Exam 5: Consolidation of Less-Than-Wholly-Owned Subsidiaries Acquired at More Than Book Value

The following information applies to Questions 41-45 On January 1, 20X6, Polka Co. (Polka) and Strauss Co. (Strauss) had condensed balance sheets as follows: On January 2, 20X6, Polka borrowed $90,000 and used the proceeds to acquire 90% of the outstanding common shares of Strauss. This debt is payable in ten equal annual principal and accrued interest payments beginning December 30, 20X6. On the acquisition date, the fair value of Strauss was $100,000, and the excess cost of the investment over Strauss's carrying amount of acquired net assets should be allocated 60% to inventory and 40% to goodwill. -Noncurrent assets on the January 2,20X6,consolidated balance sheet should be:

The following information applies to Questions 7-13 On January 1, 20X9, Gulliver Corporation acquired 80 percent of Sea-Gull Company's common stock for $160,000 cash. The fair value of the noncontrolling interest at that date was determined to be $40,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition: At the date of the business combination, the book values of Sea-Gull's net assets and liabilities approximated fair value except for inventory, which had a fair value of $45,000, and land, which had a fair value of $60,000. -Based on the preceding information,what amount of total inventory will be reported in the consolidated balance sheet prepared immediately after the business combination?

The following information applies to Questions 29-31 On January 1, 20X6, Climber Corporation acquired 90 percent of Wisden Corporation for $180,000 cash. Wisden reported net income of $30,000 and dividends of $10,000 for 20X6, 20X7, and 20X8. On January 1, 20X6, Wisden reported common stock outstanding of $100,000 and retained earnings of $60,000, and the fair value of the noncontrolling interest was $20,000. It held land with a book value of $30,000 and a market value of $35,000 and equipment with a book value of $50,000 and a market value of $60,000 at the date of combination. The remainder of the differential at acquisition was attributable to an increase in the value of patents, which had a remaining useful life of five years. All depreciable assets held by Wisden at the date of acquisition had a remaining economic life of five years. Climber uses the equity method in accounting for its investment in Wisden. -Based on the preceding information,what balance would Climber report as its investment in Wisden at January 1,20X9?

The following information applies to Questions 7-13 On January 1, 20X9, Gulliver Corporation acquired 80 percent of Sea-Gull Company's common stock for $160,000 cash. The fair value of the noncontrolling interest at that date was determined to be $40,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition: At the date of the business combination, the book values of Sea-Gull's net assets and liabilities approximated fair value except for inventory, which had a fair value of $45,000, and land, which had a fair value of $60,000. -Based on the preceding information,what amount of total assets will be reported in the consolidated balance sheet prepared immediately after the business combination?

The following information applies to Questions 21-26 On December 31, 20X8, X Company acquired controlling ownership of Y Company. A consolidated balance sheet was prepared immediately. Partial balance sheet data for the two companies and the consolidated entity at that date follow: During 20X8, X Company provided consulting services to Y Company and has not yet paid for them. There were no other receivables or payables between the companies at December 31, 20X8. -Based on the information given,X Company and Y Company reported wages payable of

The following information applies to Questions 7-13 On January 1, 20X9, Gulliver Corporation acquired 80 percent of Sea-Gull Company's common stock for $160,000 cash. The fair value of the noncontrolling interest at that date was determined to be $40,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition: At the date of the business combination, the book values of Sea-Gull's net assets and liabilities approximated fair value except for inventory, which had a fair value of $45,000, and land, which had a fair value of $60,000. -Based on the preceding information,what amount will be reported as total stockholders' equity in the consolidated balance sheet prepared immediately after the business combination?

The following information applies to Questions 41-45 On January 1, 20X6, Polka Co. (Polka) and Strauss Co. (Strauss) had condensed balance sheets as follows: On January 2, 20X6, Polka borrowed $90,000 and used the proceeds to acquire 90% of the outstanding common shares of Strauss. This debt is payable in ten equal annual principal and accrued interest payments beginning December 30, 20X6. On the acquisition date, the fair value of Strauss was $100,000, and the excess cost of the investment over Strauss's carrying amount of acquired net assets should be allocated 60% to inventory and 40% to goodwill. -Noncurrent liabilities on the January 2,20X6,consolidated balance sheet should be:

The following information applies to Questions 7-13 On January 1, 20X9, Gulliver Corporation acquired 80 percent of Sea-Gull Company's common stock for $160,000 cash. The fair value of the noncontrolling interest at that date was determined to be $40,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition: At the date of the business combination, the book values of Sea-Gull's net assets and liabilities approximated fair value except for inventory, which had a fair value of $45,000, and land, which had a fair value of $60,000. -Based on the preceding information,what amount will be reported as noncontrolling interest in the consolidated balance sheet prepared immediately after the business combination?

Which of the following stockholders equity accounts are eliminated during the consolidation process?

Based on the preceding information,what amount of land will be included in the consolidated balance sheet immediately following the acquisition?

