Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 3, Problem 3.10.2P
To determine
Introduction:
Consolidation of statements:
The result of parent as well as all of its subsidiaries financial position is reflected in consolidated statements. It is beneficial for creditors and owners of the parent company to know the outcome of the operations of parent and its subsidiaries.
To calculate: Consolidated worksheet for paulcraft corporation and its subsidiary Switzer corporation as of Dec 31 2017. Also preparing supporting amortization and income distribution schedules.
Expert Solution & Answer
Answer to Problem 3.10.2P
The Fair value of subsidiary is $480000 parent price of $480000. The fair value of net assets excluding
Explanation of Solution
1. Worksheet Paulcraft Corporation and Subsidiary Switzer Company.
| Particular | Eliminations & Adjustments | Con Inc.stmt | NCI | Controlling interest RE | Con BS | |||
| Company P | Company S | Debit | Credit | |||||
| Cash | $100000 | $110000 | $210000 | |||||
| $90000 | $55000 | $145000 | ||||||
| Inventory | $120000 | $86000 | $206000 | |||||
| Land | $100000 | $60000 | $90000 (4) | $250000 | ||||
| Investment in S | $480000 | $70000 (6) | $10000(1) | |||||
| $10000(2) | ||||||||
| $282000(3) | ||||||||
| $268000(4) | ||||||||
| Buildings | $800000 | $250000 | $130000(4) | $1180000 | ||||
| Acc depre | ($220000) | ($80000) | $19500 (5) | ($319500) | ||||
| Equipment | $150000 | $100000 | $30000 (4) | $280000 | ||||
| Acc depre | ($90000) | ($72000) | $18000 (5) | ($180000) | ||||
| Goodwill | $16000(4) | $16000 | ||||||
| Current liabilities | ($60000) | ($102000) | ($162000) | |||||
| Bond payable | ($100000) | ($100000) | ||||||
| Discount (premium) | $4000 (4) | |||||||
| $2400 (5) | $1600 | |||||||
| Common stock- S | ($10000) | $10000 (3) | ||||||
| Paid in cap in excess of Par − S | ($90000) | $90000 (3) | ||||||
| RE- S | ($182000) | $182000 (3) | ||||||
| Common stock − P | ($100000) | |||||||
| Paid in cap in excess of Par − P | ($900000) | |||||||
| RE- P | ($315000) | $70000 (6) | ||||||
| $2000 (4) | ||||||||
| $26600 (5) | ($360400) | |||||||
| Sales | ($800000) | ($350000) | ($1150000) | |||||
| COGS | $450000 | $210000 | $660000 | |||||
| Depe exp- Bldg | $30000 | $15000 | $6500 (5) | $51500 | ||||
| Depre exp- equipment | $15000 | $14000 | $6000 (5) | $35000 | ||||
| Other expenses | $140000 | $68000 | $208000 | |||||
| Interest exp | $8000 | $800 (5) | $8800 | |||||
| Sub (dividend) Income | ($10000) | $10000 (1) | ||||||
| Div declared − S | $10000 | $10000 (2) | ||||||
| Div declared- P | $20000 | $20000 | ||||||
| Total | $681900 | $681900 | ||||||
| Cons Net income | ($186700) | |||||||
| To NCI | ||||||||
| To CI | $186700 | ($186700) | ||||||
| Total NCI | ($527100) | ($527100) | ||||||
| RE CI | ||||||||
Where , (1) Current year subsidiary income (2) Current year dividend (3)Eliminate controlling interest in subsidiary equity (4) D and D schedule excess distribution (5) Per amortization schedule, excess amortize (6) Conversion to equity 2. Determination of Value analysis schedule:-
| Particulars | Company Implied Value | Parent (100%) | NCI (0%) |
| Fair Value of Company | $480000 ( working #1) | $480000 | 0 |
| Fair value of net assets excluding goodwill | $464000 (Working #2) | $464000 | 0 |
| Goodwill | $16000 | $16000 |
3. Determination and Distribution of Excess schedule
