Exam 4: Consolidated Techniques and Procedures

Powell Corporation acquired 90% of the voting stock of Santer Corporation on January 1,2010 for $11,700 when Santer had Capital Stock of $5,000 and Retained Earnings of $4,000.The amounts reported on the financial statements approximated fair value,with the exception of inventories,which were understated on the books by $500 and were sold in 2010,land which was undervalued by $1,000,and equipment with a remaining useful life of 5 years under the straight-line method which was undervalued by $1,500.Any remainder was assigned to goodwill. Financial statements for Powell and Santer Corporations at the end of the fiscal year ended December 31,2011 appear in the first two columns of the partially completed consolidation working papers.Powell has accounted for its investment in Santer using the equity method of accounting.Powell Corporation owed Santer Corporation $100 on open account at the end of the year.Dividends receivable in the amount of $450 payable from Santer to Powell is included in Powell's net receivables. Required: Complete the consolidation working papers for Powell Corporation and Subsidiary for the year ended December 31,2011.

Which of the following will be debited to the Investment account when the equity method is used?

Packo Company acquired all the voting stock of Sennett Corporation on January 1,2010 for $90,000 when Sennett had Capital Stock of $50,000 and Retained Earnings of $8,000.The excess of fair value over book value was allocated as follows: (1)$5,000 to inventories(sold in 2010), (2)$16,000 to equipment with a 4-year remaining useful life(straight-line method of depreciation)and (3)the remainder to goodwill. Financial statements for Packo and Sennett at the end of the fiscal year ended December 31,2011 (two years after acquisition),appear in the first two columns of the partially completed consolidation working papers.Packo has accounted for its investment in Sennett using the equity method of accounting. Required: Complete the consolidation working papers for Packo Company and Subsidiary for the year ending December 31,2011.

Bird Corporation has several subsidiaries that are included in its consolidated financial statements and several other investments in corporations that are not consolidated.In its year-end trial balance,the following intercompany balances appear.Ostrich Corporation is the unconsolidated company;the rest are consolidated. What amount should Bird report as intercompany receivables on its consolidated balance sheet?

Use the following information to answer question(s)below. On January 1,2011,Punch Corporation purchased 80% of the common stock of Soopy Co.Separate balance sheet data for the companies at the acquisition date(after the acquisition)are given below: At the date of the acquisition,the book values of Soopy's net assets were equal to the fair value except for Soopy's inventory,which had a fair value of $60,000. Determine below what the consolidated balance would be for each of the requested accounts. -What amount of Goodwill will be reported?

When preparing consolidated financial statements,which of the following is a subtraction in the calculation of cash flows from operating activities under the indirect method?

When preparing the consolidation workpaper for a company and its controlled subsidiary,which of the following would be used for the entities being consolidated?

A parent corporation owns 55% of the outstanding voting common stock of one domestic subsidiary.The parent has control over the subsidiary.Which of the following statements is correct?

On January 1,2011,Persona Company acquired 80% of Sule Tooling for $332,000.At that time,Sule reported their Common stock at $150,000,Additional paid in capital at $45,000,and Retained earnings at $105,000.Sule also had equipment on their books that had a remaining life of 10 years and were undervalued on the books by $40,000,but any additional fair value/book value differential is assumed to be goodwill.During the next three years,Sule reported the following: Required: Calculate the following. a.How much excess depreciation or amortization would be recognized in the consolidated financial statements in each of these three years? b.How much goodwill would be recognized on the balance sheet at the date of acquisition,and at the end of each year listed? c.How much investment income would be reported by Persona under the equity method for each of the three years? d.What would be the balance in the Investment in Sule account at January 1,2011,and at the end of each of the three years listed?

On December 31,2011,Paladium International purchased 70% of the outstanding common stock of Sennex Chemical.Paladium paid $140,000 for the shares and determined that the fair value of all recorded Sennex assets and liabilities approximated their book values,with the exception of a customer list that was not recorded and had a fair value of $10,000,and an expected remaining useful life of 5 years.At the time of purchase,Sennex had stockholders' equity consisting of capital stock amounting to $20,000 and retained earnings amounting to $80,000.Any remaining excess fair value was attributed to goodwill.The separate financial statements at December 31,2012 appear in the first two columns of the consolidation workpapers shown below. Required: Complete the consolidation working papers for Paladium and Sennex for the year 2012. Paladium

