Clipboard LZ Font G51 B C D E A Problem 1 Parent acquired shares of Subsidiary on January 1, 20xo, as indicated below. Subsidiary's balance sheet and related fair values at the date of acquisition are also shown below. 3 3 Number of shares acquired Purchase price per share $ Fair value per share at Dec. 3 $ Useful life of the automobiles Useful life of the equipment Useful life of the patent Subsidiary's net income in 21 Subsidiary's dividends in 20 Tax rate Tax depreciation Estimated tax payment 6,800 7.70 8.30 5 10 10 41,400 4,100 30.00% 23,900 6,000 Payment Change 1 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 Subsidiary's note receivable December 31, 20X0 December 31, 20X1 December 31, 20X2 December 31, 20X3 December 31, 20X4 36,181 36,181 36.181 36.181 Interest 5.10% 6.528 5,076 3,426 1756 (29,653] (31,166) (32,755) (34,426] Balance 128,000 98,347 67,181 34,426 Payment Change Subsidiary's note payable December 31, 20X0 December 31, 20X1 December 31, 20X2 December 31, 20X3 December 31, 20X4 December 31, 20X5 55,279 55.279 55.279 55,279 55,279 Interest 4.60% 11,132 9,101 6,977 4.755 2,431 ( 44.147) (46,178) (48,302) (50,524] (52.848) Balance 242.000 197.853) 151675 103,372 52,848 Subsidiary Balance Sheet December 31, 20X0 Book Value Fair Value Excess Cash 48,700 $ 48,700 Accounts receivable 64,500 64,500 Other current assets 248,600 248,600 67,000 Automobiles 106,200 (24,000) Accumulated depreciation Equipment Accumulated depreciation 187,000 196,000 (43,000) 128,000 Note receivable 123,000 Patent 59,000 77,000 Goodwill Total $ 775,000 59,800 $ 59,800 59,300 242,000 59,300 220,000 Accounts payable $ Salaries payable Note payable Common stock ($1 par value Additional paid-in capital Retained earnings Total $ 68,000 249,900 96,000 775,000 Parent Company Income Statement for the year ended December 31, 20X2 Fair Value Equity Sales 327,300 327,300 Dividend income Unrealized gain Income from Subsidiary Cost of goods sold 124,400 124,400 Salary expense 104,700 104,700 Depreciation expense 18,400 18,400 Interest expense 6,200 6,200 Utilities expense 26,200 26,200 Pretax income Tax expense Net income 3 e Parent Company Statement of Retained Earnings for the year ended December 31 Fair Value Equity 2 Beginning balance 55,500 55.500 -3 Net income 24 Dividends declared (4,000) (4,000) 25 Ending balance 26 Parent Company Balance Sheet As of December 31, 20X1 and 2x2 20X1 Fair Value Equity Cash 112,500 74,000 74,000 Accounts receivable 26,800 29,500 29,500 Inventory 17,000 11,200 11,200 3 Land 151,000 166,100 166,100 4 Equipment 204,500 255,600 255,600 3 Accumulated depreciation (45,000) (63,400) (63,400) 6 Investments 7 7 Investment in Subsidiary 8 Total 466,800 9 Accounts payable 53,650 50,500 50,500 Salaries payable 8,600 9,400 9,400 42 Taxes payable 6,200 43 Dividends payable 1,000 800 800 44 Deferred taxes payable - Depreciation 6,750 45 Deferred taxes payable - Investment 46 Deferred taxes payable - Equity method 47 Note payable 124,700 118,500 118 500 48 Common stock 92.500 108,200 108,200 49 Additional paid-in capital 117.900 137.900 137.900 50 Retained earnings 55,500 Total 51 52 466,800 Clipboard LZ Font G51 B C D E A Problem 1 Parent acquired shares of Subsidiary on January 1, 20xo, as indicated below. Subsidiary's balance sheet and related fair values at the date of acquisition are also shown below. 3 3 Number of shares acquired Purchase price per share $ Fair value per share at Dec. 3 $ Useful life of the automobiles Useful life of the equipment Useful life of the patent Subsidiary's net income in 21 Subsidiary's dividends in 20 Tax rate Tax depreciation Estimated tax payment 6,800 7.70 8.30 5 10 10 41,400 4,100 30.00% 23,900 6,000 Payment Change 1 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 Subsidiary's note receivable December 31, 20X0 December 31, 20X1 December 31, 20X2 December 31, 20X3 December 31, 20X4 36,181 36,181 36.181 36.181 Interest 5.10% 6.528 5,076 3,426 1756 (29,653] (31,166) (32,755) (34,426] Balance 128,000 98,347 67,181 34,426 Payment Change Subsidiary's note payable December 31, 20X0 December 31, 20X1 December 31, 20X2 December 31, 20X3 December 31, 20X4 December 31, 20X5 55,279 55.279 55.279 55,279 55,279 Interest 4.60% 11,132 9,101 6,977 4.755 2,431 ( 44.147) (46,178) (48,302) (50,524] (52.848) Balance 242.000 197.853) 151675 103,372 52,848 Subsidiary Balance Sheet December 31, 20X0 Book Value Fair Value Excess Cash 48,700 $ 48,700 Accounts receivable 64,500 64,500 Other current assets 248,600 248,600 67,000 Automobiles 106,200 (24,000) Accumulated depreciation Equipment Accumulated depreciation 187,000 196,000 (43,000) 128,000 Note receivable 123,000 Patent 59,000 77,000 Goodwill Total $ 775,000 59,800 $ 59,800 59,300 242,000 59,300 220,000 Accounts payable $ Salaries payable Note payable Common stock ($1 par value Additional paid-in capital Retained earnings Total $ 68,000 249,900 96,000 775,000 Parent Company Income Statement for the year ended December 31, 20X2 Fair Value Equity Sales 327,300 327,300 Dividend income Unrealized gain Income from Subsidiary Cost of goods sold 124,400 124,400 Salary expense 104,700 104,700 Depreciation expense 18,400 18,400 Interest expense 6,200 6,200 Utilities expense 26,200 26,200 Pretax income Tax expense Net income 3 e Parent Company Statement of Retained Earnings for the year ended December 31 Fair Value Equity 2 Beginning balance 55,500 55.500 -3 Net income 24 Dividends declared (4,000) (4,000) 25 Ending balance 26 Parent Company Balance Sheet As of December 31, 20X1 and 2x2 20X1 Fair Value Equity Cash 112,500 74,000 74,000 Accounts receivable 26,800 29,500 29,500 Inventory 17,000 11,200 11,200 3 Land 151,000 166,100 166,100 4 Equipment 204,500 255,600 255,600 3 Accumulated depreciation (45,000) (63,400) (63,400) 6 Investments 7 7 Investment in Subsidiary 8 Total 466,800 9 Accounts payable 53,650 50,500 50,500 Salaries payable 8,600 9,400 9,400 42 Taxes payable 6,200 43 Dividends payable 1,000 800 800 44 Deferred taxes payable - Depreciation 6,750 45 Deferred taxes payable - Investment 46 Deferred taxes payable - Equity method 47 Note payable 124,700 118,500 118 500 48 Common stock 92.500 108,200 108,200 49 Additional paid-in capital 117.900 137.900 137.900 50 Retained earnings 55,500 Total 51 52 466,800