ACTG495

Case1-AdvancedAccountingTopics

PartI

ConsolidationAccounting

Facts:OnDecember31,2023,ParentCopurchased95%ofSubCofor$120,000cash.The Balance Sheet of each corporation just prior to the acquisition is presented below.

Additionally,bookvalueandfairvalueforallofSub's assetsandliabilitiesareequal,withthe exception of property, plant and equipment, whose fair value is $47,000.

Balancesheetsbeforeacquisition:

	Parent Co	SubCo
BalanceSheet
Assets
Cash	$170,000	21,000
Accountsreceivable	60,000	45,000
Inventory	50,000	45,000
Totalcurrentassets	280,000	111,000
Property,plantandequipment,net	265,000	42,000
Totalassets	$545,000	153,000
Liabilities&Stockholders'Equity
Accountspayable	$70,000	30,000
Accruedexpenses	20,000	15,000
Totalcurrentliabilities	90,000	45,000
Notespayable	180,000	0
Commonstock	100,000	55,000
Retainedearnings	155,000	45,000
Additionalpaidincapital	20,000	8,000
Totalstockholders'equity	275,000	108,000
Totalliabilities&stockholders'equity	$545,000	153,000

Required:

1. PreparetheParentCojournalentrytorecordthepurchaseofSubCo.
2. WhatistheimpliedfairvalueofSub Co?
3. Calculatetheamountofgoodwillimplicitinthispurchase.
4. Whatistheamountofthenon-controllinginterestshareinSubCoatthedateof acquisition?
5. WhatistheconsolidateddepreciationexpensetobereflectedintheconsolidatedIncome Statementfor 2024assumingnoadditionalpurchasesand a10-yeardepreciationlifefor property, plant and equipment?
6. Preparetherequiredworkpapereliminationentriesforconsolidation.
7. PreparetheDecember31,2023consolidatedBalanceSheet(immediatelyafter acquisition) showing the adjustments, eliminations and consolidated balances.