1 Practice Problem 2 On January 1, 2014, Plant Company purchased 80% of the common stock of Sun Company for $775.000, Sun reported the following: Income Dividends 2014 $350,000 $45,000 2015 $360,000 $55,000 2016 $325,000 $65,000 9 On December 31, 2013, just prior to the acquisition, the balance sheets of Plant Company and Sun Company were as foliows 13 Cash 14 Accounts receivable (net) 15 Inventory 16 Land Plant $1,650,000 400.000 600,000 900,000 $3,550.000 Sun (Book) $515,000 190,000 125,000 100,000 $930,000 Sun (Market) $515,000 190,000 125,000 150,000 $980.000 $230,000 No amortization required 19 Liabilities 20 Common stock 21 Additional paid in capital 22 Retained earnings 500,000 250.000 2.800.000 $3,550,000 $200,000 300,000 100,000 330.000 $930,000 Required 2. Assume that Plant accounts for the acquisition using the initial Value methode, the cost method). Use the information above as well as the appropriate incomplete worksheet information to consolidate the financial statements for Plant and Sun for 2014, 2015 and 2016. Please provide all the same information as above 36 Note: If no journal entry is required, please indicate that no journal entry is needed Plant Co. Cost Method Entries 2 Trial Balances 12/11/14 Eliminations & Adjustments Consolidated Debit Credit Balance Sheet 800.000 410,000 215,000 36,000 211,000 650,000 250.000 50,000 INCOME STATEMENT Net sales Cost of sales 7 Other expenses 8 Dividend Income 9 Consolidated NI 10 To NCI 11 To Controlling interest FV Allocation 350,000 14 STATEMENT OF RETAINED EARNINGS 15 Retained earning, January 1 2.800.000 16 NI 211,000 17 Dlus 50,000 330,000 350.000 45.000 CH. Convert to Equity 2,961000 615,000 19 End RE 20 21 BALANCE SHEET 22 Cash 23 Accounts receivable net 24 Inventory 25 Land 26 Goodwill 27 Investment in Sun 1433000 425.000 800,000 900,000 735.000 230.000 270,000 100.000 S. Stockholder's Equity 775,000 29 Total Assets 43110001315 000 A Alocations 31 Liabilities 32 Common stock 33 Other paid in capital 34 Retained Earnings 35 NCI 622,000 500,000 250,000 2,961,000 300,000 300,000 100,000 635,000 1. Income Elimination 39 Tota La 4.333,000 1.335.000 D-D Elimination E. Expense Allocation FV Allocation 2 12/31/15 Trial Balances Plant Sun Eliminations & Adustments Consolidated Debit Credit Balance Sheet L INCOME STATEMENT 5 Net sales 6 Cost of sales 7 Other expenses 8 Div Income 9 Consolidated NI 10 To NCI 11 To Controlling interest 12 Total Consolidated Net Income 785,000 362,000 218,000 44,000 249,000 684,000 287,000 37,000 360.000 c. Convert to Equity 14 STATEMENT OF RETAINED EARNINGS 15 Retained earnings January 1 16 N 2.961.000 249,000 70,000 635,000 360,000 $5,000 17 Divs S-Stockholder's Equity 19 End RE 3,140,000 940,000 21 BALANCE SHEET 22 Cash 23 Accounts receivable net 24 Inventory 25 Land 26 Goodwill 27 Investment in Sun 2,000,000 442,000 683.000 900,000 968,000 310,000 208,000 100.000 A- Allocations 775,000 28 29 Total Assets 4,800,000 1,586,000 31 Liabilities 32 Common stock 13 Other paid in capital 34 Retained Earnings 35 NCI 910,000 500,000 250,000 3,140,000 246,000 300.000 100,000 940,000 1 - Income Elimination 4.800,000 D. Div Elimination 1.586000 Expense Allocation FV Allocation 12/31/16 Trial Balances Plant Eliminations & Austments Debit Credit Consolidated Balance Sheet 4 INCOME STATEMENT 5 Net sales 6 Cost of sales 7 Other expenses 8 Dividend Income 9 Consolidated NI 10 To NCI 11 To Controlling Interest 12 Total Consolidated Net Income 785,000 362,000 218,000 52,000 257,000 656,000 292,000 39,000 325,000 c. Convert to Equity 14 STATEMENT OF RETAINED EARNINGS 15 Retained earnings, January 1 16 NI 17 Diys 3,140.000 257,000 70,000 940.000 325,000 65,000 Stockholder's Equity 19 End RE 3,327,000 1,200,000 21 BALANCE SHEET 22 Cash 23 Accounts receivable net 24 Inventory 25 Land 26 Goodwill 27 Investment in Sun 1,946.000 421.000 610,000 1,200,000 95.000 400,000 250,000 100,000 775,000 31 Total Assets 4,952.000 1.235,000 1. Income Elimination abilities 34 Common stock 35 Other paid in capital 36 Retained Earnings 37 NOI 875,000 500,000 250,000 3,327,000 135,000 300.000 100,000 1.200,000 D-Div Elimination 40 Total L E 4,952,000 1,735,000 E.Expense Allocation 