Directions

1. Use theChap 04 Working Papers-12ED.xlsxas needed to complete the Chapter 4 Problem in the textbook:Problem 4-2.Use the following files to help you get started:
2. Make sure you can answer the following Chapter Checkup questions after completing all chapter exercises and problems for this chapter.
   1. Do you know how a Consolidated Income Statement is prepared for Exercise 4-1?
   2. Do you know how to construct an Excel worksheet for consolidating activities?
   3. Do you know the EL, CY, D, and A entries on the consolidating worksheet?
3. Ask questions about this chapter in the Chapter Checkup discussion for this unit as needed.

Problem 4-2 Value Analysis Price Paid Fair Value of Net Assets Excluding Goodwill Goodwill Gain on Acquisition Company Implied Fair Value Parent Price NCI Value Determination and Distribution of Excess Schedule Company Value Fair Value Subsidiary Less Book of Value of Interest Acquired Common Stock Paid in Excess Retained Earnings Total Equity Interest Acquired Book Value Excess of Cost over Book Value Parent Price NCI Worksheet Distribution Accounts Adjusted Total Intercompany Inventory Profit Deferral Parent Amount Beginning Ending Income distribution schedules: Subsidiary: Internally generated net income Total NCI share Controlling share 0 Parent % DR Parent Profit CR Sub Amount Sub % Sub Profit Parent Internally generated net income Controlling share of subsidiary Total Problem 4-2 Consolidated Worksheet Cash Accounts receivable Inventory Investment in Crayon Trial Balance Benton 191,200 290,000 310,000 1,081,000 1,850,000 (940,000) 60,000 (242,200) Bonds Payable Common stock - Benton Paid-in excess - Benton Retained earnings - Benton (400,000) (250,000) (1,250,000) (1,105,000) Common stock - Crandel Paid-in excess - Crandel Retained earnings-Crandel Other expenses Subsidiary (dividend) income Dividends Declared Totals Consolidated net income NCI share Crandel 44,300 97,000 80,000 450,000 Land Building and Equipment Accumulated Depreciation Goodwill Accounts Payable Sales Cost of goods sold Eliminations 150,000 400,000 (210,000) (106,300) (200,000) (100,000) (140,000) (880,000) 704,000 (630,000) 504,000 130,000 (24,000) 81,000 25,000 30,000 0 0 Dr Cr Controlling share NCI Controlling retained earnings Totals Eliminations Prepare Consolidated Statements Below Consol Net Inc. NCI Control. R.E. Consol. Bal. Sht. \fPR 4-2 the \"start\" Cash............................................................ Accounts Receivable (net) .......................... Inventory ..................................................... Investment in Crandel Company................. Land ............................................................ Building and Equipment .............................. Accumulated Depreciation .......................... Goodwill ...................................................... Accounts Payable ....................................... Bonds Payable ............................................ Common StockBenton ............................ Paid-In Capital in Excess of ParBenton .. Retained Earnings, April 1, 2016Benton . Common StockCrandel ........................... Paid-In Capital in Excess of ParCrandel . Retained Earnings, April 1, 2016Crandel Sales ........................................................... Dividend Income (from Crandel Company). Cost of Goods Sold..................................... Other Expenses .......................................... Dividends Declared..................................... Eliminations and Adjustments Dr. Cr. Trial Balance Benton Crandel 191,200 290,000 ............... 310,000 ............... 450,000 ............... 1,081,000 1,850,000 (940,000) 60,000 (242,200) ............... (400,000) (250,000) (1,250,000) (1,105,000) ............... ............... ............... ............... ............... ............... (880,000) ............... (24,000) 704,000 ............... ............... ............... 130,000 25,000 0 44,300 97,000 ................ 80,000 ................ ................ ................ 150,000 400,000 (210,000) ................ (106,300) ................ ................ ................ ................ ................ ................ ................ (200,000) (100,000) (140,000) ................ (630,000) ................ ................ 504,000 ................ ................ ................ 81,000 30,000 0 (CV) (D) (IAP) (IAS) (BIP) (BIS) (EL) (EL) (EL) (BIS) (ISP) (ISS) (CY2) (EIP) (EIS) ............... ............... ............... ............... ............... 32,000 ............... ............... ............... ............... 162,500 10,000 5,000 ............... ............... ............... ............... 1,800 800 160,000 80,000 112,000 200 32,000 30,000 24,000 1,200 750 ............... ............... ............... ............... 652,250 ............... 10,000 5,000 1,200 750 352,000 130,000 ............... ............... ............... ............... ............... ............... ............... ............... ............... (CV) 32,000 ............... ............... ............... ............... (NCI) 32,500 ............... ............... ............... ............... (BIP) 1,800 (ISP) 32,000 (BIS) 1,000 (ISS) 30,000 ............... (CY2) 24,000 652,250 (IAP) (IAS) (EIP) (EIS) (EL) (D) 4-17 Ch. 4 Problems Problem 4-2, Concluded Subsidiary Crandel Company Income Distribution Unrealized profit in ending inventory ........................... (EIS) $750 Internally generated net income ................................. $45,000 Realized profit in beginning inventory .............................. (BIS) 1,000 Adjusted income ........................ $45,250 NCI share................................... 20% NCI............................................. $ 9,050 Parent Benton Corporation Income Distribution Unrealized profit in ending inventory ........................... (EIP) $1,200 Internally generated net income................................. $46,000 Realized profit in beginning inventory.............................. (BIP) 1,800 80% Crandel adjusted income of $45,250............... 36,200 Controlling interest .................... $82,800 (2) Benton Corporation and Subsidiary Crandel Company Consolidated Income Statement For Year Ended March 31, 2017 Sales......................................................................................... Cost of goods sold .................................................................... Gross profit ............................................................................... Expenses .................................................................................. Consolidated net income .......................................................... Distributed to NCI ..................................................................... Distributed to controlling interest .............................................. $1,448,000 1,145,150 $ 302,850 211,000 $ 91,850 9,050 $ 82,800 Read before doing Pr. 4-2! 1. The problem states that the cost of Crandel is $425,000; the textbook wrong states $425,000. It was revised by negotiations to $450,000. 2. Significant intercompany activity exists between parent and sub. Your worksheet Pr. 4-2 Start shows all of the elimination and adjusting entries that you should copy into your worksheet for the second year ended March 31,2017. A key to the entries is presented below: Eliminations and Adjustments: (CV) Convert to equity method: Change in equity 80% = $40,000 80% = $32,000. (CY2) Eliminate intercompany dividends. (EL) Eliminate parent's share of subsidiary equity. (D)/(NCI) Distribute excess and NCI adjustment to goodwill, according to determination and distribution of excess schedule. (BIP) Eliminate intercompany profit from beginning inventory on sales from Benton to Crandel, $9,000 20% = $1,800. (ISP) Eliminate sales from Benton to Crandel from April 2016-March 2017 ($32,000). (EIP) Eliminate intercompany profit from ending inventory on sales from Benton to Crandel, $6,000 20% = $1,200. (IAP) Eliminate intercompany trade balances on sales from Benton to Crandel. (BIS) Eliminate intercompany profit from beginning inventory on sales from Crandel to Benton, $4,000 25% = $1,000. (ISS) Eliminate sales from Crandel to Benton. (EIS) Eliminate intercompany profit from ending inventory on sales from Crandel to Benton, $3,000 25% = $750. (IAS) Eliminate intercompany trade balances on sales from Crandel to Benton. 3. Prepare the Value Analysis Schedule and Determination and Distribution of Excess Schedule, the T-account distribution of income; the Worksheet for Consolidated Financial Statements at 3.31.2017 and the Consolidated Income Statement on 3.31.2017. Problem 4-2, Continued Eliminations and Adjustments: (CV) Convert to equity method: Change in equity 80% = $40,000 80% = $32,000. (CY2) Eliminate intercompany dividends. (EL) Eliminate parent's share of subsidiary equity. (D)/(NCI) Distribute excess and NCI adjustment to goodwill, according to determination and distribution of excess schedule. (BIP) Eliminate intercompany profit from beginning inventory on sales from Benton to Crandel, $9,000 20% = $1,800. (ISP) Eliminate sales from Benton to Crandel from April 2016-March 2017 ($32,000). (EIP) Eliminate intercompany profit from ending inventory on sales from Benton to Crandel, $6,000 20% = $1,200. (IAP) Eliminate intercompany trade balances on sales from Benton to Crandel. (BIS) Eliminate intercompany profit from beginning inventory on sales from Crandel to Benton, $4,000 25% = $1,000. (ISS) Eliminate sales from Crandel to Benton. (EIS) Eliminate intercompany profit from ending inventory on sales from Crandel to Benton, $3,000 25% = $750. (IAS) Eliminate intercompany trade balances on sales from Crandel to Benton. Value Analysis Schedule Company fair value........................................... Fair value of net assets excluding goodwill ...... Goodwill ............................................................ Company Implied Fair Value Parent Price (80%) $562,500 400,000 $162,500 $450,000 320,000 $130,000 Based on the above information, the following D&D schedule is prepared: Determination and Distribution of Excess Schedule Company Implied Fair Value Fair value of subsidiary.............. $562,500 Less book value of interest acquired: Total equity............................. 400,000 Interest acquired..................... Book value of interest ................ Excess of cost over book value . $162,500 Parent Price (80%) NCI Value (20%) $450,000 $112,500 $400,000 80% $320,000 $130,000 $400,000 20% $ 80,000 $ 32,500 Adjustment of identifiable accounts: Adjustment Key Goodwill ..................................... $162,500 debit D NCI Value (20%) $112,500 80,000 $ 32,500