ADVANCED ACCOUNTING CHAPTERS 15-19
12th Edition
ISBN: 9781337046251
Author: FISCHER
Publisher: CENGAGE C
expand_more
expand_more
format_list_bulleted
Question
Chapter 3, Problem 3.13.2P
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 switzer corporation as of Dec
31 2017 per 70% cost method, third year
Expert Solution & Answer
Answer to Problem 3.13.2P
The Fair value of subsidiary is $600000 parent price of $420000 and non-controlling interest value comes to $180000. The fair value of net assets excluding
Explanation of Solution
1. Worksheet
| Particular | Eliminations & Adjustments | Con Inc.stmt | NCI | Controlling interest RE | Con BS | |||
| Company P | Company S | Debit | Credit | |||||
| Cash | $157000 | $110000 | $267000 | |||||
| $90000 | $55000 | $145000 | ||||||
| Inventory | $120000 | $86000 | $206000 | |||||
| Land | $100000 | $60000 | $90000 (5) | $250000 | ||||
| Investment in S | $420000 | 0 | $49000(1) | $7000(2) | ||||
| $7000(3) | ||||||||
| $197400(4) | ||||||||
| $271600(5) | ||||||||
| Buildings | $800000 | $250000 | $130000(5) | $1180000 | ||||
| Acc depre | ($220000) | ($80000) | $19500 (6) | ($319500) | ||||
| Equipment | $150000 | $100000 | $30000 (5) | $280000 | ||||
| Acc depre | ($90000) | ($72000) | $18000 (6) | ($180000) | ||||
| Goodwill | $136000 (5) | $136000 | ||||||
| Current liabilities | ($60000) | ($102000) | ($162000) | |||||
| Bond payable | ($100000) | ($100000) | ||||||
| Discount (premium) | $4000 (5) | |||||||
| $2400 (6) | $1600 | |||||||
| Common stock- S | ($10000) | $7000 (4) | ($3000) | |||||
| Paid in cap in excess of Par − S | ($90000) | $63000 (4) | ($27000) | |||||
| RE- S | ($182000) | $127400(4) | ($163620) | |||||
| $116400(5) | ||||||||
| $600(5) | ||||||||
| Common stock − P | ($100000) | $7980(6) | ($100000) | |||||
| Paid in cap in excess of Par − P | ($900000) | ($900000) | ||||||
| RE- P | ($315000) | $49000(1) | ||||||
| $18620(6) | $1400 (5) | |||||||
| ($346780) | ||||||||
| Sales | ($800000) | ($350000) | ($1150000) | |||||
| COGS | $450000 | $210000 | $660000 | |||||
| Depe exp- Bldg | $30000 | $15000 | $6500 (6) | $51500 | ||||
| Depre exp- equipment | $15000 | $14000 | $6000 (6) | $35000 | ||||
| Other expenses | $140000 | $68000 | $208000 | |||||
| Interest exp | $8000 | $800 (6) | $8800 | |||||
| Sub (dividend) Income | ($7000) | $7000 (2) | ||||||
| Div declared − S | $10000 | $7000 (3) | $3000 | |||||
| Div declared- P | $20000 | $20000 | ||||||
| Total | $690300 | $690300 | ||||||
| Cons Net income | ($186700) | |||||||
| To NCI | $6510 | ($6510) | ||||||
| To CI | $180190 | ($180190) | ||||||
| Total NCI | ($102540) | ($197130) | ||||||
| RE CI | ($509970) | ($506970) | ||||||
Where , (1) Conversion to equity (2) Current year subsidiary income (3)Current year dividend (4) controlling interest elimination in subsidiary equity (5) D& D schedule excess distributed (6) Per amortization schedule, excess amortize
2. Determination of Value analysis schedule:-
| Particulars | Company Implied Value | Parent (70%) | NCI (30%) |
| Fair Value of Company | $600000 ( working #1) | $420000 | $180000 |
| Fair value of net assets excluding goodwill | $464000 (Working #2) | $324800 | $139200 |
| Goodwill | $136000 | $952003 | $40800 |
3. Determination and Distribution of Excess schedule
| Particulars | Company Implied Fair value | Parent (70%) | NCI (30%) | |
| Fair value of subsidiary (A) | $600000 | $420000 | $180000 | |
| Book Value of Interest acquired | ||||
| Common stock | $10000 | |||
| Paid in capital in excess of par | $90000 | |||
| $112000 | ||||
| Total Equity | $212000 | $212000 | $212000 | |
| Interest acquired | 70% | 30% | ||
| Book Value (b) | $212000 | $148400 | $63600 | |
| Excess of Fair value over Book Value (a − 212000) | $388000 ($600000-$212000) | $271600 | $116400 | |
| Adjustment of Identifiable accounts | Adjustment | Life | Amortization per year | |
| Inventory (Working #4) | ($2000) | 1 | 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 ) | $136000 | Debit D6 | ||
| Total | $388000 |
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 outstanding stock of S company for $420000
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.. Total amortization table :-
| Account adjustments | Life | Annual amount | Current year | Prior year | Total | Key |
| Inventory | 1 | ($2000) | ($2000) | ($2000) | D1 | |
| Sub 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 |
6. Internally generated income - S company Internally generated income = S company sales −[COGS+
S company income distribution
| Particular | Amount | Particular | Amount |
| CY amoritzations | $13300 | Internally generated income (Working #6) | $35000 |
| Adjusted income before tax | $21700 | ||
| NCI in subsidiary | $6510 | ||
| CI share | $15190 |
7. Internally generated income -P Company Internally generated income = P company sales −[COGS+Depreciation (bldg.)+Depreciation(equipment)+Other expense+Interest expense]
P company income distribution
| Particular | Amount | Particular | Amount |
| Internally generated income (Working #7) | $165000 | ||
| Controlling share of sub | $15190 | ||
| Controlling interest share | $180190 |
8. Adjustment value of investmentAdjsutment value of investment = Retained earning on Jan 1 2017- S company Retained earnings on purchasing date X Controlling interest
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 October 1, 2017, the Puppy Eyes Company acquired the net assets of The Cat Love Company when the fair value of Cat Love’s net assets was P116 million and their carrying amount was P120 million. The consideration transferred comprised P200 million in cash transferred at acquisition date, plus another P60 million in cash to be transferred 11 months after the acquisition date if a specified profit target being met by Cat Love. At the acquisition date there was only a low probability of the profit target being met, so the fair value of the additional consideration liability was P10 million.
