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9/10/2014 1. Assignment Print View award: 10.00 points Problem 3-20 [LO4a] Chapman Company obtains 100 percent of Abernethy Company's stock on January 1, 2012. As of that date, Abernethy has the following trial balance: Debit Credit Accounts payable $ 56,700 Accounts receivable $ 43,800 Additional paid-in capital 50,000 Buildings (net) (4-year life) 143,000 Cash and short-term investments 80,250 Common stock 250,000 Equipment (net) (5-year life) 295,000 Inventory 110,500 Land 112,000 Long-term liabilities (mature 12/31/15) 171,000 Retained earnings, 1/1/12 268,750 Supplies 11,900 Totals $ 796,450 $ 796,450 During 2012, Abernethy reported income of $122,500 while paying dividends of $15,000. During 2013, Abernethy reported income of $159,250 while paying dividends of $49,000. Assume that Chapman Company acquired Abernethy's common stock for $698,050 in cash. As of January 1, 2012, Abernethy's land had a fair value of $123,900, its buildings were valued at $219,400, and its equipment was appraised at $254,500. Chapman uses the equity method for this investment. Prepare consolidation worksheet entries for December 31, 2012, and December 31, 2013. Date Dec. 31, 2012 Entry S http://ezto.mheducation.com/hm.tpx General Journal Debit Credit (Click to select) (Click to select) 1/8 9/10/2014 Assignment Print View (Click to select) (Click to select) Entry A (Click to select) (Click to select) (Click to select) (Click to select) (Click to select) Entry I (Click to select) (Click to select) Entry D (Click to select) (Click to select) Entry E (Click to select) (Click to select) (Click to select) Dec. 31, 2013 Entry S (Click to select) (Click to select) (Click to select) (Click to select) Entry A (Click to select) (Click to select) (Click to select) (Click to select) (Click to select) Entry I (Click to select) (Click to select) Entry D http://ezto.mheducation.com/hm.tpx (Click to select) 2/8 9/10/2014 Assignment Print View (Click to select) Entry E (Click to select) (Click to select) (Click to select) Worksheet Problem 3-20 [LO4a] 2. Difficulty: 3 Hard Learning Objective: 03-04a Prepare consolidated financial statements subsequent to acquisition when the parent has applied the equity method in its internal records. award: 10.00 points Problem 3-21 [LO4b] Chapman Company obtains 100 percent of Abernethy Company's stock on January 1, 2012. As of that date, Abernethy has the following trial balance: Debit Accounts payable Accounts receivable Additional paid-in capital Buildings (net) (4-year life) Cash and short-term investments Common stock Equipment (net) (5-year life) Inventory Land Long-term liabilities (mature 12/31/15) Retained earnings, 1/1/12 Supplies Totals Credit $ 51,500 $ 46,500 50,000 190,000 67,750 250,000 442,500 107,000 93,500 166,500 448,250 19,000 $966,250 $966,250 During 2012, Abernethy reported income of $99,000 while paying dividends of $12,000. During 2013, Abernethy reported income of $151,250 while paying dividends of $53,000. http://ezto.mheducation.com/hm.tpx 3/8 9/10/2014 Assignment Print View Assume that Chapman Company acquired Abernethy's common stock for $855,330 in cash. Assume that the equipment and long-term liabilities had fair values of $464,600 and $134,620, respectively, on the acquisition date. Chapman uses the initial value method to account for its investment. Prepare consolidation worksheet entries for December 31, 2012, and December 31, 2013. Date Dec. 31, 2012 Entry S General Journal Debit Credit (Click to select) (Click to select) (Click to select) (Click to select) Entry A (Click to select) (Click to select) (Click to select) (Click to select) Entry I (Click to select) (Click to select) Entry E Dec. 31, 2013 Entry *C (Click to select) (Click to select) (Click to select) (Click to select) (Click to select) (Click to select) Entry S (Click to select) (Click to select) (Click to select) (Click to select) Entry A http://ezto.mheducation.com/hm.tpx (Click to select) (Click to select) 4/8 9/10/2014 Assignment Print View (Click to select) (Click to select) Entry I (Click to select) (Click to select) Entry E (Click to select) (Click to select) (Click to select) (Click to select) Worksheet Problem 3-21 [LO4b] 3. Difficulty: 3 Hard Learning Objective: 03-04b Prepare consolidated