Fox Corporation acquired 100 percent ownership of Lamb Products on January 1, 2018. for $200,000. On that date, Lamb reported retained earnings of $50,000 and had $10,000 of common stock outstanding and $90,000 of Paid in Capital Fox has used the equity method of accounting for its investment in Lamb. On the date of the business combination, the fair value of Lamb's depreciable assets were $20,000 more than book value. The differential assigned to depreciable assets is amortized over 10 years. In addition, notes payable is overvalued by $15,000 and has a remaining life of 5 years. Any remaining acquisition differential is assigned to goodwill, which is not impaired at December 31, 2018. There was $10,000 of intercompany receivables/payables as of 12/31/18 Required: Carefully Follow and label each step. 1. Prepare the acquisition analysis as of acquisition date. Compute the unamortized differential as of 1/1/2018. 2. Verify the calculation of the balance in the acccount equity in sub earnings and record the parent company entries with respect to its equity investment in sub 3. Calculate Net Income Allocated to the Controlling Interest (also known as consolidated net income) 4. Prepare all elimination entries for 2018 5. Complete the consolidating spreadsheet for the year ended 2018. P CO. SCO. ELIMINATIONS CONS.TOT. DR. CR. INCOME STATEMENT FYE 12/31/18 (000's) Sales Equity in sub earnings 100 200 25 Total revenues 225 100 Cost of goods sold Depreciation expense Other expenses 120 25 15 Total expenses 160 70 Net income 65 30 RETAINED EARNINGS STATEMENT Retained Earnings 1/1 298 50 Net income 65 30 Dividends declared 30 10 Retained Earnings 12/31 333 70 BALANCE SHEET 65 Cash and receivables Inventory Land Depreciable Assets Investment in Yellow goodwill 43 260 80 500 215 50 80 150 108 310 160 650 215 Accumulated depreciation (205) (105) (310) Total assets 893 240 1,133 Accounts payable Notes payable 60 200 250 Common stock Paid in capital Retained earnings Noncontrolling interest in sub Total liabilities and equity 250 50 333 10 90 70 260 140 403 I 893 F TRUE TRUE 0 O 1,133 TRUE 1. What is net income to controlling interest? 2. What is consolidated depreciation expense? 3. What is consolidated other expenses? 4. What is the differential assigned to goodwill? 5. What are consolidated total assets? 6. What is the consolidated common stock? 7. What is the consolidated Retained Earnings at 1/1/18? 8. What are consolidated dividends declared? 9. What are consolidated cash and receivables? 10. What is consolidated accumulated depreciation? (enter as a negative amount) Fox Corporation acquired 100 percent ownership of Lamb Products on January 1, 2018. for $200,000. On that date, Lamb reported retained earnings of $50,000 and had $10,000 of common stock outstanding and $90,000 of Paid in Capital Fox has used the equity method of accounting for its investment in Lamb. On the date of the business combination, the fair value of Lamb's depreciable assets were $20,000 more than book value. The differential assigned to depreciable assets is amortized over 10 years. In addition, notes payable is overvalued by $15,000 and has a remaining life of 5 years. Any remaining acquisition differential is assigned to goodwill, which is not impaired at December 31, 2018. There was $10,000 of intercompany receivables/payables as of 12/31/18 Required: Carefully Follow and label each step. 1. Prepare the acquisition analysis as of acquisition date. Compute the unamortized differential as of 1/1/2018. 2. Verify the calculation of the balance in the acccount equity in sub earnings and record the parent company entries with respect to its equity investment in sub 3. Calculate Net Income Allocated to the Controlling Interest (also known as consolidated net income) 4. Prepare all elimination entries for 2018 5. Complete the consolidating spreadsheet for the year ended 2018. P CO. SCO. ELIMINATIONS CONS.TOT. DR. CR. INCOME STATEMENT FYE 12/31/18 (000's) Sales Equity in sub earnings 100 200 25 Total revenues 225 100 Cost of goods sold Depreciation expense Other expenses 120 25 15 Total expenses 160 70 Net income 65 30 RETAINED EARNINGS STATEMENT Retained Earnings 1/1 298 50 Net income 65 30 Dividends declared 30 10 Retained Earnings 12/31 333 70 BALANCE SHEET 65 Cash and receivables Inventory Land Depreciable Assets Investment in Yellow goodwill 43 260 80 500 215 50 80 150 108 310 160 650 215 Accumulated depreciation (205) (105) (310) Total assets 893 240 1,133 Accounts payable Notes payable 60 200 250 Common stock Paid in capital Retained earnings Noncontrolling interest in sub Total liabilities and equity 250 50 333 10 90 70 260 140 403 I 893 F TRUE TRUE 0 O 1,133 TRUE 1. What is net income to controlling interest? 2. What is consolidated depreciation expense? 3. What is consolidated other expenses? 4. What is the differential assigned to goodwill? 5. What are consolidated total assets? 6. What is the consolidated common stock? 7. What is the consolidated Retained Earnings at 1/1/18? 8. What are consolidated dividends declared? 9. What are consolidated cash and receivables? 10. What is consolidated accumulated depreciation? (enter as a negative amount)
