ADVANCED ACCOUNTING(LL) W/CONNECT
ADVANCED ACCOUNTING(LL) W/CONNECT
13th Edition
ISBN: 9781260282382
Author: Hoyle
Publisher: MCG
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Chapter 4, Problem 37P

a.

To determine

Determine the consolidated balances for this business combination as of December 31, 2018.

b.

To determine

Identify the changes which would be evident in the consolidated statements if instead the non-controlling interest’s acquisition-date fair value is assessed at $167,500.

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On January 1, 2023, Tamarisk Company issued 1,450 of its $20 par value common shares with a fair value of $60 per share in exchange for the 2,000 outstanding common shares of Sheffield Company in a purchase transaction. Registration costs amounted to $2,500, paid in cash. Just prior to the acquisition, the balance sheets of the two companies were as follows: Cash Accounts receivable (net) Inventory Plant and equipment (net) Land Total assets Accounts payable Notes payable Common stock, $20 par value Other contributed capital Retained earnings Total equities Tamarisk Company $83,000 103,000 56,000 95,000 23,500 $360,500 $63,000 89,500 100,000 60,000 48,000 $360,500 Sheffield Company $12,600 18,000 25,000 46,500 22,000 $124,100 $19,500 30,000 40,000 27,500 7,100 $124,100 Any difference between the book value of equity and the value implied by the purchase price relates to goodwill.
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Herbert, Inc., acquired all of Rambis Company’s outstanding stock on January 1, 2017, for $574,000 in cash. Annual excess amortization of $12,000 results from this transaction. On the date of the takeover, Herbert reported retained earnings of $400,000, and Rambis reported a $200,000 balance. Herbert reported internal net income of $40,000 in 2017 and $50,000 in 2018 and declared $10,000 in dividends each year. Rambis reported net income of $20,000 in 2017 and $30,000 in 2018 and declared $5,000 in dividends each year.   Assume that Herbert’s internal net income figures above do not include any income from the subsidiary. If the parent uses the equity method, what is the amount reported as consolidated retained earnings on December 31, 2018? What would be the amount of consolidated retained earnings on December 31, 2018, if the parent had applied either the initial value or partial equity method for internal accounting purposes?
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