In the event the profit target was met and the P60 million cash was transferred, what amount should Puppy Eyes present for Goodwill in its statement of Financial position on December 31, 2017, according to IFRS 3 Business Combinations?
Group of answer choices
84 million
144 million
94 million
140 million
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.1. Why did Celgene acquire Receptos?2. What accounting method was used, and for what amount, to record the acquisition?3. What amount did Celgene include in pre-combination service compensation in the total consideration transferred? What support is provided for this treatment in the Accounting Standards Codification (see ASC 805-30-30, paragraphs 9-13)?4. What allocations did Celgene make to the assets acquired and liabilities assumed in the acquisition? Provide a calculation showing how Celgene determined the amount allocated to goodwill.5. Describe the nature of the in-process research and development product rights acquired by Celgene in its acquisition of Receptos.6. How…
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.
How will Celgene account for the in-process research and development product rights acquired in the Receptos combination?
Chapter 3 Solutions
ADVANCED ACCOUNTING CHAPTERS 15-19
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
- 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?arrow_forwardOn 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. What accounting method was used, and for what amount, to record the acquisition?arrow_forwardOn July 1, 2016, Gupta Corporation bought 25% of the outstanding common stock of VB Company for $100 million cash. At the date of acquisition of the stock, VB’s net assets had a total fair value of $350 million and a book value of $220 million. Of the $130 million difference, $20 million was attributable to the appreciated value of inventory that was sold during the last half of 2016, $80 million was attributable to buildings that had a remaining depreciable life of 10 years, and $30 million related to equipment that had a remaining depreciable life of 5 years. Between July 1, 2016, and December 31, 2016, VB earned net income of $32 million and declared and paid cash dividends of $24 million. Required: 1. Prepare all appropriate journal entries related to the investment during 2016, assuming Gupta accounts for this investment by the equity method. 2. Determine the amounts to be reported by Gupta: a. As an investment in Gupta’s December 31, 2016, balance sheet. b. As investment revenue…arrow_forward
- Northwest Paperboard Company, a paper and allied products manufacturer, was seeking to gain a foothold inCanada. Toward that end, the company bought 40% of the outstanding common shares of Vancouver Timber andMilling, Inc., on January 2, 2018, for $400 million.At the date of purchase, the book value of Vancouver’s net assets was $775 million. The book values and fairvalues for all balance sheet items were the same except for inventory and plant facilities. The fair value exceededbook value by $5 million for the inventory and by $20 million for the plant facilities.The estimated useful life of the plant facilities is 16 years. All inventory acquired was sold during 2018.Vancouver reported net income of $140 million for the year ended December 31, 2018. Vancouver paid acash dividend of $30 million.Required:1. Prepare all appropriate journal entries related to the investment during 2018.2. What amount should Northwest report as its income from its investment in Vancouver for the year…arrow_forwardOn January 1, 2016, Cameron Inc. bought 20% of the outstanding common stock of Lake Construction Company for $300 million cash. At the date of acquisition of the stock, Lake’s net assets had a fair value of $900 million. Their book value was $800 million. The difference was attributable to the fair value of Lake’s buildings and its land exceeding book value, each accounting for one-half of the difference. Lake’s net income for the year ended December 31, 2016, was $150 million. During 2016, Lake declared and paid cash dividends of $30 million. The buildings have a remaining life of 10 years. Required: 1. Prepare all appropriate journal entries related to the investment during 2016, assuming Cameron accounts for this investment by the equity method. 2. Determine the amounts to be reported by Cameron: a. As an investment in Cameron’s 2016 balance sheet. b. As investment revenue in the income statement. c. Among investing activities in the statement of cash flows.arrow_forwardOn 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. What amount did Celgene include in pre-combination service compensation in the total consideration transferred? What support is provided for this treatment in the Accounting Standards Codification (see ASC 805-30-30, paragraphs 9-l3)?arrow_forward
