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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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Student Name: Instructor
Class: McGraw-Hill/Irwin
Problem 04-32
Totals for the business combination for the year ending December 31, 2006
FATHER, INC. AND SAM CORPORATION
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
Add the two book values less $2,500 excess adjustment
Add the two book values
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Student Name: Instructor
Class: McGraw-Hill/Irwin
Problem 04-32
FATHER, INC. AND SAM CORPORATION
Consolidation Worksheet
Non-
Father, Sam Consolidation Entries controlling Conso
Accounts Inc. Corporation Debit Credit Interest To
Revenues (1,360,000)$ (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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Student Name: Instructor
Class: McGraw-Hill/Irwin
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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Student Name: Instructor
Class: McGraw-Hill/Irwin
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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Correct!
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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$