1 Practice Problem 2 On January 1, 2014, Plant Company purchased 80% of the common stock of Sun Company for $775.000, Sun reported the following: Income Dividends 2014 $350,000 $45,000 2015 $360,000 $55,000 2016 $325,000 $65,000 9 On December 31, 2013, just prior to the acquisition, the balance sheets of Plant Company and Sun Company were as foliows 13 Cash 14 Accounts receivable (net) 15 Inventory 16 Land Plant $1,650,000 400.000 600,000 900,000 $3,550.000 Sun (Book) $515,000 190,000 125,000 100,000 $930,000 Sun (Market) $515,000 190,000 125,000 150,000 $980.000 $230,000 No amortization required 19 Liabilities 20 Common stock 21 Additional paid in capital 22 Retained earnings 500,000 250.000 2.800.000 $3,550,000 $200,000 300,000 100,000 330.000 $930,000 Required 2. Assume that Plant accounts for the acquisition using the initial Value methode, the cost method). Use the information above as well as the appropriate incomplete worksheet information to consolidate the financial statements for Plant and Sun for 2014, 2015 and 2016. Please provide all the same information as above 36 Note: If no journal entry is required, please indicate that no journal entry is needed Plant Co. Cost Method Entries 2 Trial Balances 12/11/14 Eliminations & Adjustments Consolidated Debit Credit Balance Sheet 800.000 410,000 215,000 36,000 211,000 650,000 250.000 50,000 INCOME STATEMENT Net sales Cost of sales 7 Other expenses 8 Dividend Income 9 Consolidated NI 10 To NCI 11 To Controlling interest FV Allocation 350,000 14 STATEMENT OF RETAINED EARNINGS 15 Retained earning, January 1 2.800.000 16 NI 211,000 17 Dlus 50,000 330,000 350.000 45.000 CH. Convert to Equity 2,961000 615,000 19 End RE 20 21 BALANCE SHEET 22 Cash 23 Accounts receivable net 24 Inventory 25 Land 26 Goodwill 27 Investment in Sun 1433000 425.000 800,000 900,000 735.000 230.000 270,000 100.000 S. Stockholder's Equity 775,000 29 Total Assets 43110001315 000 A Alocations 31 Liabilities 32 Common stock 33 Other paid in capital 34 Retained Earnings 35 NCI 622,000 500,000 250,000 2,961,000 300,000 300,000 100,000 635,000 1. Income Elimination 39 Tota La 4.333,000 1.335.000 D-D Elimination E. Expense Allocation FV Allocation 2 12/31/15 Trial Balances Plant Sun Eliminations & Adustments Consolidated Debit Credit Balance Sheet L INCOME STATEMENT 5 Net sales 6 Cost of sales 7 Other expenses 8 Div Income 9 Consolidated NI 10 To NCI 11 To Controlling interest 12 Total Consolidated Net Income 785,000 362,000 218,000 44,000 249,000 684,000 287,000 37,000 360.000 c. Convert to Equity 14 STATEMENT OF RETAINED EARNINGS 15 Retained earnings January 1 16 N 2.961.000 249,000 70,000 635,000 360,000 $5,000 17 Divs S-Stockholder's Equity 19 End RE 3,140,000 940,000 21 BALANCE SHEET 22 Cash 23 Accounts receivable net 24 Inventory 25 Land 26 Goodwill 27 Investment in Sun 2,000,000 442,000 683.000 900,000 968,000 310,000 208,000 100.000 A- Allocations 775,000 28 29 Total Assets 4,800,000 1,586,000 31 Liabilities 32 Common stock 13 Other paid in capital 34 Retained Earnings 35 NCI 910,000 500,000 250,000 3,140,000 246,000 300.000 100,000 940,000 1 - Income Elimination 4.800,000 D. Div Elimination 1.586000 Expense Allocation FV Allocation 12/31/16 Trial Balances Plant Eliminations & Austments Debit Credit Consolidated Balance Sheet 4 INCOME STATEMENT 5 Net sales 6 Cost of sales 7 Other expenses 8 Dividend Income 9 Consolidated NI 10 To NCI 11 To Controlling Interest 12 Total Consolidated Net Income 785,000 362,000 218,000 52,000 257,000 656,000 292,000 39,000 325,000 c. Convert to Equity 14 STATEMENT OF RETAINED EARNINGS 15 Retained earnings, January 1 16 NI 17 Diys 3,140.000 257,000 70,000 940.000 325,000 65,000 Stockholder's Equity 19 End RE 3,327,000 1,200,000 21 BALANCE SHEET 22 Cash 23 Accounts receivable net 24 Inventory 25 Land 26 Goodwill 27 Investment in Sun 1,946.000 421.000 610,000 1,200,000 95.000 400,000 250,000 100,000 775,000 31 Total Assets 4,952.000 1.235,000 1. Income Elimination abilities 34 Common stock 35 Other paid in capital 36 Retained Earnings 37 NOI 875,000 500,000 250,000 3,327,000 135,000 300.000 100,000 1.200,000 D-Div Elimination 40 Total L E 4,952,000 1,735,000 E.Expense Allocation