Consolidation Procedures for Less than Wholly-Owned Subsidiary Acquired at More Than Book Value Peerless acquires 75% of Special Foods outstanding CS for $375,000 on January 1, 20X1 The fair value of the noncontrolling interest is estimated at $125,000. The consideration given by Peerless plus the value of the NCI interest is $500,000. The difference between fair value and book value is $200,000. Fair Value of Consideration $500,000 Book Value of Special Foods' net assets Common Stock - Special Foods Retained Earnings - Special Foods Difference between Fair Value and BV 200,000 100,000 $200,000 FV Consideration FV of Net Identifiable Net Assets BV of Net Identifiable Assets 500,000 410,000 300,000 Peerless Special 160,000 20X1 Separate Operating Income, Peerless Net Income, Special Foods Dividends 70,000 50,000 60,000 Differences between BV and FV of Special Foods' Identifiable Assets and Liabilities as of January 1, 20X1, the Date of Combination Book Value Fair Value 60,000 40,000 80,000 90,000 Inventory Land Building & Equipment B&E Accum Deprec Net BV 600,000 (300,000) 300,000 300,000 400,000 340,000 510,000 Goodwill was impaired for $12,000 The building is depreciated using straight line depreciation and there are 10 years remaining. Accumulated depreciation at date of acquisition was $300,000 December 31, 20X1, Consolidated Financial Statements, Initial Year of Ownership 75% Acquisition at More than Book Value Peerless Special Debit Credit Consolidated 410,000 (160,000) (50,000) (40,000) 220,000 (115,000) (20,000) (15,000) Income Statement Sales Less: COGS Less: Depreciation Expense Less: Other Expenses Less: Impairment Loss Income from Special Foods Consolidated Net Income NClin Net Income Controlling Interest in Net Incom 25,500 185,500 70,000 185,500 70,000 Statement of Retained Earnings Beginning Balance Net Income Less: Dividends Declared Ending Balance 300,000 185,500 (60,000 425,500 100,000 70,000 (50,000) 120,000 Balance Sheet Cash Accounts Receivable Inventory Investment in Special Foods 162,500 75,000 100,000 363,000 75,000 50,000 75,000 Land Building & Equipment Less: Acoumulated Depreciation Goodwill Total Assets 175,000 800,000 (450,000) 40,000 600,000 (320,000) 1,225,500 520,000 Accounts Payable Bonds Payable Common Stock Retained Earnings NClin NA of Special Foods 100,000 200,000 500,000 425,500 100,000 100,000 200,000 120,000 Total Liabilities & Equity 1,225,500 520,000 Book Value Calciulations NCI Peerless Common Stock Retained Earnings + + + Beginning Book Value Net Income - Divivdends Ending Book Value + + + Excess Yalue (Differential Calculations NCI + Peerless + + Inventory Land Accum Depreciation Building Goodwill + + II. Beginning Book Value - Changes Ending Book Value = Account Name Debit Credit Consolidation Procedures for Less than Wholly-Owned Subsidiary Acquired at More Than Book Value Peerless acquires 75% of Special Foods outstanding CS for $375,000 on January 1, 20X1 The fair value of the noncontrolling interest is estimated at $125,000. The consideration given by Peerless plus the value of the NCI interest is $500,000. The difference between fair value and book value is $200,000. Fair Value of Consideration $500,000 Book Value of Special Foods' net assets Common Stock - Special Foods Retained Earnings - Special Foods Difference between Fair Value and BV 200,000 100,000 $200,000 FV Consideration FV of Net Identifiable Net Assets BV of Net Identifiable Assets 500,000 410,000 300,000 Peerless Special 160,000 20X1 Separate Operating Income, Peerless Net Income, Special Foods Dividends 70,000 50,000 60,000 Differences between BV and FV of Special Foods' Identifiable Assets and Liabilities as of January 1, 20X1, the Date of Combination Book Value Fair Value 60,000 40,000 80,000 90,000 Inventory Land Building & Equipment B&E Accum Deprec Net BV 600,000 (300,000) 300,000 300,000 400,000 340,000 510,000 Goodwill was impaired for $12,000 The building is depreciated using straight line depreciation and there are 10 years remaining. Accumulated depreciation at date of acquisition was $300,000 December 31, 20X1, Consolidated Financial Statements, Initial Year of Ownership 75% Acquisition at More than Book Value Peerless Special Debit Credit Consolidated 410,000 (160,000) (50,000) (40,000) 220,000 (115,000) (20,000) (15,000) Income Statement Sales Less: COGS Less: Depreciation Expense Less: Other Expenses Less: Impairment Loss Income from Special Foods Consolidated Net Income NClin Net Income Controlling Interest in Net Incom 25,500 185,500 70,000 185,500 70,000 Statement of Retained Earnings Beginning Balance Net Income Less: Dividends Declared Ending Balance 300,000 185,500 (60,000 425,500 100,000 70,000 (50,000) 120,000 Balance Sheet Cash Accounts Receivable Inventory Investment in Special Foods 162,500 75,000 100,000 363,000 75,000 50,000 75,000 Land Building & Equipment Less: Acoumulated Depreciation Goodwill Total Assets 175,000 800,000 (450,000) 40,000 600,000 (320,000) 1,225,500 520,000 Accounts Payable Bonds Payable Common Stock Retained Earnings NClin NA of Special Foods 100,000 200,000 500,000 425,500 100,000 100,000 200,000 120,000 Total Liabilities & Equity 1,225,500 520,000 Book Value Calciulations NCI Peerless Common Stock Retained Earnings + + + Beginning Book Value Net Income - Divivdends Ending Book Value + + + Excess Yalue (Differential Calculations NCI + Peerless + + Inventory Land Accum Depreciation Building Goodwill + + II. Beginning Book Value - Changes Ending Book Value = Account Name Debit Credit