Exam 4: Consolidated Techniques and Procedures

Pawl Corporation acquired 90% of Snab Corporation on January 1,2014 for $72,000 cash when Snab's stockholders' equity consisted of $30,000 of Capital Stock and $30,000 of Retained Earnings.The difference between the fair value of Pawl's assets and liabilities and the book value was allocated to a plant asset with a remaining 10-year straight-line life that was overvalued on the books by $5,000.The remainder was attributable to goodwill.The separate company statements for Pawl and Snab appear in the first two columns of the partially completed consolidation working papers. Required: Complete the consolidation working papers for Pawl and Snab for the year 2014.

Pecan Incorporated acquired 80% of the voting stock of Shew Manufacturing for $800,000 on January 2,2014 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 2014,Shew borrowed $80,000 on a short-term non-interest-bearing note from Pecan,and on December 31,2014,Shew mailed a check for $20,000 to Pecan in partial payment of the note.Pecan deposited the check on January 4,2015,and recorded the entry to reduce the note balance at that time. Required: Complete the consolidation working papers for the year ended December 31,2014.

Pull Incorporated and Shove Company reported summarized balance sheets as shown below,on December 31,2014. On January 1,2015,Pull purchased 70% of the outstanding capital stock of Shove for $392,000,of which $92,000 was paid in cash,and $300,000 was borrowed from their bank.The debt is to be repaid in 10 annual installments beginning on December 31,2015,with each payment consisting of $30,000 principal,plus accrued interest. The excess fair value of Shove Company over the underlying book value is allocated to inventory (60 percent)and to goodwill (40 percent). Required: Calculate the balance in each of the following accounts,on the consolidated balance sheet,immediately following the acquisition. a.Current assets b.Noncurrent assets c.Current liabilities d.Long-term debt e.Stockholders' equity

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?

Pigeon Corporation acquired an 80% interest in Statue Company on January 1,2014,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 2014 and paid no dividends.At year-end 2014,Statue owed Pigeon $18,000 on account.Pigeon's separate income for 2011 was $150,000.Controlling interest share of consolidated net income for 2014 was

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

Use the following information to answer question(s)below. On January 1,2014,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?

Parrot Corporation acquired 90% of Swallow Co.on January 1,2014 for $27,000 cash when Swallow's stockholders' equity consisted of $10,000 of Capital Stock and $5,000 of Retained Earnings.The difference between the fair value and book value of Swallow's net assets was allocated solely to a patent amortized over 5 years.The separate company statements for Parrot and Swallow appear in the first two columns of the partially completed consolidation working papers. Required: Complete the consolidation working papers for Parrot and Swallow for the year 2014.

On December 31,2014,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 31,2015 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 2015. Paladium

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

On January 2,2014,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 31,2015 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 31,2015.

Packo Company acquired all the voting stock of Sennett Corporation on January 1,2014 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 2014), (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 31,2015 (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 31,2015.

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 31,2014. Required: 1.Prepare the Cash Flow for Operations part of the cash flow statement for Flagship for the year ended December 31,2014.

Use the following information to answer question(s)below. On January 1,2014,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?

Which one of the following will increase consolidated retained earnings?

Use the following information to answer question(s)below. On January 1,2014,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 is the reported amount for the noncontrolling interest?

On January 1,2014,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 1,2014,and at the end of each of the three years listed?

Puddle Corporation acquired all the voting stock of Soggi Company for $500,000 on January 1,2014 when Soggi had Capital Stock of $300,000 and Retained Earnings of $150,000.The book value of Soggi's assets and liabilities were equal to the fair value except for the plant assets.The entire cost-book value differential is allocated to plant assets and is fully depreciated on a straight-line basis over a 10-year period. During 2014,Puddle borrowed $25,000 on a short-term non-interest-bearing note from Soggi,and on December 31,2014,Puddle mailed a check to Soggi to settle the note.Soggi deposited the check on January 5,2015,but receipt of payment of the note was not reflected in Soggi's December 31,2014 balance sheet. Required: Complete the consolidation working papers for the year ended December 31,2014.

A parent company uses the equity method to account for its wholly-owned subsidiary,but has applied it incorrectly.In each of the past four full years,the company adjusted the Investment account when it received dividends from the subsidiary but did not adjust the account for any of the subsidiary's profits.The subsidiary had four years of profits and paid yearly dividends in amounts that were less than reported net incomes.Which one of the following statements is correct if the parent company discovered its mistake at the end of the fourth year,and is now preparing consolidation working papers?

Use the following information to answer question(s)below. On January 1,2014,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 Inventory will be reported?