| Particulars | Company Implied Fair value | Parent (100%) | NCI (0%) | |
| Fair value of subsidiary (A) | $480000 | $480000 | 0 | |
| Book Value of Interest acquired | ||||
| Common stock | $10000 | |||
| Paid in capital in excess of par | $90000 | |||
| $112000 | ||||
| Total Equity | $212000 | $212000 | ||
| Interest acquired | 100% | |||
| Excess of Fair value over Book Value (a − 212000) | $268000 ($480000-$212000) | $268000 | ||
| Adjustment of Identifiable accounts | Adjustment | Life | Amortization per year | |
| Inventory (Working #4) | ($2000) | Credit D1 | ||
| Land(Working #4) | $90000 | Debit D2 | ||
| Bonds Payable(Working #4) | $4000 | 5 years | $800 | Debit D3 |
| Buildings(Working #4) | $130000 | 20 | $6500 | Debit D4 |
| Equipment(Working #4) | $30000 | 5 | $6000 | Debit D5 |
| Goodwill ( per Value analysis table ) | $16000 | Debit D6 | ||
| Total | $208000 |
Where Debit D records non-controlling interest portion of excess of fair value over the book value, excess in investment account is distributed and patent is adjusted to fair value.
Working :-
1. Company fair value of subsidiary
P Company purchase stock of S company for $480000
2. Fair value of net assets excluding goodwill
= Total Equity +Inventory +land+ Bonds payable+ Buildings+ Equipment
3. Goodwill
4. Assets
| Assets | Adjustment (a-b) | Cost (a) | Market Value (b) |
| Inventory | ($2000) | 40000 | 38000 |
| Land | $90000 | 60000 | 150000 |
| Bonds Payable | $4000 | 100000 | 96000 |
| Buildings | $130000 | 150000 ( $200000-$50000) | 280000 |
| Equipment | $30000 | 70000 ($10000-$30000) | 100000 |
5 Calculating adjustment value of investment Adjustment value of investment = S company earnings as on dec 31 2017 − S company retained earnings as on purchasing date .
6. Total amortization table
| Account adjustments | Life | Annual amount | Current year | Prior year | Total | Key |
| Inventory | 1 | ($2000) | ($2000) | ($2000) | D1 | |
| Subject to amortization | ||||||
| Bonds payable | 5 | $800 | $800 | $1600 | $2400 | A3 |
| Buildings | 20 | $6500 | $6500 | $13000 | $19500 | A4 |
| Equipment | 5 | $6000 | $6000 | $12000 | $18000 | A5 |
| Total amortizations | $13300 | $13300 | $26600 | $39900 |
7. Internally generated income - S company Internally generated income = S company sales −[COGS+
S company income distribution
| Particular | Amount | Particular | Amount |
| Current year amortizations | $13300 | Internally generated income (Working #7) | $35000 |
| Adjusted income before tax | $21700 | ||
| NCI in subsidiary | 0 | ||
| Controlling interest share (100%) | $21700 |
8. Internally generated income - P Company Internally generated income = S company sales −[COGS+Depreciation (bldg.)+Depreciation(equipment)+Other expense]
P company income distribution
| Particular | Amount | Particular | Amount |
| Current year amortizations | $13300 | Internally generated income (Working #8) | $165000 |
| Controlling share of subsidiary | $21700 | ||
| Controlling interest share | $186700 |
Want to see more full solutions like this?
Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
On August 27, 2015, Celgene Corporation acquired all of the outstanding stock of Receptos, Inc., in exchange for $7.6 billion in cash. Referring to Celgene's 2015 financial statements and its July 14, 2015, press release announcing the acquisition, answer the following questions regarding the Receptos acquisition.
Why did Celgene acquire Recentos?
