to an unspecified intangible is recorded:

On January 1, 2016, Preston Corporation acquired an 80% interest in Spiegel Company for $2,400,000. At that time Spiegel Company had common stock of $1,800,000 and retained earnings of $800,000. The book values of Spiegel Company's assets and liabilities were equal to their fair values except for land and bonds payable. The land's fair value was $120,000 and its book value was $100,000. The outstanding bonds were issued on January 1, 2005, at 9% and mature on January 1, 2018. The bond principal is $600,000 and the current yield rate on similar bonds is 8%. Required: Prepare the workpaper entries necessary on December 31, 2016, to allocate, amortize, and depreciate the difference between implied and book value.

On January 1, 2016, 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, 2016. What is the amount of consolidated retained earnings?

Pruin Corporation acquired all of the voting stock of Satto Corporation on January 1, 2016, 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 2016, $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, 2017 (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, 2017. Pruin Corporation and Satto Corporation Consolidated Statements Workpaper at December 31, 2017