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d. Prepare a worksheet to consolidate the financial statements of these two companies as of December 31, 2013. (Leave no cells blank - be certain to enter "0" wherever required. Enter consolidated entries for Investment in Atlanta Company in the order of (S) Elimination of subsidiary's stockholders' equity, (I) Elimination of intra-entity income, (A1) Allocation of subsidiary identifiable net asset fair value in excess of book value and (A2) Allocation of goodwill to parent and noncontrolling interest. Enter consolidated entries for Noncontrolling interest, 7/1 in the order of (A1) Allocation of subsidiary identifiable net asset fair value in excess of book value and (A2) Allocation of goodwill to parent and noncontrolling interest and (S) Elimination of subsidiary's stockholders' equity. Input all amounts as positive values except for the credit balances which should be entered with the minus sign.) TRUMAN COMPANY AND SUBSIDIARY ATLANTA COMPANY Consolidation Worksheet For Year Ending December 31, 2013 Consolidation Entries Truman Revenues $ (699,075 Atlanta ) Operating expenses 423,000 Income of subsidiary (43,925 (320,000 ) (459,000 ) ) Separate company net $ income $ Debit 309,000 $ (150,000 ) Credit NCI Cons. $ $ $ $ Consolidated net income NCI in Atlanta's income Controlling interest in CNI $ Retained $ earnings, 1/1 (887,000 ) Net income (above) (320,000 ) Dividends paid 150,000 Retained earnings, 12/31 $ (1,057,000 Current assets $ 407,625 Investment in Atlanta 823,375 $ (573,000 ) (150,000 $ ) 60,000 ) $ (663,000 $ 441,000 ) $ $ Land 477,000 282,000 Buildings 738,000 683,000 Patent Goodwill Total assets $ 2,446,000 Liabilities (889,000 ) Common stock (95,000 Additional paid-in capital Retained earnings, 12/31 $ $ 1,406,000 $ $ (423,000 ) ) (300,000 ) (405,000 ) (20,000 ) (1,057,000 ) (663,000 ) Noncontrollin g interest, 7/1 Noncontrollin g interest, $ 12/31 Total liabilities and $ stockholders' equity (2,446,000 ) $ (1,406,000 ) $ $ $ Problem 3-20 [LO4a] Chapman Company obtains 100 percent of Abernethy Company's stock on January 1, 2012. As of that date, Abernethy has the following trial balance: Debit Accounts payable Accounts receivable Additional paid-in capital Buildings (net) (4year life) Cash and short-term investments Common stock Equipment (net) (5year life) Inventory Land Long-term liabilities (mature 12/31/15) Retained earnings, 1/1/12 Supplies Totals Credit $ $ 58,300 43,500 50,000 210,000 83,250 250,000 417,500 95,000 103,000 163,000 445,850 14,900 $ 967,150 $ 967,150 During 2012, Abernethy reported income of $122,000 while paying dividends of $15,000. During 2013, Abernethy reported income of $175,000 while paying dividends of $55,000. Assume that Chapman Company acquired Abernethy's common stock for $877,650 in cash. As of January 1, 2012, Abernethy's land had a fair value of $116,200, its buildings were valued at $285,600, and its equipment was appraised at $391,750. Chapman uses the equity method for this investment. Prepare consolidation worksheet entries for December 31, 2012, and December 31, 2013. Date Dec. 31, 2012 Entry S Entry A Entry I Entry D Entry E Dec. 31, 2013 Entry S Entry A Entry I Entry D Entry E Problem 3-21 [LO4b] General Journal Debit Credit Chapman Company obtains 100 percent of Abernethy Company's stock on January 1, 2012. As of that date, Abernethy has the following trial balance: Debit Accounts payable Accounts receivable Additional paid-in capital Buildings (net) (4year life) Cash and short-term investments Common stock Equipment (net) (5year life) Inventory Land Long-term liabilities (mature 12/31/15) Retained earnings, 1/1/12 Supplies Totals Credit $ $ 59,300 44,300 50,000 137,000 73,750 250,000 262,500 126,500 100,500 176,000 227,850 18,600 $ 763,150 $ 763,150 During 2012, Abernethy reported income of $96,000 while paying dividends of $12,000. During 2013, Abernethy reported income of $141,000 while paying dividends of $45,000. Assume that Chapman Company acquired Abernethy's common stock for $635,560 in cash. Assume that the equipment and long-term liabilities had fair values of $287,450 and $144,440, respectively, on the acquisition date. Chapman uses the initial value method to account for its investment. Prepare consolidation worksheet entries for December 31, 2012, and December 31, 2013. Date