Exam 3: Consolidated Statements: Subsequent to Acquisition

On January 1, 2016, Promo, Inc.purchased 70% of Set Corporation for $469,000.On that date the book value of the net assets of Set totaled $500,000.Based on the appraisal done at the time of the purchase, all assets and liabilities had book values equal to their fair values except as follows: Book Value Fair Value Inventory \ 100,000 \ 120,000 Land 75,000 85,000 Equipment (useful life 4 years) 125,000 165,000 The remaining excess of cost over book value was allocated to a patent with a 10-year useful life. During 2016 Promo reported net income of $200,000 and Set had net income of $100,000. What is consolidated net income if Promo recognizes income from Set using the sophisticated equity method?

What is the effect if an unconsolidated subsidiary is accounted for by the equity method but consolidated statements are being prepared for the parent company and other subsidiaries?

On January 1, 2016, Parent Company purchased 80% of the common stock of Subsidiary Company for $316,000.On this date, Subsidiary had common stock, other paid-in capital, and retained earnings of $40,000, $120,000, and $190,000, respectively.Net income and dividends for 2 years for Subsidiary Company were as follows: ? ? 201 202 Net income \ 50,000 \ 90,000 Dividends 10,000 20,000 On January 1, 2016, the only tangible assets of Subsidiary that were undervalued were inventory and building.Inventory, for which FIFO is used, was worth $5,000 more than cost.The inventory was sold in 2016.Building, which was worth $15,000 more than book value, has a remaining life of 8 years, and straight-line depreciation is used.Any remaining excess is goodwill. ? Prepare Parent's 2016 and 2017 journal entries (after the purchase has been recorded) to record the transactions related to its investment in Subsidiary under the a.cost method b.simple equity method

Pete purchased 100% of the common stock of the Sanburn Company on January 1, 2016, for $500,000.On that date, the stockholders' equity of Sanburn Company was $380,000.On the purchase date, inventory of Sanburn Company, which was sold during 2016, was understated by $20,000.Any remaining excess of cost over book value is attributable to patent with a 20-year life.The reported income and dividends paid by Sanburn Company were as follows: ? ? 2016 2017 Net income \ 80,000 \ 90,000 Dividends paid 10,000 10,000 Using the simple equity method, which of the following amounts are correct? ? Investment Income Investment Account Balance 2016 December 31,2016 A) \ 80,000 \ 570,000 B) \ 70,000 \ 570,000 C) \ 70,000 \ 550,000 D) \ 80,000 \ 550,000

Company A purchased a 90% interest in Company B in 2016 with total subsidiary goodwill of $135,000.Assume the investment amount exceeded the fair value of the subsidiary with the subsidiary book value based on acquisition date, amortized balances on December 31, 2019 of $1,000,000.The estimated fair value of Company B of $1,035,000 and the estimated fair value of net identifiable assets of $1,000,000.Select the following which is applies to the above transaction: ? Goodwill is not impaired and no loss is calculated. Goodwill is impaired and a Goodwill impairment loss of $100,000 is calculated. All of the goodwill of $135,000 needs to be written off. Goodwill is impaired and a Goodwill impairment loss of $35,000 is calculated.

Dickinson Corporation is considering the acquisition of Williston Company through the acquisition of Williston's common stock.Dickinson Corporation will issue 15,000 shares of its $5 par common stock, with a fair value of $30 per share, in exchange for all 10,000 outstanding shares of Williston Company's voting common stock.The acquisition meets the criteria for a tax-free exchange as to the seller.Because of this, Dickinson Corporation will be limited for future tax returns to the book value of the depreciable assets.Dickinson Corporation falls into the 30% tax bracket.The appraisal of the assets of Williston Company shows that the inventory has a fair value of $120,000, and the depreciable fixed assets have a fair value of $250,000 and a 10-year life.Any remaining excess is attributed to goodwill.Williston Company has the following balance sheet just before the acquisition: ? ? Williston Company Bal ance Sheet December 31,2016 Assets Liabilities \& Equities Cash \ 40,000 Current Liabilities \ 50,000 Accounts Receivable 150,000 Bonds Payable 100,000 Inventory 100,000 Common Stock (\ 10 par ) 100,000 Depreciable Assets Retained Earnings \ \ Required: a.Prepare a value analysis and a determination and distribution of excess schedule.? ? b.Prepare the elimination entries that would be made on the consolidated worksheet on the date of acquisition.