Bar Corporation has been looking to expand its operations and has decided to acquire the assets of Vicker Company and Kendal Company. Bar will issue 30,000 shares of its $10 par common stock to acquire the net assets of Vicker Company and will issue 15,000 shares to acquire the net assets of Kendal Company.Vicker and Kendal have the following balance sheets as of December 31, 2015:Assets Vicker KendalAccounts receivable . . . . . . . . . . . . . . . . . $ 200,000 $ 80,000Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000 85,000Property, plant, and equipment:Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000 50,000Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . .500,000 300,000Accumulated depreciation. . . . . . . . .. . . (150,000) (110,000)Total assets . . . . . . . . . .…
On July 1, 2017, Entity H acquired 25% of the shares of Oki, Inc. for P1,000,000. At the date, the equity of Oki was P4,000,000, with all the identifiable assets and liabilities being measured at amounts equal to fair value. The table below shows the profits and losses made by Oki during 2017 to 2021:
YEAR PROFIT(LOSS)
2017 P200,000
2018 (2,000,000)
2019 (2,500,000)
2020 160,000
2021 300,000
How much share of profit of assocaiate should Entity H report in its 2020 profit or loss?
a.Nil
b. P40,000
c. P60,000
d. P100,000
Chapter 3 Solutions
Advanced Accounting
Ch. 3 - Prob. 1UTICh. 3 - Prob. 2UTICh. 3 - Prob. 3UTICh. 3 - Prob. 4UTICh. 3 - Prob. 5UTICh. 3 - Prob. 6UTICh. 3 - Prob. 7UTICh. 3 - Prob. 1ECh. 3 - Prob. 2ECh. 3 - Prob. 3.1E
Ch. 3 - Prob. 3.2ECh. 3 - Prob. 3.3ECh. 3 - Prob. 3.4ECh. 3 - Prob. 3.5ECh. 3 - Equity method, second year, eliminations, income...Ch. 3 - Prob. 4.2ECh. 3 - Prob. 5.1ECh. 3 - Prob. 5.2ECh. 3 - Prob. 5.3ECh. 3 - Prob. 5.4ECh. 3 - Prob. 5.5ECh. 3 - Prob. 6.1ECh. 3 - Prob. 6.2ECh. 3 - Prob. 7.1ECh. 3 - Prob. 7.2ECh. 3 - Prob. 7.3ECh. 3 - Prob. 7.4ECh. 3 - Prob. 7.5ECh. 3 - Prob. 8.1ECh. 3 - Prob. 8.2ECh. 3 - Prob. 9ECh. 3 - Prob. 10.1ECh. 3 - Prob. 10.2ECh. 3 - Prob. 10.3ECh. 3 - Prob. 11ECh. 3 - Prob. 3B.1.1AECh. 3 - Prob. 3B.1.2AECh. 3 - Prob. 3B.1.3AECh. 3 - Prob. 3B.2.1AECh. 3 - Prob. 3B.2.2AECh. 3 - Prob. 3B.3AECh. 3 - Prob. 3.1.1PCh. 3 - Prob. 3.1.2PCh. 3 - Prob. 3.1.3PCh. 3 - Prob. 3.2.1PCh. 3 - Prob. 3.2.2PCh. 3 - Prob. 3.3.1PCh. 3 - Prob. 3.3.2PCh. 3 - Prob. 3.3.3PCh. 3 - Prob. 3.3.4PCh. 3 - Prob. 3.4.1PCh. 3 - Prob. 3.4.2PCh. 3 - Prob. 3.5.1PCh. 3 - Prob. 3.5.2PCh. 3 - Prob. 3.5.3PCh. 3 - Prob. 3.6.1PCh. 3 - Prob. 3.6.2PCh. 3 - Prob. 3.6.3PCh. 3 - Prob. 3.7.1PCh. 3 - Prob. 3.7.2PCh. 3 - Prob. 3.7.3PCh. 3 - Prob. 3.8.1PCh. 3 - Prob. 3.8.2PCh. 3 - Prob. 3.9.1PCh. 3 - Prob. 3.9.2PCh. 3 - Prob. 3.10.1PCh. 3 - Prob. 3.10.2PCh. 3 - Prob. 3.11.1PCh. 3 - Prob. 3.11.2PCh. 3 - Prob. 3.12.1PCh. 3 - Prob. 3.12.2PCh. 3 - Prob. 3.13.1PCh. 3 - Prob. 3.13.2PCh. 3 - Prob. 3.15.1PCh. 3 - Prob. 3.15.2PCh. 3 - Prob. 3.16.1PCh. 3 - Prob. 3.16.2PCh. 3 - Prob. 3.17.1PCh. 3 - Prob. 3.17.2PCh. 3 - Prob. 3.18.1PCh. 3 - Prob. 3.18.2PCh. 3 - Prob. 3A.1.1APCh. 3 - Prob. 3A.1.2APCh. 3 - Prob. 3A.2APCh. 3 - Prob. 3A.3APCh. 3 - Prob. 3B.1APCh. 3 - Prob. 3B.2APCh. 3 - Prob. 3B.3.1APCh. 3 - The trial balances of Campton Corporation and Dorn...Ch. 3 - The trial balances of Campton Corporation and Dorn...
