On January 1, 2014, Father Company acquired an 80 percent interest in Sun Company for $425,000. The acquisition-date fair value of the 20 percent noncontrolling interest’s ownership shares was $102,500. Also as of that date, Sun reported total stockholders’ equity of $400,000: $100,000 in common stock and $300,000 in retained earnings. In setting the acquisition price, Father appraised four accounts at values different from the balances reported within Sun’s financial records. Problem Buildings (8-year remaining life) Undervalued by $20,000 Land Undervalued by $50,000 Equipment (5-year remaining life) Undervalued by $12,500 Royalty agreement (20-year remaining life) Not recorded, valued at $30,000 As of December 31, 2018, the trial balances of these two companies are as follows: Father Company Sun Company Debits Current assets $605,000 $280,000 Investment in Sun Company 425,000 –0– Land 200,000 300,000 Buildings (net) 640,000 290,000 Equipment (net) 380,000 160,000 Expenses 550,000 190,000 Dividends declared 90,000 20,000 Total debits $2,890,000 $1,240,000 Credits Liabilitie $910,000 $300,000 Common stock 480,000 100,000 Retained earnings, 1/1/18 704,000 480,000 Revenues 780,000 360,000 Dividend income 16,000 –0– Total credits $2,890,000 $1,240,000 Included in these figures is a $20,000 payable that Sun owes to the parent company. No goodwill impairments have occurred since the Sun Company acquisition. Required 1. Determine consolidated totals for Father Company and Sun Company for the year 2018. 2. Prepare worksheet entries to consolidate the trial balances of Father Company and Sun Company for the year 2018. 3. Assume instead that the acquisition-date fair value of the noncontrolling interest was $104,500. What balances in the December 31, 2018, consolidated statements would change?

On January 1, 2014, Father Company acquired an 80 percent interest in Sun Company for $425,000. The acquisition-date fair value of the 20 percent noncontrolling interest’s ownership shares was $102,500. Also as of that date, Sun reported total stockholders’ equity of $400,000: $100,000 in common stock and $300,000 in retained earnings. In setting the acquisition price, Father appraised four accounts at values different from the balances reported within Sun’s financial records. Problem Buildings (8-year remaining life) Undervalued by $20,000 Land Undervalued by $50,000 Equipment (5-year remaining life) Undervalued by $12,500 Royalty agreement (20-year remaining life) Not recorded, valued at $30,000 As of December 31, 2018, the trial balances of these two companies are as follows: Father Company Sun Company Debits Current assets $605,000 $280,000 Investment in Sun Company 425,000 –0– Land 200,000 300,000 Buildings (net) 640,000 290,000 Equipment (net) 380,000 160,000 Expenses 550,000 190,000 Dividends declared 90,000 20,000 Total debits $2,890,000 $1,240,000 Credits Liabilitie $910,000 $300,000 Common stock 480,000 100,000 Retained earnings, 1/1/18 704,000 480,000 Revenues 780,000 360,000 Dividend income 16,000 –0– Total credits $2,890,000 $1,240,000 Included in these figures is a $20,000 payable that Sun owes to the parent company. No goodwill impairments have occurred since the Sun Company acquisition. Required 1. Determine consolidated totals for Father Company and Sun Company for the year 2018. 2. Prepare worksheet entries to consolidate the trial balances of Father Company and Sun Company for the year 2018. 3. Assume instead that the acquisition-date fair value of the noncontrolling interest was $104,500. What balances in the December 31, 2018, consolidated statements would change?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 8MC

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Problem

Buildings (8-year remaining life) Undervalued by $20,000

Land Undervalued by $50,000

Equipment (5-year remaining life) Undervalued by $12,500

Royalty agreement (20-year remaining life) Not recorded, valued at $30,000

As of December 31, 2018, the trial balances of these two companies are as follows:

Father Company Sun Company

Debits

Current assets $605,000 $280,000

Investment in Sun Company 425,000 –0–

Land 200,000 300,000

Buildings (net) 640,000 290,000

Equipment (net) 380,000 160,000

Expenses 550,000 190,000

Dividends declared 90,000 20,000

Total debits $2,890,000 $1,240,000

Credits

Liabilitie $910,000 $300,000

Common stock 480,000 100,000

Retained earnings, 1/1/18 704,000 480,000

Revenues 780,000 360,000

Dividend income 16,000 –0–

Total credits $2,890,000 $1,240,000

Included in these figures is a $20,000 payable that Sun owes to the parent company. No goodwill impairments have occurred since the Sun Company acquisition.

Required

1. Determine consolidated totals for Father Company and Sun Company for the year 2018.

2. Prepare worksheet entries to consolidate the trial balances of Father Company and Sun Company for the year 2018.

3. Assume instead that the acquisition-date fair value of the noncontrolling interest was $104,500. What balances in the December 31, 2018, consolidated statements would change?

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