Chapter 04 XLSol

7/27/2019 Chapter 04 XLSol

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Student Name: Instructor

Class: McGraw-Hill/Irwin

Problem 04-32

FATHER, INC. AND SAM CORPORATION

- Purchase price allocation and annual amortization

Acqisition-date subsidiary fair value 850,000$Book value of subsidiary (600,000)Fair value in excess of book value 250,000$ Correct!

Allocations to specific accounts based on differencebetween fair value and book value:Land 165,000$Buildings and equipment (25,000)Copyright 100,000Notes payable 10,000 250,000

Total -$

Correct!

Life ExcessAnnual excess amortizations: (years) Amortizations

Buildings and equipment 25,000 10Copyright 100,000 20Notes payable 10,000 8

Total

(2,500)$5,0001,2503,750$

Correct!


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Problem 04-32

Totals for the business combination for the year ending December 31, 2006


Account Name Balance Explanation

Revenues 1,900,000

Cost of goods sold 1,085,000

Depreciation expense 267,500

Amortization expense 10,000

Interest expense 50,250

Equity in income of Sam -

Net income 487,250

Retained earnings, 1/1 1,265,000

Noncontrolling interest in income 26,250of subsidiary

Dividends paid 260,000

Retained earnings, 12/31 1,466,000

Current assets 1,493,000

Investment in Sam -

Land 517,000

Buildings and equipment (net) 1,119,500

Copyright 190,000

Total assets 3,319,500

Accounts payable 339,000

Notes payable 581,250

Noncontrolling interest in Sam 183,250

Common stock 300,000

Additional paid-in capital 450,000

Retained earnings, 12/31 1,466,000 Computed above

figures

of the subsidiary can be included in the consolidatedEliminated so that the individual revenues and expenses

Parent company balance

Parent company balance

Add the book values less $10,000 excess allocation plus

amortization

20% of fair value as of 1/1/06 [$170,000] plus noncontrollinginterest in income of subsidiary [$26,250] less dividends paid to

outside owners [$13,000]

Add book values

Add the book values less the $25,000 allocation [asset was

Add the two book values plus the $165,000 allocation

for the year

Book value plus $100,000 excess allocation less amortization

overvalued] plus the excess amortization

consolidated dividendsless noncontrolling interest in subsidiary's income less

Add the two book values

of the subsidiary can be included in the consolidated figures

Eliminated so that the individual assets and liabilities

amortization expense multiplied by 20% outside ownership$135,000 reported income of the subsidiary less $3,750

Consolidated balance on 1/1/06 plus consolidated net income

noncontrolling interest balanceare intercompany, payments to outside owners decrease

parent company balance; subsidiary's payments to parent

acquisition do not affect consolidated figures

Parent company balance; sunsidiary's operations prior to

Add the two book values plus $5,000 excess adjustment

Revenues less expenses

Add the two book values plus $1,250 excess adjustment


Add the two book values less $2,500 excess adjustment



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Problem 04-32


Consolidation Worksheet

Non-

Father, Sam Consolidation Entries controlling Conso

Accounts Inc. Corporation Debit Credit Interest To

Revenues (1,360,000)$ (540,000)$ (1,9$

Cost of goods sold 700,000 385,000 1,0

Depreciation expense 260,000 10,000 [E] 2,500 2

Amortization expense - 5,000 [E] 5,000

Interest expense 44,000 5,000 [E] 1,250

Equity in income of Sam (105,000) - [ I ] 105,000 Separate company net income (461,000)$ (135,000)$

Consolidated net income (4$

Noncontrolling interest in Sam's income (26,250)

Controlling interest in CNI (4

Retained earnings, 1/1 (1,265,000)$ (440,000)$ [S] 440,000 (1,2$

Net income (461,000) (135,000) (4

Dividends paid 260,000 65,000 [D] 52,000 13,000 2Retained earnings, 12/31 (1,466,000)$ (510,000)$ (1,4$

Current assets 965,000$ 528,000$ 1,4$

Investment in Sam 733,000 - [D] 52,000 [S] 480,000

[ I ] 105,000

[A] 200,000

Land 292,000 60,000 [A] 165,000 5

Buildings and equipment (net) 877,000 265,000 [E] 2,500 [A] 25,000 1,1

Copyright - 95,000 [A] 100,000 [E] 5,000 1Total assets 2,867,000$ 948,000$ 3,3$

Accounts payable (191,000) (148,000) (3

Notes payable (460,000) (130,000) [A] 10,000 [E] 1,250 (5

NCI in Sam 1/1 [S] 120,000

NCI in Sam 12/31 [A] 50,000 (170,000) (1

Common stock (300,000) (100,000) [S] 100,000 (3

Additional paid-in capital (450,000) (60,000) [S] 60,000 (4

Retained earnings, 12/31 (1,466,000) (510,000) (1,4Total liabilities and equity (2,867,000)$ (948,000)$ (3,3$

Parentheses indicate a credit balance.


