4. On January 1, 2009, R Corp. issued shares of its common stock to acquire all of the outstanding common stock of S Inc. S's book value was only $180,000 at the time, but R issued 12,000 shares having a par value of $1 per share and a fair value of $20 per share. R was willing to convey these shares because it felt that buildings (10-year life) were undervalued on Ss records by $60,000 while equipment (five-year life) was undervalued by $25,000. Any consideration transferred over fair value of identified net assets acquired is assigned to goodwill. The Trial Balances for Rand S as of December 31, 2012 are presented below: Revenues Expenses Equity in subsidiary earnings Net income Rand Corp. $ 372.000 (264.000) 25.000 $ 133.000 Spaulding Inc $108.000 (72.000) 0 36.000 $ 765,000 133.000 84.000 S $14.000 $102.000 36,000 (24.000) SI14.000 Retained earnings January 1, 2012 Net income (above) Dividends paid Retained earnings, December 31, 2012 Current assets Investment in Spaulding Inc Buildings (net) Equipment (net Total assets $ 150.000 242.000 525.000 389,250 SI 306 250 $ 22.000 0 85.000 129.000 $236.000 0 Liabilities $ 82.250 $ 50,000 Common stock 360,000 72.000 Additional paid-in capital 50,000 Retained earnings. December 31, 2012 (above) $14,000 114.000 Total liabilities and stockholders' equity S1.306.230 $236.000 Required: Prepare the December 31, 2012 consolidation entries for this business combination assuming the parent uses the: a. Equity method b. What *C entry will be on the 2013 consolidation worksheet if R Corp uses the Partial equity method to account for this investment; the initial value method? 4. On January 1, 2009, R Corp. issued shares of its common stock to acquire all of the outstanding common stock of S Inc. S's book value was only $180,000 at the time, but R issued 12,000 shares having a par value of $1 per share and a fair value of $20 per share. R was willing to convey these shares because it felt that buildings (10-year life) were undervalued on Ss records by $60,000 while equipment (five-year life) was undervalued by $25,000. Any consideration transferred over fair value of identified net assets acquired is assigned to goodwill. The Trial Balances for Rand S as of December 31, 2012 are presented below: Revenues Expenses Equity in subsidiary earnings Net income Rand Corp. $ 372.000 (264.000) 25.000 $ 133.000 Spaulding Inc $108.000 (72.000) 0 36.000 $ 765,000 133.000 84.000 S $14.000 $102.000 36,000 (24.000) SI14.000 Retained earnings January 1, 2012 Net income (above) Dividends paid Retained earnings, December 31, 2012 Current assets Investment in Spaulding Inc Buildings (net) Equipment (net Total assets $ 150.000 242.000 525.000 389,250 SI 306 250 $ 22.000 0 85.000 129.000 $236.000 0 Liabilities $ 82.250 $ 50,000 Common stock 360,000 72.000 Additional paid-in capital 50,000 Retained earnings. December 31, 2012 (above) $14,000 114.000 Total liabilities and stockholders' equity S1.306.230 $236.000 Required: Prepare the December 31, 2012 consolidation entries for this business combination assuming the parent uses the: a. Equity method b. What *C entry will be on the 2013 consolidation worksheet if R Corp uses the Partial equity method to account for this investment; the initial value method