Dec. 31, 2012 Entry S General Journal Debit Credit Entry A Entry I Entry E Dec. 31, 2013 Entry *C Entry S Entry A Entry I Entry E Problem 3-22 [LO4c] Chapman Company obtains 100 percent of Abernethy Company's stock on January 1, 2012. As of that date, Abernethy has the following trial balance: Debit Accounts payable Accounts receivable Additional paid-in capital Buildings (net) (4year life) Cash and short-term investments Common stock Equipment (net) (5year life) Inventory Land Long-term liabilities (mature 12/31/15) Retained earnings, 1/1/12 Supplies Totals Credit $ $ 51,500 46,500 50,000 190,000 67,750 250,000 442,500 107,000 93,500 166,500 448,250 19,000 $ 966,250 $ 966,250 During 2012, Abernethy reported income of $99,000 while paying dividends of $12,000. During 2013, Abernethy reported income of $151,250 while paying dividends of $53,000. Assume that Chapman Company acquired Abernethy's common stock by paying $947,250 in cash. All of Abernethy's accounts are estimated to have a fair value approximately equal to present book values. Chapman uses the partial equity method to account for its investment. Prepare the consolidation worksheet entries for December 31, 2012, and December 31, 2013. (Leave no cells blank. If no entry is required, select "No Journal Entry Required" in the account field and zero (0) in the amount field.) Date General Journal Debit Credit Dec. 31, 2012 Entry S Entry A Entry I Entry D Entry E Dec. 31, 2013 Entry *C Entry S Entry A Entry I Entry D Entry E Problem 4-27 [LO2, LO4, LO5] On January 1, Beckman, Inc., acquires 60 percent of the outstanding stock of Calvin for $51,612. Calvin Co. has one recorded asset, a specialized production machine with a book value of $19,200 and no liabilities. The fair value of the machine is $75,700, and the remaining useful life is estimated to be 10 years. Any remaining excess fair value is attributable to an unrecorded process trade secret with an estimated future life of 4 years. Calvin's total acquisition date fair value is $86,020. At the end of the year, Calvin reports the following in its financial statements: Revenu es $ Expens es 73,350 29,700 Net income $ 43,650 Dividen ds paid $ Machi ne $ Comm on stock Retain 31,370 ed earnings Other assets Total assets 17,280 3 8 , 6 5 0 4 8 , $6 5 0 5,000 $ 48,650 Total equity 1 0 , $0 0 0 Determine the amounts that Beckman should report in its year-end consolidated financial statements for noncontrolling interest in subsidiary income, total noncontrolling interest, Calvin's machine (net of accumulated depreciation), and the process trade secret. (Input all amounts as positive values.) Amounts Noncontrolling interest in subsidiary income Total noncontrolling interest Calvin's machine (net accumulated depreciation) Process trade secret $ $ $ $ Problem 4-40 [LO2, LO3, LO6, LO7, LO8] On July 1, 2013, Truman Company acquired a 70 percent interest in Atlanta Company in exchange for consideration of $800,450 in cash and equity securities. The remaining 30 percent of Atlanta's shares traded closely near an average price that totaled $343,050 both before and after Truman's acquisition. In reviewing its acquisition, Truman assigned a $122,500 fair value to a patent recently developed by Atlanta, even though it was not recorded within the financial records of the subsidiary. This patent is anticipated to have a remaining life of five years. The following financial information is available for these two companies for 2013. In addition, the subsidiary's income was earned uniformly throughout the year. Subsidiary dividend payments were made quarterly. Revenues Operating expenses Income of subsidiary Net income Retained earnings, 1/1/13 Net income (above) Dividends paid Retained earnings, 12/31/13 Current assets Investment in Atlanta Land Buildings Total assets Liabilities Common stock Additional paid-in capital $ Truman (699,075) $ 423,000 Atlanta (459,000) 309,000 (43,925) $ (320,000) $ (150,000) $ (887,000) $ (573,000) (320,000) (150,000) 150,000 60,000 $ (1,057,000) $ (663,000) $ $ 441,000 407,625 823,375 477,000 738,000 $ $ 2,446,000 (889,000) 282,000 683,000 $ $ 1,406,000 (423,000) (95,000) (300,000) (405,000) (20,000) Retained earnings, 12/31/13 Total liabilities and stockholder s' equity (1,057,000) (663,000) $ (2,446,000) $ (1,406,000) a. How did Truman allocate Atlanta's acquisition-date