financial statements subsequent to acquisition when the parent has applied the initial value method in its internal records. award: 10.00 points Problem 3-22 [LO4c] Chapman Company obtains 100 percent of Abernethy Company's stock on January 1, 2012. As of that date, Abernethy has the following trial balance: Debit Accounts payable Accounts receivable Additional paid-in capital Buildings (net) (4-year life) Cash and short-term investments Common stock Equipment (net) (5-year life) Inventory Land Long-term liabilities (mature 12/31/15) Retained earnings, 1/1/12 Supplies http://ezto.mheducation.com/hm.tpx Credit $ 54,100 $ 48,500 50,000 130,000 66,000 250,000 437,500 109,000 89,000 178,500 358,800 11,400 5/8 9/10/2014 Assignment Print View Totals $891,400 $891,400 During 2012, Abernethy reported income of $126,000 while paying dividends of $16,000. During 2013, Abernethy reported income of $174,000 while paying dividends of $49,000. Assume that Chapman Company acquired Abernethy's common stock by paying $785,800 in cash. All of Abernethy's accounts are estimated to have a fair value approximately equal to present book values. Chapman uses the partial equity method to account for its investment. Prepare the consolidation worksheet entries for December 31, 2012, and December 31, 2013. (Leave no cells blank. If no entry is required, select "No Journal Entry Required" in the account field and zero (0) in the amount field.) Date Dec. 31, 2012 Entry S General Journal Debit Credit (Click to select) (Click to select) (Click to select) (Click to select) Entry A (Click to select) (Click to select) Entry I (Click to select) (Click to select) Entry D (Click to select) (Click to select) Entry E (Click to select) (Click to select) Dec. 31, 2013 Entry *C (Click to select) (Click to select) http://ezto.mheducation.com/hm.tpx 6/8 9/10/2014 Assignment Print View Entry S (Click to select) (Click to select) (Click to select) (Click to select) Entry A (Click to select) (Click to select) Entry I (Click to select) (Click to select) Entry D (Click to select) (Click to select) Entry E (Click to select) (Click to select) Worksheet Problem 3-22 [LO4c] 4. Difficulty: 3 Hard Learning Objective: 03-04c Prepare consolidated financial statements subsequent to acquisition when the parent has applied the partial equity method in its internal records. award: 10.00 points Problem 4-27 [LO2, LO4, LO5] On January 1, Beckman, Inc., acquires 60 percent of the outstanding stock of Calvin for $70,320. Calvin Co. has one recorded asset, a specialized production machine with a book value of $17,700 and no liabilities. The fair value of the machine is $106,200, and the remaining useful life is estimated to be 10 years. Any remaining excess fair value is attributable to an unrecorded process trade secret with an estimated future life of 4 years. Calvin's total acquisition date fair value is $117,200. At the end of the year, Calvin reports the following in its financial statements: http://ezto.mheducation.com/hm.tpx 7/8 9/10/2014 Assignment Print View Revenues Expenses Net income Dividends paid $ 56,700 21,750 $ 34,950 $ Machine Other assets $15,930 24,020 Total assets $39,950 Common stock Retained earnings Total equity $ 10,000 29,950 $ 39,950 5,000 Determine the amounts that Beckman should report in its year-end consolidated financial statements for noncontrolling interest in subsidiary income, total noncontrolling interest, Calvin's machine (net of accumulated depreciation), and the process trade secret. (Input all amounts as positive values.) Amounts Noncontrolling interest in subsidiary income Total noncontrolling interest Calvin's machine (net accumulated depreciation) Process trade secret $ $ $ $ Worksheet Difficulty: 2 Medium Learning Objective: 04-04 Understand the computation and allocation of consolidated net income in the presence of a noncontrolling interest. Problem 4-27 [LO2, LO4, LO5] Learning Objective: 04-02 Describe the valuation principles underlying the acquisition method of accounting for the noncontrolling interest. Learning Objective: 04-05 Identify and calculate the four noncontrolling interest figures that must be included within the consolidation process and prepare a consolidation worksheet in the presence of a noncontrolling interest. http://ezto.mheducation.com/hm.tpx 8/8