Hug Company (year end December 31st) acquires 80% of Corpuz Company for $560,000 cash

on July 1, 2014. Corpuz reported common stock of $280,000 and retained earnings of $220,000

on that date. Patent (remaining life 2 years) was undervalued by $30,000, Equipment (remaining

life 5 years) was undervalued by $80,000 and Buildings (remaining life 8 years) were

undervalued by $40,000. Any excess consideration transferred over fair value was attributed to

goodwill with an indefinite life. However, at December 31, 2016 it was determined that goodwill

had been impaired by $6,000. Corpuz earns income and pays dividends as follows:

2014 2015 2016

Net income full year $100,000 $130,000 $150,000

Net income last 6 months $60,000

Dividends - issued August $40,000 $60,000 $60,000

Hug uses the acquisition method and the full equity method for its investments.

Assignment:

1. Prepare all journal entries on Hugs accounting records to account for the activity of

Corpuz for each year of ownership (2014, 2015, and 2016). This should include the

acquisition.

2. Prepare the consolidation/elimination/reclassification entries on the consolidation

worksheet at July 1, 2014, December 31, 2014, December 31, 2015 and December 31,

2016.

3. Compute Hug's general ledger investment in Corpuz at July 1, 2014, December 31,

2014, December 31, 2015 and December 31, 2016. Show in T account format

4. Compute the amount Hug records as Income from Corpuz for the years ended

December 31, 2014, December 31, 2015, and December 31, 2016

5. Compute the Non-controlling interest in the Net Income of Corpuz at December 31, 2014

December 31, 2015 and December 31, 2016. Show in T account format

6. Compute the Non-Controlling Interest in Net Assets (consolidated balance sheet) in

Corpuz at July 1, 2014, December 31, 2014, December 31, 2015 and December 31,

2016. Show in T account format.