fair value to the various assets acquired and liabilities assumed in the combination? (Input all amounts as positive values.) Consideration transferred by Truman Noncontrolling interest fair value Atlanta's acquisition-date total fair value Book value of Atlanta Fair value in excess of book value Excess fair value assigned to: Patent Goodwill $ $ $ $ $ $ $ b. How did Truman allocate the goodwill from the acquisition across the controlling and noncontrolling interests? (Input all amounts as positive values.) Controlling Interest Goodwill $ Noncontrolling Interest $ c. How did Truman derive the Investment in Atlanta account balance at the end of 2013? (Amounts to be deducted should be indicated with a minus sign.) Initial value at acquisition date Truman's share of Atlanta's income for half year Dividends 2013 $ Investment account balance 12/31/13 $ Prepare consolidation worksheet entries for December 31, 2012, and December 31, 2013. Problem 3-20 Date General Journal Debit Credit Dec. 31, 2012 Entry S Common Stock-Abernethy Additional Paid in Capital Retained Earnings, 1/1/12 Investment in Abernethy Entry A 745,850 Land Buildings Goodwill Equipment Investment in Abernethy Entry I Equity in Subsidiary Earnings 108,250 Investment in Abernethy Entry D Investment in Abernethy Dividends Paid Entry E Depreciation Expense 108,250 15,000 15,000 Equipment Buildings 18,900 Dec. 31, 2013 Entry S Common Stock-Abernethy Additional Paid in Capital Retained Earnings, 1/1/13 Investment in Abernethy Entry A 852,850 Land Buildings Goodwill Equipment Investment in Abernethy Entry I Equity in Subsidiary Earnings 161,250 Investment in Abernethy Entry D Investment in Abernethy Dividends Paid Entry E Depreciation Expense 161,250 55,000 55,000 Equipment Buildings 18,900 Prepare consolidation worksheet entries for December 31, 2012, and December 31, 2013. Problem 3-21 [ Date Dec. 31, 2012 Entry S General Journal Debit Credit Common Stock-Abernethy Additional Paid-In Capital Retained Earnings, 1/1/12 Investment in Abernethy Entry A 527,850 Equipment Long-Term Liabilities Goodwill Investment in Abernethy Entry I Dividend Income 527,850 12,000 Dividends Paid Entry E 12,000 Depreciation Expense Interest Expense Long-Term Liabilities Equipment Dec. 31, 2013 Entry *C Investment in Abernethy Retained Earnings, 1/1/13 71,120 71,120 Entry S Common Stock-Abernethy Additional Paid-In Capital Retained Earnings, 1/1/13 Investment in Abernethy Entry A 611,850 Equipment Long-Term Liabilities Goodwill Investment in Abernethy Entry I 94,830 Dividend Income 45,000 Dividends Paid Entry E 45,000 Depreciation Expense Interest Expense Long-Term Liabilities Equipment Problem 4-27 Determine the amounts that Beckman should report in its year-end consolidated financial statements for noncontrolling interest in subsidiary income, total noncontrolling interest, Calvin's machine (net of accumulated depreciation), and the process trade secret. (Input all amounts as positive values.) Amounts Noncontrolling interest in subsidiary income Total noncontrolling interest Calvin's machine (net accumulated depreciation) Process trade secret $ 49,911 $ 82,319 $ 66,178 $ 42,375 d. Prepare a worksheet to consolidate the financial statements of these two companies as of December 31, 2013. (Leave no cells blank - be certain to enter "0" wherever required. Enter consolidated entries for Investment in Atlanta Company in the order of (S) Elimination of subsidiary's stockholders' equity, (I) Elimination of intra-entity income, (A1) Allocation of subsidiary identifiable net asset fair value in excess of book value and (A2) Allocation of goodwill to parent and noncontrolling interest. Enter consolidated entries for Noncontrolling interest, 7/1 in the order of (A1) Allocation of subsidiary identifiable net asset fair value in excess of book value and (A2) Allocation of goodwill to parent and noncontrolling interest and (S) Elimination of subsidiary's stockholders' equity. Input all amounts as positive values except for the credit balances which should be entered with the minus sign.) TRUMAN COMPANY AND SUBSIDIARY ATLANTA COMPANY Consolidation Worksheet For Year Ending December 31, 2013 Truman Revenues $ (699,075 Atlanta ) Operating expenses (43,925 ) Separate company net income $ 309,000 $ (150,000 ) NCI Cons. $ 229,500 $0 $0 $ -928,575 12,250 ) ) (320,000 (459,000 Credit 