- Anton Company acquired the net assets of Hair Company on January 1, 2015, for $600,000. Using a business valuation model, the estimated value of Anton Company was $650,000 immediately after the acquisition. The fair value of Anton’s net assets was $400,000. 1. What amount of goodwill was recorded by Anton Company when it acquired Hair Company?2. Using the information, answer the questions posed in the following two independent situations: a. On December 31, 2016, there were indications that goodwill might have been impaired. At that time, the existing recorded book value of Anton Company’s net assets, including goodwill, was $500,000. The fair value of the net assets, exclusive of goodwill, was estimated to be $340,000. The value of the business was estimated to be $520,000. Is goodwill impaired? If so, what adjustment is needed? b. On December 31, 2018, there were indications that goodwill might have been impaired. At that time, the existing recorded book value of Anton Company’s net…arrow_forwardOn January 1, 2017, the Ilocos Norte Corporation purchased the business of its competitor in a business combination. The total purchase price was at P15M. The only identifiable asset of the said competitor included a factory building with a fair value of 3,600,000 and 2 machineries with a fair market value of P6M (Mach A) and P4M (Mach B). The acquired business is considered a separate business segment distinct from all other operations of Ilocos Norte Corporation. The factory building was estimated to have a 30-year remaining useful life while machineries were estimated to have a fifteen and twenty-year useful lives for machinery A and B, respectively. Assets are to be depreciated using straight-line method to zero residual values. Late in 2021, because of technological changes in the industry and reduced selling prices for its products, the company believes that its asset(s) of this business segment have been impaired. The company estimates that the business segment will produce…arrow_forwardOn January 1, 2017, the Ilocos Norte Corporation purchased the business of its competitor in a business combination. The total purchase price was at P15M. The only identifiable asset of the said competitor included a factory building with a fair value of 3,600,000 and 2 machineries with a fair market value of P6M (Mach A) and P4M (Mach B). The acquired business is considered a separate business segment distinct from all other operations of Ilocos Norte Corporation. The factory building was estimated to have a 30-year remaining useful life while machineries were estimated to have a fifteen and twenty-year useful lives for machinery A and B, respectively. Assets are to be depreciated using straight-line method to zero residual values. Late in 2021, because of technological changes in the industry and reduced selling prices for its products, the company believes that its asset(s) of this business segment have been impaired. The company estimates that the business segment will produce…arrow_forward
- On September 1, 2017, Winans Corporation acquired Aumont Enterprises for a cash payment of $700,000. At the time of purchase, Aumont’s balance sheet showed assets of $620,000, liabilities of $200,000, and owners’ equity of $420,000. The fair value of Aumont’s assets is estimated to be $800,000. Compute the amount of goodwill acquired by Winans.arrow_forwardOn January 1, 2016, PAR Inc. purchased 65% of the shares of SUB Co. for $8,000 when retained earnings of SUB was $9,500. The investment is recorded at cost by PAR and the FVE method was used to value goodwill. At the date of the acquisition, trademarks with a fair value of $500 were identified that were not recorded on the books of SUB. Also, the building was valued at $200 higher than book value. The trademarks had a remaining useful life of 8 years, and the building had a remaining useful life of 40 years, at that time. PAR booked a goodwill impairment loss on goodwill resulting from the SUB acquisition of $136 in 2019. During 2020, PAR Inc. reported income of $800 and Sub Co. $570. Dividends of $100 were paid by Sub to PAR. At December 31, 2020, the entity retained earnings of PAR Inc. is $16,500 and SUB Co. is $10,700. At the end of 2019, PAR had $190 of inventory still on its books that was purchased from SUB (cost $145). At the end of 2020, PAR had $115 of inventory still on…arrow_forwardParker Company acquires an 80% interest in Sargent Company for $300,000 in cash on January 1, 2015, when Sargent Company has the following balance sheet: (attached)The excess of the price paid over book value is attributable to the fixed assets, which have a fair value of $250,000, and to goodwill. The fixed assets have a 10-year remaining life. Parker Company uses the simple equity method to record its investment in Sargent Company. The following trial balances of the two companies are prepared on December 31, 2015: Parker Sargent Current Assets . . . . . . . . . . . . . . . . . . . . . . . . 10,000 130,000 Depreciable Fixed A . . . . . . . . . . . . . . . . . . 400,000 200,000 Accumulated Depreciation . . . .. . . . . . . (106,000) (20,000) Investment in Sargent . .. .. . . . . . . . . . . . . 316,000 Current Liabilities. . . . . . . . . . . . . . . . . . . . . (60,000)…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Auditing: A Risk Based-Approach to Conducting a Q...AccountingISBN:9781305080577Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:South-Western College Pub
Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
Auditing: A Risk Based-Approach to Conducting a Q...
Accounting
ISBN:9781305080577
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:South-Western College Pub
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College