Consolidation Exam

ACC 4700 Advanced Accounting I

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Instructions:

1. Enter your name in the green space above.

2. Students are required to complete the problem using this Excel workbook template. Complete each

part of the problem (separate tabs) within the space provided identified by the green cells. Do not

insert or delete any cells, rows or columns. The spreadsheet is protected to prevent unintended

modifications to the file.

3. When completed with the problem, submit this template file in Blackboard in the respective module

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Consolidation Exam

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On January 1, 2011, Pierce Co. acquired 80% of the outstanding voting stock of Stefen company in exchange

for $1,200,000 cash. At that time, although Stefen's book value was $925,000, Pierce assessed Stefen's total

business fair value at $1,500,000. Since that date, Stefen has neither issued nor reacquired any shares of its

own stock. The book value of Stefen's individual assets and liabilities approximated their acquisition date

fair value except for the patent account (5 year remaining life) which was undervalued by $350,000. Any

remaining excess fair value was assigned to goodwill and no goodwill impairments have occurred. Intaentity sales (Stefen sells to Pierce) of inventory for the past three years and separate financial statements for

these two companies as of December 31, 2013 is as follows:

Intra-entity sales

$

2011

125,000 $

2012

220,000 $

80,000

125,000

160,000

25%

28%

25%

Intra-entity ending inventory at transfer

price

Gross profit rate on intra-entity

inventory transfers

2013

300,000

Pierce

1,740,000 $

(820,000)

(104,000)

(220,000)

(20,000)

124,000

700,000

Stefen

950,000

(500,000)

(85,000)

(120,000)

(15,000)

230,000

Sales

Cost of goods sold

Depreciation expense

Amortization expense

Interest expense

Income from subsidiary

Net income

$

Retained earnings, 1/1/2013

Net income (above)

Dividends paid

Retained earnings, 12/31/2013

$

2,800,000 $

700,000

(200,000)

3,300,000

345,000

230,000

(25,000)

550,000

Cash and receivables

Inventory

Investment in subsidiary

Buildings (net)

Equipment (net)

Patents (net)

Total assets

$

1,110,000 $

990,000

1,420,000

1,000,000

25,000

950,000

5,495,000

330,000

800,000

800,000

63,000

107,000

2,100,000

Liabilities

Common stock

Additional paid in capital

Retain earnings, 12/31/2013

Total liabilities and stockholders' equity

$

995,000 $

900,000

300,000

3,300,000

5,495,000

650,000

800,000

100,000

550,000

2,100,000

#1 Prepare a schedule to determine goodwill and allocation to controlling and noncontrolling interests at the acquisition date.

Consideration transferred

Noncontrolling interest fair value

Subsidiary fair value at acquisition

Book value

Excess cost assigned to specific accounts

Excess cost not identified - Goodwill

Controlling interest share of goodwill =

Noncontrolling interest share of goodwill =

#2 Prepare a consolidation worksheet as of December 31, 2013.

Account

Income Statement

Sales

Cost of goods sold

Depreciation expense

Amortization expense

Interest expense

Income from subsidiary

Net income (separate)

Consolidated net income

Noncontrolling interest subsidary

Net income to controlling interest

Pierce

Stefen

Consolidation Entries

Debit

Credit

Noncontrolling

Interest

Consolidated

Balances

Statement of Retained Earnings

Retained earnings, 1/1/2013

Net income (above)

Dividends paid

Retained earnings, 12/31/2013

Balance Sheet

Cash and receivables

Inventory

Investment in subsidiary

Buildings (net)

Equipment (net)

Patents (net)

Goodwill

Total assets

Liabilities

Noncontrolling interest 1/1/13

Noncontrolling interest 12/31/13

Common stock

Additional paid in capital

Retained earnings, 12/31/2013

Total liabilities and stockholders' equity

I would like to know how to calculate step by step and how to do the consolidated worksheet please be detailed. I really need to learn this.