Exam 4: Consolidated Techniques and Procedures

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.

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, 2010, 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, 2012, the companies showed the following balances on their respective adjusted trial balances: Requirement 1: Calculate the balance in the Plant assets - net and the Patent accounts on the consolidated balance sheet as of December 31, 2012. Requirement 2: Calculate consolidated net income for 2012, 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, 2012.

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.

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.

Puddle Corporation acquired all the voting stock of Soggi Company for $500,000 on January 1, 2011 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 2011, Puddle borrowed $25,000 on a short-term non-interest-bearing note from Soggi, and on December 31, 2011, Puddle mailed a check to Soggi to settle the note.Soggi deposited the check on January 5, 2012, but receipt of payment of the note was not reflected in Soggi's December 31, 2011 balance sheet. Required: Complete the consolidation working papers for the year ended December 31, 2011.

Parakeet Company has the following information collected in order to prepare a cash flow statement and uses the direct 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 Parakeet for the year ended December 31, 2011.

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

Which one of the following will increase consolidated retained earnings?

Pommu Corporation paid $78,000 for a 60% interest in Schtick Inc.on January 1, 2011, 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, 2011 are given below: During 2011, Pommu made only two journal entries with respect to its investment in Schtick.On January 1, 2011, it debited the Investment in Schtick account for $78,000 and on November 1, 2011, 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, 2011. 2.Prepare a consolidated balance sheet for Pommu and Subsidiary as of December 31, 2011.

A parent company uses the equity method to account for its wholly-owned subsidiary.Which of the following will be a correct procedure for the Investment account?

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 is the amount of consolidated Retained Earnings?

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?

Parrot Corporation acquired 90% of Swallow Co.on January 1, 2011 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 2011.

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.

Pull Incorporated and Shove Company reported summarized balance sheets as shown below, on December 31, 2011. On January 1, 2012, 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, 2012, 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

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 Inventory will be reported?

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 is the reported amount for the noncontrolling interest?