Company Background:

Florida Chocolate Inc. was first opened as a sole proprietor in 20x2 under the name Alexandria's Chocolates. The company produced 4 specialty chocolate products using an old family recipe, which only the owner, Alexandria Vierra, knows. The company started as a small homebased business.

In 20x4 Alexandria decided to expand the business, opened a factory in Ft. Lauderdale Florida and converted the business to a corporation named Florida Chocolate Inc. Due to the huge success of the business she decided to expand to Europe in 20x6, opening another factory in England. This factory is run by Alexandria's brother Nelson. The third factory was open in Brazil in 20x9 and is run by Alexandria's sister Laura.

Project Information:

*The recording currency and functional currency of Florida Chocolate Inc. is the U.S. Dollar.

On January 1, 20x6 Florida Chocolate Inc acquired 100% of Brazil Co's outstanding stock to open a factory in Brazil.The following facts relate to the acquisition:

• Florida Chocolate Inc paid $1,000,000 cash for Brazil Co Industries.
• On January 1, 20x6, Brazil Co had the following assets and liabilities on its balance sheet: Cash - $375,000, Inventory - $1,000,000, Land - $100,000, Buildings & equipment - $625,000, Accounts Payable - $300,000, and Notes Payable - $1,500,000.
• Fair market values of all Brazil Co' assets and liabilities approximate their costs with the exception of:
  • Inventory - $950,000
  • Land - $300,000
  • Buildings & Equipment - $975,000
• For the year ended December 31, 20x6, Florida Chocolate Inc had the following other assets and liabilities on its balance sheet: Cash - $825,000, Inventory - $1,250,000, Land - $500,000, Buildings & equipment - $1,500,000, Accounts payable - $500,000, Notes payable - $2,000,000. Retained earnings before closing the income statement was $2,500,000.
• Florida Chocolate Inc. received income from Brazil Co of $125,000, and dividends from Brazil Co of $50,000.
• Florida Chocolate Inc 's sales for the year were $3,000,000. Cost of goods sold was $1,900,000, and its operating expenses were $875,000.
• Brazil Co' sales for the year were $1,000,000. Cost of goods sold was $650,000, and its operating expenses were $225,000.
• Assume that net income increased Brazil Co' cash balances. Dividends were paid out of Brazil Co' cash balances.
• Ignore amortization expense. There were no intercompany transactions between Florida Chocolate Inc. and Brazil Co during 20x6.

Due to the huge success of the business she expanded to Europe in 20x7, opening another factory in England. The recording currency of the England factory is the Euro and the functional currency is the Pound sterling. Part 1:

This week's assignment will be a draft of Part 1 of the portfolio project. The final version of Part 1 of the project is due, along with Part 2, in their final versions, with Part 3 as the Portfolio Project for this class.

Prepare the allocation schedule, consolidation worksheet, and journal entries for the initial consolidation with Brazil Co. in 20x6. Prepare the journal entries required at year end, and the consolidation entries.(Assume Brazil uses the U.S. Dollar as their recording and functional currency.)

Check my project and fix it

Fair Value Adjustments:

Inventory: Original value: $1,000,000 Fair value: $950,000 Adjustment: $50,000 decrease

Land: Original value: $100,000 Fair value: $300,000 Adjustment: $200,000 increase

Buildings & Equipment: Original value: $625,000 Fair value: $975,000 Adjustment: $350,000 increase

Based on the fair value adjustments, we can prepare the allocation schedule:

Assets: Inventory: $50,000 decrease Land: $200,000 increase Buildings & Equipment: $350,000 increase

Part 1: Allocation Schedule:

• Cash: $1,000,000
• Inventory: $950,000
• Land: $300,000
• Buildings & Equipment: $975,000
• Accounts Payable: $300,000
• Notes Payable: $1,500,000

Florida Chocolate Inc. and Brazil Co. Consolidation Worksheets
Jan 1, 20x6
	Florida Chocolate	Brazil Co.	Consolidation	entries	Consolidated
Debit	Credit
Assets
Cash and receivables	$825,000	$375,000			1,200,000
inventory	1,250,000	1,000,000		50,000	2,200,000
Land	500,000	100,000	200,000		800,000
Building and Equipment	1,500,000	625,000	350,000		2,475,000
Investment Brazil Co	1,000,000			1,000,000	0
Total Assets	$5,075,000	$2,100,000	550,000	1,050,000	6,675,000
Liabilities and sctockholders'equity
Account payable	$500,000	$300,000			$800,000
Notes payable	2,000,000	1,500,000			3,500,000
Total liabilities	$2,500,000	$1,800,000			4,300,000
Equity
Retained earnings.	2,500,000	300,000	300,000		2,500,000
Total Liabilities and equity	5,000,000	2,100,000

To calculate goodwill or gain on bargain purchase, we compare the fair value of the net assets acquired with the consideration paid.

Consideration Paid : Cash: $1,000,000

Fair Value of Net Assets Acquired: Original value of net assets: ($375,000 + $1,000,000 + $100,000 + $625,000) - ($300,000 + $1,500,000) = $300,000

Journal Entries:

Debit. Credit

Cash $1,000,000

Investment in Brazil Co $1,000,000

To record the purchase of Brazil Co's stock on January 1, 20x6

Inventory $50,000

Buildings & Equipment 350000

Goodwill 300,000

To record the fair value adjustment of assets and liabilities on January 1, 20x6

Cash 375,000

Inventory 950,000

Land 300,000

Buildings & Equipment 975,000

vestment in Brazil Co 2,600,000

to record Florida Chocolate inc allocated the purchase price to the assets and liabilities acquiered.

Income from Brazil Co $125,000

Dividends from Brazil Co $50,000

Investment in Brazil Co $175,000

To record the income and dividends from Brazil Co in 20x6

To record the fair value adjustment of assets and liabilities on January 1, 20x6: Debit: Debit: Buildings & Equipment $50,000 Credit: Goodwill $300,000