Knowledge Booster
Similar questions
- Asaparrow_forwardOn January 1, 2025, Vaughn Corporation purchased 20% of the common shares of Bramble Company for $196,000. During the year, Bramble earned net income of $77,000 and paid dividends of $19,250. Prepare the entries for Vaughn to record the purchase and any additional entries related to this investment in Bramble Company in 2025. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.)arrow_forwardCardinal Company acquires an 80% interest in Huron Company common stock for $420,000 cash on January 1, 2015. At that time, Huron Company has the following balance sheet: (attached)Prepare a determination and distribution of excess schedule for the investment in Huron Company (a value analysis is not needed). Prepare journal entries that Cardinal Company would make on its books to record income earned and/or dividends received on its investment in Huron Company during 2015 and 2016 under the following methods: simple equity, sophisticated equity, and cost.arrow_forward
- Z Corporation has the following transactions relating to its investment during 2020: Jan 5 Acquired 16,000 shares of Y company for P1,500,000 paying an additional P10,000 for brokerage and P5,000 for commission. Feb 14 Received dividends from Y company declared January 10,2020 to the stockholders of records January 31,2020, P16,000. Required:prepare all the necessary entries assuming the investment is 1. Financial asset at Fair Value through profit and loss 2. Financial asset at Fair Value through other comprehensive incomearrow_forward) Liala Ltd acquired all the issued shares of Jordan Ltd on 1 January 2015. The following transactions occurred between the two entities: 1. On 1 June 2016, Liala Ltd sold inventory to Jordan Ltd for $12000, this inventory previously costed Liala Ltd $10000. By 30 June 2016, Jordan Ltd had sold 20% of this inventory to other entities for $3000. The other 80% was all sold to external entities by 30 June 2017 for $13000. 2. During the 2016–17 period, Jordan Ltd sold inventory to Liala Ltd for $6000, this being at cost plus 20% mark-up. Of this inventory, 20 % remained on hand in Liala Ltd at 30 June 2017. The tax rate is 30% Required:(i) Prepare the consolidation worksheet entries for Liala Ltd at 30 June 2017 in relation to the intragroup transfers of inventory. (ii) Compute the amount of cost of goods sold to be reported in the consolidated income statement for 2017 relating to the relevant intra-group sales. (b) On 1 July 2016 Liala ltd sold an item of plant to Jordan Ltd for $150000…arrow_forwardOn January 2, 2022, Promenade Company purchased 25% of Twilight Company'S ordinary shares: no goodwill resulted from the purchase. Promenade appropriately carries this investment at equity and the balance in Twilight's investment account was 3,800,000 at December 31, 2022. Twilight reported net income of 2, 400, 000 for the year and paid dividends amounting to 960,000 during 2022. How much did Promenade pay for it's investment?arrow_forward
- Subject - account Please help me. Thankyou.arrow_forwardBorn Company acquires an 80% interest in Roland Company for $660,000 cash on January 1, 2017. The NCI has a fair value of $165,000. Any excess of cost over book value is attributed to goodwill. To help pay for the acquisition, Born Company issues 5,000 shares of its common stock with a fair value of $70 per share. Roland’s balance sheet on the date of the purchase is as follows: Assets Liabilities and Equity Cash . . . . . . . . . . . . . . . . . . . . $ 20,000 Inventory . . . . . . . . . . . . . . . . 140,000 Property, plant, andequipment (net). . . . . . . . . . 550,000 Total assets . . . . . . . . . . . . . $710,000 Current liabilities . . . . . . . $110,000 Bonds payable . . . . . . . . . 