Pennack Corporation purchased 75% of the outstanding stock of Shing Corporation on January 1,2011 for $300,000 cash.At the time of the purchase,the book value and fair value of Shing's assets and liabilities were equal.Shing's balance sheet at the time of acquisition and December 31,2011 are shown below. Shing earned $60,000 in income during the year,and paid out $30,000 in dividends.Pennack uses the equity method to account for its investment in Shing. Requirement 1: Calculate Pennack's net income from Shing in 2011. Requirement 2: Calculate the noncontrolling interest share in Shing's income for 2011. Requirement 3: Calculate the balance in the Investment in Shing account reported on Pennack's separate general ledger at December 31,2011. Requirement 4: Calculate the noncontrolling interest that will be reported on the consolidated balance sheet at December 31,2011.

On January 2,2011,Paleon Packaging purchased 90% of the outstanding common stock of Sampson Shipping and Supplies for $513,000.Sampson's book values represented the fair values of all recorded assets and liabilities at that date,however Sampson had rights to a patent that was not recorded on their books,with an approximate fair value of $270,000,and a 10-year remaining useful life.Sampson's shareholders' equity reported on that date consisted of $100,000 in capital stock and $150,000 in retained earnings.Any remaining fair value/book value differential is assumed to be goodwill.The December 31,2012 financial statements for each of the companies are provided in the worksheet below. Required: Complete the consolidation worksheet provided below to determine consolidated balances to be reported at December 31,2012.

When performing a consolidation,if the balance sheet does not balance,

In contrast with single entity organizations,consolidated financial statements include which of the following in the calculation of cash flows from operating activities under the indirect method?

On consolidated working papers,a subsidiary's net income is

Flagship Company has the following information collected in order to prepare a cash flow statement and uses the indirect method for Cash Flow from Operations.The annual report year end is December 31,2011. Required: 1.Prepare the Cash Flow for Operations part of the cash flow statement for Flagship for the year ended December 31,2011.

Pecan Incorporated acquired 80% of the voting stock of Shew Manufacturing for $800,000 on January 2,2011 when Shew had outstanding common stock of $600,000 and Retained Earnings of $300,000.The book value and fair value of Shew's assets and liabilities were equal except for equipment.The entire fair value/book value differential is allocated to equipment and is fully depreciated on a straight-line basis over a 5-year period. During 2011,Shew borrowed $80,000 on a short-term non-interest-bearing note from Pecan,and on December 31,2011,Shew mailed a check for $20,000 to Pecan in partial payment of the note.Pecan deposited the check on January 4,2012,and recorded the entry to reduce the note balance at that time. Required: Complete the consolidation working papers for the year ended December 31,2011.

Pigeon Corporation acquired an 80% interest in Statue Company on January 1,2011,for $90,000 cash when Statue had Capital Stock of $60,000 and Retained Earnings of $40,000.The fair value/book value differential was attributable to equipment with a 10-year (straight-line)life.Statue suffered a $10,000 net loss in 2011 and paid no dividends.At year-end 2011,Statue owed Pigeon $18,000 on account.Pigeon's separate income for 2011 was $150,000.Controlling interest share of consolidated net income for 2011 was

On January 1,2011,Paisley Incorporated paid $300,000 for 60% of Smarnia Company's outstanding capital stock.Smarnia reported common stock on that date of $250,000 and retained earnings of $100,000.Plant assets,which had a five-year remaining life,were undervalued in Smarnia's financial records by $10,000.Smarnia also had a patent that was not on the books,but had a market value of $60,000.The patent has a remaining useful life of 10 years.Any remaining fair value/book value differential is allocated to goodwill.Smarnia's net income and dividends paid the first three years that Paisley owned them are shown below. Requirement 1: Calculate the noncontrolling interest share in Smarnia's income for each of the three years. Requirement 2: Calculate the noncontrolling interest that should be reported on the consolidated balance sheet at the end of each of the three years. Requirement 3: Assuming that Paisley uses the equity method to record their investment in Smarnia,calculate the ending balance in the Investment in Smarnia account for each of the three years.

Use the following information to answer question(s)below. On January 1,2011,Punch Corporation purchased 80% of the common stock of Soopy Co.Separate balance sheet data for the companies at the acquisition date(after the acquisition)are given below: At the date of the acquisition,the book values of Soopy's net assets were equal to the fair value except for Soopy's inventory,which had a fair value of $60,000. Determine below what the consolidated balance would be for each of the requested accounts. -What amount of total liabilities will be reported?