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Given Data P04-32

Sam Corporation outstanding common stock 80%

acquired by Father, Inc.Cash paid by Father, Inc. for 680,000$

Sam Corporation shares

Book value of Sam Corporation 600,000

Sam accounts values on 1/1/09Book Fair Value Value

Land 60,000$ 225,000$Buildings and equipment 275,000 250,000(10-year remaining life)

Copyright (20-year life) 100,000 200,000Notes payable (due in 8 years) 130,000 120,000

Father, Sam

Inc. Corporation12/31/2009 12/31/2009Revenues (1,360,000)$ (540,000)$Cost of goods sold 700,000 385,000Depreciation expense 260,000 10,000Amortization expense - 5,000

Interest expense 44,000 5,000Equity in income of Sam (105,000) -Net income (461,000)$ (135,000)$

Retained earnings, 1/1/0 (1,265,000) (440,000)Net income (461,000) (135,000)Dividends paid 260,000 65,000Retained earnings, 12/31/09 (1,466,000)$ (510,000)$

Current assets 965,000$ 528,000$Investment in Sam 733,000 -Land 292,000 60,000Buildings and equipment (net) 877,000 265,000Copyright - 95,000Total assets 2,867,000$ 948,000$

Accounts payable (191,000)$ (148,000)$Notes payable (460,000) (130,000)Common stock (300,000) (100,000)

Additional paid-in capital (450,000) (60,000)Retained earnings (1,466,000) (510,000)Total liabilities and equity (2,867,000)$ (948,000)$

Note: Credits are indicated by parentheses.


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Problem 04-34

Consideration transferred by Adams 603,000$

Noncontrolling interest fair value 67,000

Acquisition-date total fair value 670,000$ Correct!

Book value of Barstos (460,000)

Excess fair value over book value 210,000$ Correct!

Annual

Life Excess

(years) Amortizations

Land 30,000$ -

Buildings (20,000) 10

Equipment 40,000 5Patents 50,000 10

Notes payable 20,000 5

Goodwill 120,000 indefinite

Total 90,000$

Correct!

ADAMS CORPORATION AND BARSTOW, INC.

- Purchase price allocation and excess amortizations

-

(2,000)$

5,000 8,000

Correct!

15,000$

-4,000


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Problem 04-34

ADAMS CORPORATION AND BARSTOW, INC.

Consolidation Worksheet

For Year Ending December 31, 2006 Non-

Adams Barstow controlling Consolidated

Accounts Corp. Inc. Debit Credit Interest Totals

Revenues (940,000)$ (280,000)$ (1,220,000$

Cost of goods sold 480,000 90,000 570,000

Depreciation expense 100,000 55,000 [E] 6,000 161,000

Amortization expense - [E] 5,000 5,000

Interest expense 40,000 15,000 [E] 4,000 59,000

Investment income (108,000) [ I ] 108,000 -

Separate company net income (428,000) (120,000)

Consolidated net income (425,000

Income to noncontrolling interest (10,500) 10,500

Income to controlling interest (414,500

Retained earnings, 1/1 (1,367,000)$ (340,000)$ [*C] 13,500 (1,353,500$

340,000

Controlling interest net income (428,000) (120,000) (414,500

Dividends paid (110,000) (70,000) [D] 63,000 7,000 110,000

Retained earnings, 12/31 (1,685,000)$ (530,000)$ (1,658,000$

Current assets 610,000$ 250,000$ 860,000$

Investment in Barstow, Inc. 702,000 [D] 63,000 [*C] 13,500 -

[S] 468,000

[A] 175,500

[ I ] 108,000

Land 380,000 150,000 [A] 30,000 560,000Buildings 490,000 250,000 [E] 2,000 [A] 18,000 724,000

Equipment 873,000 150,000 [A] 32,000 [E] 8,000 1,047,000

Patents [A] 45,000 [E] 5,000 40,000

Goodwill [A] 90,000 90,000

Total assets 3,055,000$ 800,000$ 3,321,000$

Notes payable (860,000) (230,000) [A] 16,000 [E] 4,000 (1,078,000

Common stock (510,000) (180,000) [S] 180,000 (510,000

Retained earnings, 12/31 (1,685,000) (390,000) (1,658,000

Noncontrolling interest [S] 52,000

[A] 19,500 (71,500) (75,000

Total liabilities and equity (3,055,000)$ (800,000)$ (3,321,000$

Parentheses indicate a credit balance.


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Given Data P04-33

Barstow, Inc. outstanding voting shares 90%

acquired by Adams CorporationCash paid by Adams Corporation for 603,000$

Barstow, Inc. shares

Barstow account values on 12/31/09Book Fair MarketValue Value

Current assets 160,000$ 160,000$Land 120,000 150,000Buildings (10-year life) 220,000 200,000Equipment (5-year life) 160,000 200,000

Patents (10-year life) - 50,000Liabilities (5-year life) (200,000) (180,000)Common stock (180,000)Retained earnings, 12/31/09 (280,000)

Adams Barstow, Inc.Corporation Corporation12/31/2011 12/31/2011

Debits

Current assets 610,000$ 250,000$

Land 380,000 150,000Buildings 490,000 250,000Equipment 873,000 150,000Investment in Barstow, Inc. 702,000 -Cost of goods sold 480,000 90,000Depreciation expense 100,000 55,000Interest expense 40,000 15,000

Dividends paid 110,000 70,000Total debits 3,785,000$ 1,030,000$

Credits

Notes Payable 860,000 230,000Common stock 510,000 180,000Retained earnings, 1/1/11 1,367,000 340,000Revenues 940,000 280,000

Investment income 108,000 -Total credits 3,785,000$ 1,030,000$

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Chapter 04 XLSol