1. Alpha Corporation purchased 70% of Beta Company on January 1, 2015, for $98,000. On that date, the non controlling interest had a fair value of $42,000 and Beta reported common stock outstanding of $100,000 and retained earnings of $20,000. The differential is partially comprised of $5,000 related to excess value of buildings and equipment. These assets have a remaining useful life of five years. During 2015 Beta had income of $40,000 and paid dividends of $10,000. Alpha uses the equity method in accounting for itsownership of Beta. On December 31, 2016 the trial balances of the companies are as follows: Alpha Income statement Corporation Beta Company Sales 200,000 120,000 Cost of goods sold -99,800 -61,000 Depreciation expense -25,000 -17,400 Interest expense -6,000 -14,000 Income from subsidary 16,620 Consolidated net income 85,820 27,600 Statement of retained earnings Beginning balance 228,560 50,000 Net income 85,820 27,600 Less dividends declared -40,000 -10,000 Ending balance 274,380 67,600 39,200 55,000 Balance sheet Cash & accounts receivable Inventory Investment in Beta Land Buildings & equipment Accumulated depreciation Total assets 81,400 60,000 124,370 40,000 504,000 -168,000 641,770 30,000 362,000 -77,400 408,800 41,200 200,000 Accounts payable Bonds payable Bond premium Common stock Retained earnings Total liabilities & equity 86,190 80,000 1,200 200,000 274,380 641,770 100,000 67,600 408,800 Beta sold inventory costing $45,000 to Alpha for $75,000 in 2015. Alpha held $9,000 in inventory at the end of 2015. Beta sold inventory costing $77,000 to Alpha in 2016 for $140,000 Alpha held $10,000 in inventory at the end of 2016. On 1/1/2015 Alpha sold equipment with a book value of $10,000 to Beta for $14,000. The equipment orginally cost Alpha $18,000. The equipment has a remaining life of 5 years at 1/1/2015. 1. Prepare an allocation of acquisition value at the time of acquisition to determine any excess value. 2. Record the equity entries made by Alpha for 2015 and 2016. 3. Prepare the analysis and entries required for the worksheet in 2015 and 2016. 1. Alpha Corporation purchased 70% of Beta Company on January 1, 2015, for $98,000. On that date, the non controlling interest had a fair value of $42,000 and Beta reported common stock outstanding of $100,000 and retained earnings of $20,000. The differential is partially comprised of $5,000 related to excess value of buildings and equipment. These assets have a remaining useful life of five years. During 2015 Beta had income of $40,000 and paid dividends of $10,000. Alpha uses the equity method in accounting for itsownership of Beta. On December 31, 2016 the trial balances of the companies are as follows: Alpha Income statement Corporation Beta Company Sales 200,000 120,000 Cost of goods sold -99,800 -61,000 Depreciation expense -25,000 -17,400 Interest expense -6,000 -14,000 Income from subsidary 16,620 Consolidated net income 85,820 27,600 Statement of retained earnings Beginning balance 228,560 50,000 Net income 85,820 27,600 Less dividends declared -40,000 -10,000 Ending balance 274,380 67,600 39,200 55,000 Balance sheet Cash & accounts receivable Inventory Investment in Beta Land Buildings & equipment Accumulated depreciation Total assets 81,400 60,000 124,370 40,000 504,000 -168,000 641,770 30,000 362,000 -77,400 408,800 41,200 200,000 Accounts payable Bonds payable Bond premium Common stock Retained earnings Total liabilities & equity 86,190 80,000 1,200 200,000 274,380 641,770 100,000 67,600 408,800 Beta sold inventory costing $45,000 to Alpha for $75,000 in 2015. Alpha held $9,000 in inventory at the end of 2015. Beta sold inventory costing $77,000 to Alpha in 2016 for $140,000 Alpha held $10,000 in inventory at the end of 2016. On 1/1/2015 Alpha sold equipment with a book value of $10,000 to Beta for $14,000. The equipment orginally cost Alpha $18,000. The equipment has a remaining life of 5 years at 1/1/2015. 1. Prepare an allocation of acquisition value at the time of acquisition to determine any excess value. 2. Record the equity entries made by Alpha for 2015 and 2016. 3. Prepare the analysis and entries required for the worksheet in 2015 and 2016