100,000 Common stock ($10 par) . . 200,000 Retained earnings . . . . .. . . 300,000 Total liabilities and equity $710,000 Controlling share of net income for 2017 is $150,000, net of the noncontrolling interest of $10,000. Born declares and pays dividends of $10,000, and Roland…arrow_forwardUse the preceding information for Palto’s purchase of Saleen common stock. Assume Palto purchases 80% of the Saleen common stock for $300,000 cash. Palto has the following balance sheet immediately after the purchase:1. Prepare the value analysis and the determination and distribution of excess schedule for the investment in Saleen. 2. Complete a consolidated worksheet for Palto Company and its subsidiary Saleen Company as of January 1, 2015.arrow_forward
- On May 31,2018, Fedex Company acquired Aramex Company's outstanding stock by paying $400,000 cash and issuing 10,000 shares of its own $30 par value common stock, when the market price was $32 per share. Fedex paid legal and accounting fees amounting to S35,000 in addition to stock issuance costs of $8,000. Aramex is dissolved on the date of the acquisition. Balance sheet information for Fedex and Aramex immediately preceding the acquisition is shown below, including fair values for Aramex's assets and liabilities. Fedex Aramex Aramex Book Value Book Value Fair Value Cash 490,000 $140,000 $140,000 Accounts Receivable 560,000 280,000 280,000 Inventory 520,000 200,000 260,000 Land 460,000 150,000 140,000 Plant Assets - Net 980,000 325,000 355,000 Construction Permits 380,000 170,000 190,000 Accounts Payable Other accrued expenses Notes Payable Common Stock ($30 par) Common Stock ($20 par) (460,000) (160,000) (800,000) (960,000) (140,000) (140,000) (45,000) (45,000) (460,000) (460,000)…arrow_forwardOn December 31, 2016, Akron, Inc. purchased 5 Percent of Zip Company’s common shares on the open market in exchange for $16,000. On December 31, 2017, Akron, Inc., acquires an additional 25 percent of Zip Company’s outstanding common stock for $95,000.During the next two years, the following information is available for Zip Company:At December 31, 2017, Zip reports a net book value of $290,000. Akron attributed any excess of its 30 percent share of Zip’s fair over book value to its share of Zip’s franchise agreements. The franchise agreements had a remaining life of 10 years at December 31, 2017.a. Assume Akron applies the equity method to its Investment in Zip account:1. What amount of equity income should Akron report for 2018?2. On Akron’s December 31, 2018, balance sheet, what amount is reported for the Investment in Zip account?b. Assume Akron uses fair-value accounting for its Investment in Zip account:1. What amount of income from its investment in Zip should Akron report for…arrow_forwardprepare of the related journal entries. On 1 January 2017, FIBERBOATS acquired 100% of BELL Corporation. FIBERBOATS issued 50,000 shares of its BD0.600 par ordinary shares, with a market price of BD0.400 on the date the acquisition was announced and BD0.800 on the date the acquisition was completed, for all of BELL Corporation ordinary shares. The book value of net assets of BELL Corporation at the date of acquisition was BD10,000. On that date, the fair value of BELL Corporation assets and liabilities equalled their respective carrying amounts with the exception of property, plant and equipment (PPE) that exceeded its book value by BD120,000. The fair value of BELL’s identifiable intangibles (in-process research and development) is BD70,000. The in-process research and development will be amortized over 5 years.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education