Exercise 5 (LO 4) Sophisticated equity method, first year, eliminations, state- ments. (Note: Read carefully, as this is not the same as Exercise 3.) Parker Company acquires an 80% interest in Sargent Company for $300,000 on January 1, 2015, when Sargent Company has the following balance sheet: Assets Current assets .............. Depreciable fixed assets ...... $100,000 200,000 Liabilities and Equity Current liabilities ............... Common stock ($10 par)......... Retained earnings .............. Total liabilities and equity...... $ 50,000 100,000 150,000 $300,000 Total assets............... $300,000 The excess of the price paid over book value is attributable to the fixed assets, which have a fair value of $250,000, and to goodwill. The fixed assets have a 10-year remaining life. Parker uses the sophisticated equity method to record the investment in Sargent Company. The following trial balances of the two companies are prepared on December 31, 2015: Sargent 130,000 200,000 120,000) Current Assets ........... Depreciable Fixed Assets ... Accumulated Depreciation ......... Investment in Sargent Company ............. Current Liabilities Common Stock ($10 par) ............... Retained Earnings, January 1, 2015................ Sales ........................................... Expenses ........... Subsidiary Income (from Sargent Company)............ Dividends Declared........ Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............... Parker 10,000 400,000 (106,000) 312,000 (60,000) (300,000) (200,000) (150,000) 110,000 (16,000) (40,000) (100,000) (150,000) (100,000) 75,000 5,000 1. If you did not solve Exercise 3, prepare a determination and distribution of excess schedule for the investment (a value analysis is not needed). 2. Prepare all the eliminations and adjustments that would be made on the 2015 consolidated worksheet. 3. If you did not solve Exercise 3, prepare the 2015 consolidated income statement and its related income distribution schedule. Exercise 5 (LO 4) Sophisticated equity method, first year, eliminations, state- ments. (Note: Read carefully, as this is not the same as Exercise 3.) Parker Company acquires an 80% interest in Sargent Company for $300,000 on January 1, 2015, when Sargent Company has the following balance sheet: Assets Current assets .............. Depreciable fixed assets ...... $100,000 200,000 Liabilities and Equity Current liabilities ............... Common stock ($10 par)......... Retained earnings .............. Total liabilities and equity...... $ 50,000 100,000 150,000 $300,000 Total assets............... $300,000 The excess of the price paid over book value is attributable to the fixed assets, which have a fair value of $250,000, and to goodwill. The fixed assets have a 10-year remaining life. Parker uses the sophisticated equity method to record the investment in Sargent Company. The following trial balances of the two companies are prepared on December 31, 2015: Sargent 130,000 200,000 120,000) Current Assets ........... Depreciable Fixed Assets ... Accumulated Depreciation ......... Investment in Sargent Company ............. Current Liabilities Common Stock ($10 par) ............... Retained Earnings, January 1, 2015................ Sales ........................................... Expenses ........... Subsidiary Income (from Sargent Company)............ Dividends Declared........ Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............... Parker 10,000 400,000 (106,000) 312,000 (60,000) (300,000) (200,000) (150,000) 110,000 (16,000) (40,000) (100,000) (150,000) (100,000) 75,000 5,000 1. If you did not solve Exercise 3, prepare a determination and distribution of excess schedule for the investment (a value analysis is not needed). 2. Prepare all the eliminations and adjustments that would be made on the 2015 consolidated worksheet. 3. If you did not solve Exercise 3, prepare the 2015 consolidated income statement and its related income distribution schedule
