Plaza, Inc., acquires 80 percent of the outstanding common stock of Stanford Corporation on January 1, 2018, in exchange for $900,000 cash. At the acquisition date, Stanford’s total fair value, including the noncontrolling interest, was assessed at $1,125,000. Also at the acquisition date, Stanford’s book value was $690,000.Several individual items on Stanford’s financial records had fair values that differed from their book values as follows:For internal reporting purposes, Plaza, Inc., employs the equity method to account for this investment. The following account balances are for the year ending December 31, 2018, for both companies.At year-end, there were no intra-entity receivables or payables.Prepare a worksheet to consolidate the financial statements of Plaza, Inc., and its subsidiary Stanford. Book ValueFair ValueTradenames (indefinite life)..Property and equipment (net, 8-yearremaining life)Patent (14-year remaining life) .$ 360,000290,000$383,000330,000132,000272,000 PlazaStanford$(1,400,000)774,000$ (825,000)395,750RevenuesCost of goods sold .Depreciation expenseAmortization expense328,000-0-(280,000)$ (578,000)$(1,275,000)(578,000)300,00036,25028,000Equity in income of Stanford.Net income....$ (365,000)$ (530,000)(365,000)50,000$ {845,000)$ 432,250Retained earnings, 1/1/18.Net income...Dividends declared..Retained earnings, 12/31/18.Current assets ..Investment in Stanford.$(1,553,000)$ 860,0001,140,000240,000-0-Tradenames.Property and equipment (net).Patents ...1,030,000-0-360,000253,750104,000$3,270,000$ (142,000)(300,000)(1,275,000)(1,553,000)$ 1,150,000$ (145,000)(120,000)(40,000)(845,000)Total assetsAccounts payable.Common stockAdditional paid-in capital.Retained earnings (above).Total liabilities and equities. .$(3,270,000)$(1,150,000)

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Plaza, Inc., acquires 80 percent of the outstanding common stock of Stanford Corporation on January 1, 2018, in exchange for $900,000 cash. At the acquisition date, Stanford’s total fair value, including the noncontrolling interest, was assessed at $1,125,000. Also at the acquisition date, Stanford’s book value was $690,000.
Several individual items on Stanford’s financial records had fair values that differed from their book values as follows:
For internal reporting purposes, Plaza, Inc., employs the equity method to account for this investment. The following account balances are for the year ending December 31, 2018, for both companies.
At year-end, there were no intra-entity receivables or payables.
Prepare a worksheet to consolidate the financial statements of Plaza, Inc., and its subsidiary Stanford.

Book Value
Fair Value
Tradenames (indefinite life)..
Property and equipment (net, 8-year
remaining life)
Patent (14-year remaining life) .
$ 360,000
290,000
$383,000
330,000
132,000
272,000

Plaza
Stanford
$(1,400,000)
774,000
$ (825,000)
395,750
Revenues
Cost of goods sold .
Depreciation expense
Amortization expense
328,000
-0-
(280,000)
$ (578,000)
$(1,275,000)
(578,000)
300,000
36,250
28,000
Equity in income of Stanford.
Net income....
$ (365,000)
$ (530,000)
(365,000)
50,000
$ {845,000)
$ 432,250
Retained earnings, 1/1/18.
Net income...
Dividends declared..
Retained earnings, 12/31/18.
Current assets ..
Investment in Stanford.
$(1,553,000)
$ 860,000
1,140,000
240,000
-0-
Tradenames.
Property and equipment (net).
Patents ...
1,030,000
-0-
360,000
253,750
104,000
$3,270,000
$ (142,000)
(300,000)
(1,275,000)
(1,553,000)
$ 1,150,000
$ (145,000)
(120,000)
(40,000)
(845,000)
Total assets
Accounts payable.
Common stock
Additional paid-in capital.
Retained earnings (above).
Total liabilities and equities. .
$(3,270,000)
$(1,150,000)

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