Exam 4: Consolidated Techniques and Procedures

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?

On December 31,2014,Patenne Incorporated purchased 60% of Smolin Manufacturing for $300,000.The book value and fair value of Smolin's assets and liabilities were equal with the exception of plant assets which were undervalued by $60,000 and had a remaining life of 10 years,and a patent which was undervalued by $40,000 and had a remaining life of 5 years.At December 31,2016,the companies showed the following balances on their respective adjusted trial balances: Assets (includes Requirement 1: Calculate the balance in the Plant assets - net and the Patent accounts on the consolidated balance sheet as of December 31,2016. Requirement 2: Calculate consolidated net income for 2016,and the amount allocated to the controlling and noncontrolling interests. Requirement 3: Calculate the balance of the noncontrolling interest in Smolin to be reported on the consolidated balance sheet at December 31,2016.

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.

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.

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: -What amount of Goodwill will be reported?

On January 2,2014,PBL Enterprises purchased 90% of Santos Incorporated outstanding common stock for $1,687,500 cash.Santos' net assets had a book value of $1,300,000 at the time.A building with a 15-year remaining life and a book value of $100,000 had a fair value of $175,000.Any other excess amount was attributed to goodwill.PBL reported net income for the first year of $350,000 (without regard for its ownership in Santos),while Santos had $175,000 in earnings. Required: 1.Calculate the amount of goodwill related to this acquisition as reported on the consolidated balance sheet at January 2,2014. 2.Calculate the amount of consolidated net income for the year ended December 31,2014. 3.What is the amount that will be assigned to the building on the consolidated balance sheet at the date of acquisition?

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?

The direct method of the consolidated cash flow statement begins with the controlling share of consolidated net income.

In the cost method of acquisition income is recognized only when the subsidiary declares dividends.

Pennack Corporation purchased 75% of the outstanding stock of Shing Corporation on January 1,2014 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 31,2014 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 2014. Requirement 2: Calculate the noncontrolling interest share in Shing's income for 2014. Requirement 3: Calculate the balance in the Investment in Shing account reported on Pennack's separate general ledger at December 31,2014. Requirement 4: Calculate the noncontrolling interest that will be reported on the consolidated balance sheet at December 31,2014.

Pommu Corporation paid $78,000 for a 60% interest in Schtick Inc.on January 1,2014,when Schtick's Capital Stock was $80,000 and its Retained Earnings $20,000.The fair values of Schtick's identifiable assets and liabilities were the same as the recorded book values on the acquisition date.Trial balances at the end of the year on December 31,2014 are given below: During 2014,Pommu made only two journal entries with respect to its investment in Schtick.On January 1,2014,it debited the Investment in Schtick account for $78,000 and on November 1,2014,it credited Dividend Income for $6,000. Required: 1.Prepare a consolidated income statement and a statement of retained earnings for Pommu and Subsidiary for the year ended December 31,2014. 2.Prepare a consolidated balance sheet for Pommu and Subsidiary as of December 31,2014.

In the consolidated balance sheet,the GAAP requires that the amount of goodwill be shown as a separate balance sheet item even if it is immaterial.

The GAAP only authorizes the use of the indirect method for preparation of the consolidated cash flow statement.

The entry to record the receipt of intercompany note receivable includes a credit to Note Receivable - Subsidiary.

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: -What is the amount of consolidated Retained Earnings?

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.

Proceeds from the sale of land are presented in the operating activities on the consolidated cash flow statement.

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

Platt Corporation paid $87,500 for a 70% interest in Suve Corporation on January 1,2014,when Suve's Capital Stock was $70,000 and its Retained Earnings $30,000.The fair values of Suve's identifiable assets and liabilities were the same as the recorded book values on the acquisition date.Trial balances at the end of the year on December 31,2014 are given below: During 2014,Platt made only two journal entries with respect to its investment in Suve.On January 1,2014,it debited the Investment in Suve account for $87,500 and on November 1,2014,it credited Dividend Income for $7,000. Required: 1.Prepare a consolidated income statement and a statement of retained earnings for Platt and Subsidiary for the year ended December 31,2014. 2.Prepare a consolidated balance sheet for Platt and Subsidiary as of December 31,2014.

Adjustments made for consolidation statements impact both the parent and subsidiary general ledger accounts.