The following information applies to Questions 37 - 38 On December 31, 20X5, Paris Corporation acquired 60 percent of Sanlo Company's common stock for $180,000. At that date, the fair value of the noncontrolling interest was $120,000. Of the $45,000 differential, $5,000 related to the increased value of Sanlo's inventory, $15,000 related to the increased value of its land, and $10,000 related to the increased value of its equipment that had a remaining life of five years from the date of combination. Sanlo sold all inventory it held at the end of 20X5 during 20X6. The land to which the differential related was also sold during 20X6 for a large gain. In 20X6, Sanlo reported net income of $40,000 but paid no dividends. Paris accounts for its investment in Sanlo using the equity method. -Based on the preceding information,what amount of differential would Paris amortize during 20X6 in its equity method journal entries?

The following information applies to Questions 29-31 On January 1, 20X6, Climber Corporation acquired 90 percent of Wisden Corporation for $180,000 cash. Wisden reported net income of $30,000 and dividends of $10,000 for 20X6, 20X7, and 20X8. On January 1, 20X6, Wisden reported common stock outstanding of $100,000 and retained earnings of $60,000, and the fair value of the noncontrolling interest was $20,000. It held land with a book value of $30,000 and a market value of $35,000 and equipment with a book value of $50,000 and a market value of $60,000 at the date of combination. The remainder of the differential at acquisition was attributable to an increase in the value of patents, which had a remaining useful life of five years. All depreciable assets held by Wisden at the date of acquisition had a remaining economic life of five years. Climber uses the equity method in accounting for its investment in Wisden. -Based on the preceding information,the increase in the fair value of patents held by Wisden is:

The following information applies to Questions 14 - 20 On January 1, 20X6, Interstate Corporation acquired 70 percent of Catapult Company's common stock for $210,000 cash. The fair value of the noncontrolling interest at that date was determined to be $90,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition: At the date of the business combination, the book values of Catapult's assets and liabilities approximated fair value except for inventory, which had a fair value of $30,000, and land, which had a fair value of $95,000. -Based on the preceding information,what amount of total assets will be reported in the consolidated balance sheet prepared immediately after the business combination?

The following information applies to Questions 7-13 On January 1, 20X9, Gulliver Corporation acquired 80 percent of Sea-Gull Company's common stock for $160,000 cash. The fair value of the noncontrolling interest at that date was determined to be $40,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition: At the date of the business combination, the book values of Sea-Gull's net assets and liabilities approximated fair value except for inventory, which had a fair value of $45,000, and land, which had a fair value of $60,000. -Based on the preceding information,what amount of total liabilities will be reported in the consolidated balance sheet prepared immediately after the business combination?

On January 1,20X8,Vector Company acquired 80 percent of Scalar Company's ownership on for $120,000 cash.At that date,the fair value of the noncontrolling interest was $30,000.The book value of Scalar's net assets at acquisition was $125,000.The book values and fair values of Scalar's assets and liabilities were equal,except for buildings and equipment,which were worth $15,000 more than book value.Buildings and equipment are depreciated on a 10-year basis.Although goodwill is not amortized,the management of Vector concluded at December 31,20X8,that goodwill from its acquisition of Scalar shares had been impaired and the correct carrying amount was $5,000.Goodwill and goodwill impairment were assigned proportionately to the controlling and noncontrolling shareholders.No additional impairment occurred in 20X9. Trial balance data for Vector and Scalar on December 31,20X9,are as follows: Required: 1)Provide all consolidating entries needed to prepare a three-part consolidation worksheet as of December 31,20X9. 2)Prepare a three-part consolidation worksheet for 20X9 in good form. Problem 57 (continued):

The following information applies to Questions 7-13 On January 1, 20X9, Gulliver Corporation acquired 80 percent of Sea-Gull Company's common stock for $160,000 cash. The fair value of the noncontrolling interest at that date was determined to be $40,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition: At the date of the business combination, the book values of Sea-Gull's net assets and liabilities approximated fair value except for inventory, which had a fair value of $45,000, and land, which had a fair value of $60,000. -Based on the preceding information,what amount of consolidated retained earnings will be reported immediately after the business combination?

The following information applies to Questions 39-40 On January 1, 20X8, Ramon Corporation acquired 75 percent of Tester Company's voting common stock for $300,000. At the time of the combination, Tester reported common stock outstanding of $200,000 and retained earnings of $150,000, and the fair value of the noncontrolling interest was $100,000. The book value of Tester's net assets approximated market value except for patents that had a market value of $50,000 more than their book value. The patents had a remaining economic life of ten years at the date of the business combination. Tester reported net income of $40,000 and paid dividends of $10,000 during 20X8. -Based on the preceding information,which of the following is an consolidating entry needed to prepare a full set of consolidated financial statements at December 31,20X8:

When a parent owns less than 100% of a subsidiary,the noncontrolling interest shareholders are allocated their ownership percentage of income or net assets in all of the following consolidating entries except for: