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

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 1,20X8?

Pink Inc.sells half of its 70% interest in Brown Co.on January 1,20X6.On that date,the fair value of Brown as a whole is $940,000 and the carrying amount of Pink's 70% share of Brown is $320,000.What,if any,is the gain on the sale of half of Pink's interest in Brown?

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 eliminating entry needed to prepare a full set of consolidated financial statements at December 31,20X8?

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?

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?

On January 1,20X8,Vector Company acquired 80 percent of Scalar Company's ownership 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 eliminating 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.

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 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 been paid for them.There were no other receivables or payables between the companies at December 31,20X8. -Based on the information given,what percentage of Y Company's shares were acquired by X Company?

Bristle Corporation acquired 75 percent of Silver Corporation's common stock on December 31, 20X8, for $300,000. The fair value of the noncontrolling interest at that date was determined to be $100,000. Silver's balance sheet immediately before the combination reflected the following balances: A careful review of the fair value of Silver's assets and liabilities indicated that inventory, land, and buildings and equipment (net) had fair values of $65,000, $100,000, and $300,000 respectively. Goodwill is assigned proportionately to Bristle and the noncontrolling shareholders. -Based on the preceding information,what amount of goodwill will be reported in the consolidated balance sheet immediately following the acquisition?

Magellan Corporation acquired 80 percent ownership of Dipper Corporation on January 1,20X8,for $200,000.At that date,Dipper reported common stock outstanding of $75,000 and retained earnings of $150,000.The fair value of the noncontrolling interest was $50,000.The differential is assigned to equipment,which had a fair value $25,000 greater than book value and a remaining economic life of five years at the date of the business combination.Dipper reported net income of $40,000 and paid dividends of $20,000 in 20X8. Required: 1)Provide the journal entries recorded by Magellan during 20X8 on its books if it accounts for its investment in Dipper using the equity method. 2)Give the eliminating entries needed at December 31,20X8,to prepare consolidated financial statements.

Bristle Corporation acquired 75 percent of Silver Corporation's common stock on December 31, 20X8, for $300,000. The fair value of the noncontrolling interest at that date was determined to be $100,000. Silver's balance sheet immediately before the combination reflected the following balances: A careful review of the fair value of Silver's assets and liabilities indicated that inventory, land, and buildings and equipment (net) had fair values of $65,000, $100,000, and $300,000 respectively. Goodwill is assigned proportionately to Bristle and the noncontrolling shareholders. -Based on the preceding information,what amount will be reported as investment in Silver Corporation stock in the consolidated balance sheet immediately following the acquisition?

On January 1,20X8,Colorado Corporation acquired 75 percent of Denver Company's voting common stock for $90,000 cash.At that date,the fair value of the noncontrolling interest was $30,000.Denver's balance sheet at the date of acquisition contained the following balances: At the date of acquisition,the reported book values of Denver's assets and liabilities approximated fair value.Eliminating entries are being made to prepare a consolidated balance sheet immediately following the business combination. -Based on the preceding information,the amount of goodwill reported is:

Top Corporation acquired 80 percent of Bottom Corporation's common stock on January 1,20X8,for $520,000.At that date,Bottom reported common stock outstanding of $250,000 and retained earnings of $375,000.Assume the fair value of the noncontrolling interest on January 1,20X8 was $130,000.The book values and fair values of Bottom's assets and liabilities were equal on the acquisition date,except for other intangible assets,which had a fair value $25,000 greater than book value and a 5-year remaining life.Top and Bottom reported the following data for 20X8 and 20X9: Compute consolidated comprehensive income for 20X8 and 20X9. Compute comprehensive income attributable to the controlling interest for 20X8 and 20X9.

On December 31,20X8,Melkor Corporation acquired 80 percent of Sydney Company's common stock for $160,000.At that date,the fair value of the noncontrolling interest was $40,000.Of the $75,000 differential,$10,000 related to the increased value of Sydney's inventory,$20,000 related to the increased value of its land,and $25,000 related to the increased value of its equipment that had a remaining life of 10 years from the date of combination.Sydney sold all inventory it held at the end of 20X8 during 20X9.The land to which the differential related was also sold during 20X9 for a large gain.At the date of combination,Sydney reported retained earnings of $75,000 and common stock outstanding of $50,000.In 20X9,Sydney reported net income of $60,000,but paid no dividends.Melkor accounts for its investment in Sydney using the equity method. -Based on the preceding information,the amount of goodwill reported in the consolidated financial statements prepared immediately after the combination is:

All of the following are examples of how a parent company may lose control over a subsidiary and discontinue future consolidation,except:

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 been paid for them.There were no other receivables or payables between the companies at December 31,20X8. -Based on the information given,what is the amount of unpaid consulting services at December 31,20X8,on work done by X Company for Y Company?

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 been paid for them.There were no other receivables or payables between the companies at December 31,20X8. -Based on the information given,what amount will be reported as total controlling interest in the consolidated balance sheet?

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

On December 31,20X8,Defoe Corporation acquired 80 percent of Crusoe Company's common stock for $104,000 cash.The fair value of the noncontrolling interest at that date was determined to be $26,000.Data from the balance sheets of the two companies included the following amounts as of the date of acquisition: On that date,the book values of Crusoe's assets and liabilities approximated fair value except for inventory,which had a fair value of $45,000,and buildings and equipment,which had a fair value of $100,000.At December 31,20X8,Defoe reported accounts payable of $15,000 to Crusoe,which reported an equal amount in its accounts receivable. Required: 1)Provide the eliminating entries needed to prepare a consolidated balance sheet immediately following the business combination. 2)Prepare a consolidated balance sheet worksheet.

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 been 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