Amiel Company acquired 90% of the common stock of Talia Corporation on December 31, 20X0. The balance sheets of the two companies immediately after the acquisition was made are shown below:

The following are the two companies’ income statements, retained earnings statements, and year-end balance sheets for 20X1. Amiel’s financial statements were prepared using the equity method to account for its investment in Talia.

Ignore income taxes.

Required:

1. Determine the amount of excess of acquisition value over book value of Talia, and the components of the excess.

2. Prepare Amiel’s consolidated balance sheet as of December 31, 20X0.

3. Determine the amount of excess value amortization for 20X1.

4. Prepare Amiel’s consolidated income statement, retained earnings statement, and year-end balance sheet for 20X1.

Transcribed Image Text:

Talia Fair ($ in millions) Amiel Talia Values $ 55 120 99 Cash $ 13 $13 Other current assets 21 21 Investment in Talia Fixed assets 290 88 118 (Remaining life 10 years) Total assets $564 $122 $ 22 $ 7 Accounts payable Long-term liabilities 7 75 44 44 Common stock 20 10 Retained earnings 447 61 Total liabilities and equity $564 $122