Balance sheet information for Pawn Company and its 90%-owned subsidiary, Sox Corporation, at December 31, 2016, is summarized as follows: Pawn Sox Current assets-net \ 200,000 \ 50,000 Property, plant, and equipment-net 1,000,000 600,000 Investment in Sox 558,000 \ 1,758,000 \ 650,000 Current liabilities \ 100,000 \ 30,000 Capital stock 800,000 400,000 Retained earnings 858,000 220,000 \ 1,758,000 \ 650,000 Pawn acquired its interest in Sox for cash at book value several years ago when Sox's assets and liabilities were equal to their fair values. The consolidated balance sheet of Pawn and Sox at December 31, 2016 will show

On January 1, 2016, Promo, Inc.purchased 70% of Set Corporation for $469,000.On that date the book value of the net assets of Set totaled $500,000.Based on the appraisal done at the time of the purchase, all assets and liabilities had book values equal to their fair values except as follows: Book Value Fair Value Inventory \ 100,000 \ 120,000 Land 75,000 85,000 Equipment (useful life 4 years) 125,000 165,000 The remaining excess of cost over book value was allocated to a patent with a 10-year useful life. During 2016 Promo reported net income of $200,000 and Set had net income of $100,000. What income from subsidiary did Promo include in its net income if Promo uses the simple equity method?

On January 1, 2016, Parent Company purchased 80% of the common stock of Subsidiary Company for $316,000.On this date, Subsidiary had common stock, other paid-in capital, and retained earnings of $40,000, $120,000, and $190,000, respectively.Net income and dividends for 2 years for Subsidiary Company were as follows: ? ? 2016 2017 Netincome \ 50,000 \ 90,000 Dividends 10,000 20,000 On January 1, 2016, the only tangible assets of Subsidiary that were undervalued were inventory and building.Inventory, for which FIFO is used, was worth $5,000 more than cost.The inventory was sold in 2016.Building, which was worth $15,000 more than book value, has a remaining life of 8 years, and straight-line depreciation is used.Any remaining excess is goodwill. ? Prepare all necessary elimination entries for the consolidating worksheet of December 31, 2017.Assume Parent uses the simple equity method of accounting for its investment in Subsidiary.

Pete purchased 100% of the common stock of the Sanburn Company on January 1, 2016, for $500,000.On that date, the stockholders' equity of Sanburn Company was $380,000.On the purchase date, inventory of Sanburn Company, which was sold during 2016, was understated by $20,000.Any remaining excess of cost over book value is attributable to patent with a 20-year life.The reported income and dividends paid by Sanburn Company were as follows: ? ? 2016 2017 Net income \ 80,000 \ 90,000 Dividends paid 10,000 10,000 Using the cost method, which of the following amounts are correct? ? Investment Income Investment Account Balance 2016 December 31,2016 A) \ 10,000 \ 500,000 B) \ 10,000 \ 570,000 C) \ 0 \ 570,000 D) \ 80,000 \ 500,000

The method of accounting for subsidiaries that is required for influential investments is the

If in the consolidation process the investment in subsidiary account is increased or decreased by the amount determined by the following calculation: $\text { (Parent ownership percentage } ) \times ( \text { Current balance in subsidiary retained eamings minus the subsidiary's retained eamings balance on the date of acquisition } )$ the investment account is being converted from

Refer to the information below and Worksheet 3-1. ? On January 1, 2016, Parent Company purchased 80% of the common stock of Subsidiary Company for $316,000.On this date, Subsidiary had common stock, other paid-in capital, and retained earnings of $40,000, $120,000, and $190,000, respectively.Net income and dividends for 2 years for Subsidiary Company were as follows: ? ? 2016 2017 Netincome \ 50,000 \ 90,000 Dividends 10,000 20,000 On January 1, 2016, the only tangible assets of Subsidiary that were undervalued were inventory and building.Inventory, for which FIFO is used, was worth $5,000 more than cost.The inventory was sold in 2016.Building, which was worth $15,000 more than book value, has a remaining life of 8 years, and straight-line depreciation is used.Any remaining excess is goodwill. ? Required: a.Complete the consolidating worksheet for December 31, 2017. b.Prepare supportive Income Distribution Schedules for Subsidiary and Parent.