154,500 0 589,750 43,925 423,000 Income of subsidiary $ Debit 0 0 0 Consolidated net income -338,825 NCI in Atlanta's income -18,825 Controlling interest in CNI Retained earnings, 1/1 18,825 $ -320,000 $ (887,000 ) Net income (above) (320,000 ) Dividends paid $ 150,000 (573,000 ) (150,000 ) $ (1,057,000 Current assets $ 407,625 ) $ (663,000 $ 441,000 0 $ -887,000 0 0 0 -320,000 30,000 9,000 0 Retained earnings, 12/31 0 0 60,000 573,000 0 0 ) 150,000 $ -1,057,000 282,000 Buildings 738,000 683,000 0 43,925 0 85,750 0 0 477,000 656,600 0 Land 0 21,000 823,375 0 0 Investment in Atlanta 0 $ 848,625 58,100 0 0 0 0 0 759,000 0 0 0 1,421,000 Patent 122,500 Total assets $ 2,446,000 $ Liabilities $ (889,000 ) (423,000 ) Common stock (95,000 ) (300,000 ) Additional paid-in capital (405,000 ) (20,000 ) Retained earnings, 12/31 (1,057,000 ) (663,000 ) 110,250 0 0 0 1,406,000 $ 0 83,000 Goodwill 12,250 $ 3,138,875 (2,446,000 ) $ (1,406,000 ) 300,000 0 0 -95,000 20,000 0 0 -405,000 0 0 0 -1,057,000 36,750 24,900 281,400 343,050 0 $ -1,312,000 0 Total liabilities and stockholders' equity 0 0 Noncontrolling interest, 12/31 0 0 Noncontrolling interest, 7/1 0 0 $ 352,875 $ 1,405,175 $ 1,405,175 0 -352,875 $ -3,221,875 On April 1, Pujols, Inc., exchanges $612,250 fair-value consideration for 70 percent of the outstanding stock of Ramirez Corporation. The remaining 30 percent of the outstanding shares continued to trade at a collective fair value of $245,250. Ramirez's identifiable assets and liabilities each had book values that equaled their fair values on April 1 for a net total of $747,500. During the remainder of the year, Ramirez generates revenues of $700,000 and expenses of $410,000 and paid no dividends. On a December 31 consolidated balance sheet, what amount should be reported as noncontrolling interest? $311,250 $332,250 $310,500 $349,390 Corporation acquires Hooker, Inc. The parent pays more for it than the fair value of the subsidiary's net assets. On the acquisition date, Treadway has equipment with a book value of $447,000 and a fair value of $619,000. Hooker has equipment with a book value of $332,000 and a fair value of $426,500. Hooker is going to use pushdown accounting. Immediately after the acquisition, what amounts in the Equipment account appear on Hooker's separate balance sheet and on the consolidated balance sheet? Treadway rev: 10_01_2012 $426,500 and $873,500. $332,000 and $779,000. $332,000 and $951,000. $426,500 and $1,045,500 Amie, Inc., has 103,000 shares of $2 par value stock outstanding. Prairie Corporation acquired 30,900 of Amie's shares on January 1, 2010, for $123,600 when Amie's net assets had a total fair value of $337,300. On July 1, 2013, Prairie agreed to buy an additional 61,800 shares of Amie from a single stockholder for $6 per share. Although Amie's shares were selling in the $5 range around July 1, 2013, Prairie forecasted that obtaining control of Amie would produce significant revenue synergies to justify the premium price paid. If Amie's net identifiable assets had a fair value of $497,300 at July 1, 2013, how much goodwill should Prairie report in its postcombination consolidated balance sheet? $79,500 $120,700 $0 $51,500 On January 1, 2012, Chamberlain Corporation pays $510,400 for a 60 percent ownership in Neville. Annual excess fair-value amortization of $24,800 results from the acquisition. On December 31, 2013, Neville reports revenues of $481,000 and expenses of $347,000 and Chamberlain reports revenues of $799,000 and expenses of $494,000. The parent figures contain no income from the subsidiary. What is consolidated net income attributable to the controlling interest? $370,520 $414,200 $395,320 $481,000 Willkom Corporation bought 100 percent of Szabo, Inc., on January 1, 2011. On that date, Willkom's equipment (10year life) has a book value of $445,000 but a fair value of $631,000. Szabo has equipment (10-year life) with a book value of $282,000 but a fair value of $468,000. Willkom uses the equity method to record its investment in Szabo. On December 31, 2013, Willkom has equipment with a book value of $311,500 but a fair value of $531,200. Szabo has equipment with a book value of $197,400 but a fair value of $431,600. What is the consolidated balance for the Equipment account as of December 31, 2013? rev: 10_01_2012 $508,900. $694,900. $639,100. $962,800