1. Alpha Corporation purchased 70% of Beta Company on January 1, 2019, 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 patents. These assets have a remaining useful life of five years. During 2019 Beta had income of $40,000 and paid dividends of $10,000. Alpha uses the equity method in accounting for it's ownership of Beta. On December 31, 2020 the trial balances of the companies are as follows: Income statement Sales Cost of goods sold Depreciation expense Interest expense Income from subsidary Consolidated net income Statement of retained earnings Beginning balance Net income Less dividends declared Ending balance Alpha Corporation Beta Company 200,000 140,000 -99,800 -61,000 -25,000 -10,200 -6,000 -14,000 16,620 85,820 54,800 228,560 85,820 -40,000 274,380 50,000 54,800 -10,000 94,800 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 57,200 362,000 -77,400 436,000 Total assets 641,770 436,000 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 94,800 436,000 Beta sold inventory costing $45,000 to Alpha for $75,000 in 2019. Alpha held $9,000 in inventory at the end of 2019. Beta sold inventory costing $77,000 to Alpha in 2020 for $140,000 Alpha held $10,000 in inventory at the end of 2020. On 1/1/2019 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 1/1/2019. 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 2019 and 2020. 3. Prepare the analysis and entries required for the worksheet in 2019 and 2020. 1. Alpha Corporation purchased 70% of Beta Company on January 1, 2019, 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 patents. These assets have a remaining useful life of five years. During 2019 Beta had income of $40,000 and paid dividends of $10,000. Alpha uses the equity method in accounting for it's ownership of Beta. On December 31, 2020 the trial balances of the companies are as follows: Income statement Sales Cost of goods sold Depreciation expense Interest expense Income from subsidary Consolidated net income Statement of retained earnings Beginning balance Net income Less dividends declared Ending balance Alpha Corporation Beta Company 200,000 140,000 -99,800 -61,000 -25,000 -10,200 -6,000 -14,000 16,620 85,820 54,800 228,560 85,820 -40,000 274,380 50,000 54,800 -10,000 94,800 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 57,200 362,000 -77,400 436,000 Total assets 641,770 436,000 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 94,800 436,000 Beta sold inventory costing $45,000 to Alpha for $75,000 in 2019. Alpha held $9,000 in inventory at the end of 2019. Beta sold inventory costing $77,000 to Alpha in 2020 for $140,000 Alpha held $10,000 in inventory at the end of 2020. On 1/1/2019 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 1/1/2019. 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 2019 and 2020. 3. Prepare the analysis and entries required for the worksheet in 2019 and 2020