The Paris Company purchased an 80% interest in Seine, Inc.for $600,000 on July 1, 2016, when Seine had the following balance sheet: ? ? Assets Accounts receivable \ 50,000 Inventory 120,000 Land 80,000 Building 270,000 Equipment Total \ 600,000 Liabilities and Equity Current liabilities \ 100,000 Common stock, \ 5 par 50,000 Paid-in capital in excess of par 150,000 Retained earnings (July 1) Total \ 600,000 The inventory is understated by $20,000 and is sold in the third quarter of 2016.The building has a fair value of $320,000 and a 10-year remaining life.The equipment has a fair value of $120,000 and a remaining life of 5 years.Any remaining excess is attributed to goodwill. ? From July 1 through December 31, 2016, Seine had net income of $100,000 and paid $10,000 in dividends. ? Assume that Paris uses the cost method to record its investment in Seine. ? Required: ? a.Prepare a determination and distribution of excess schedule as of July 1, 2016.? ? b.Prepare the eliminations and adjustments that would be made on the December 31, 2016, consolidated worksheet to eliminate the investment in Seine.Distribute and amortize any excess.

On January 1, 2016, Parent Company purchased 80% of the common stock of Subsidiary Company for $316,000.On this date, Subsidiary had common stock, other paid-in capital, and retained earnings of $40,000, $120,000, and $190,000, respectively.Net income and dividends for 2 years for Subsidiary Company were as follows: ? ? 2016 2017 Netincome \ 50,000 \ 90,000 Dividends 10,000 20,000 On January 1, 2016, the only tangible assets of Subsidiary that were undervalued were inventory and building.Inventory, for which FIFO is used, was worth $5,000 more than cost.The inventory was sold in 2016.Building, which was worth $15,000 more than book value, has a remaining life of 8 years, and straight-line depreciation is used.Any remaining excess is goodwill. ? Prepare all necessary elimination entries for the consolidating worksheet of December 31, 2016.Assume Parent uses the simple equity method of accounting for its investment in Subsidiary.?

Balance sheet information for Pawn Company and its 90%-owned subsidiary, Sox Corporation, at December 31, 2016, is summarized as follows: Current assets-net \ 200,000 \ 50,000 Property, plant, and equipment-net 1,000,000 600,000 Investment in Sox 558,000 \ 1,758,000 \ 650,000 Current liabilities \ 100,000 \ 30,000 Capital stock 800,000 400,000 Retained earnings 858,000 220,000 \ 1,758,000 \ 650,000 Pawn acquired its interest in Sox for cash at book value several years ago when Sox's assets and liabilities were equal to their fair values. Consolidated total assets of Pawn and Sox, at December 31, 2016, will be ____.

On January 1, 2016, Rabb Corp.purchased 80% of Sunny Corp.'s $10 par common stock for $975,000.On this date, the carrying amount of Sunny's net assets was $1,000,000.The fair values of Sunny's identifiable assets and liabilities were the same as their carrying amounts except for plant assets (net), which were $100,000 in excess of the carrying amount. ​ In the January 1, 2016, consolidated balance sheet, goodwill should be reported at ____.

How is the portion of consolidated earnings to be assigned to non-controlling interest in consolidated financial statements determined?​

The determination and distribution schedule for the consolidation of Petoskey (80% interest) and Sable reads in part: ? Prepare the elimination entries to distribute and amortize the excess purchase cost on a.1/1/16, the date of acquisition b.12/31/16, the end of the first year following the acquisition c.12/31/18, the end of the third year following the acquisition.

On January 1, 20161, Parent Company purchased 80% of the common stock of Subsidiary Company for $316,000.On this date, Subsidiary had common stock, other paid-in capital, and retained earnings of $40,000, $120,000, and $190,000, respectively.Net income and dividends for 2 years for Subsidiary Company were as follows: ? ? 2016 2017 Netincome \ 50,000 \ 90,000 Dividends 10,000 20,000 On January 1, 2016, the only tangible assets of Subsidiary that were undervalued were inventory and building.Inventory, for which FIFO is used, was worth $5,000 more than cost.The inventory was sold in 2017.Building, which was worth $15,000 more than book value, has a remaining life of 8 years, and straight-line depreciation is used.Any remaining excess is goodwill. ? Prepare the necessary date alignment entries for the consolidating worksheet for December 31, 2016 and December 31, 2017 assuming that Parent records its investment in Subsidiary using a.the cost method b.the simple equity method ? If date alignment entries are not required, give rationale.