I have these 2 cases and I wanted to know if you could help me understand?

Value Added Accounting Practices in Strategic Business Decisions Case 4 Fall 2016 Names Section: Points: Case 3.1 - 40 points Case 3.2 - 40 points Total (80 points) Case 4.1 Intercompany transactions Peninsula Company acquired all the outstanding stocks of Sandbar Corporation on January 1, 2011, for $15,000,000, when Sandbar's stockholder equity consisted of $5,000,000 capital stock and $2,000,000 retained earnings. The price reflected a $500,000 undervaluation of Sandbar's inventory (sold in 2011) and a $3,500,000 undervaluation of Sandbar's buildings (remaining useful life seven years). During 2012, Sandbar sold a piece of land that cost $1,000,000 to Peninsula for $1,500,000. Peninsula resold the land for $2,200,000 during 2015. Peninsula sells inventory to Sandbar on a regular basis, as follows (in thousands): 2011 2012 2013 2014 2015 Sales to Sandbar Cost to Peninsula 500 1,000 1,200 1,000 1,500 300 600 720 600 900 % unsold by Sandbar at year end 0 30 18 25 20 % unpaid by Sandbar at year end 0 50 30 20 20 Sandbar sold equipment with a book value of $800,000 to Peninsula on January 1, 2015, for $1,600,000. This equipment had a remaining useful life of four years at the time of the sale. Peninsula uses the equity method to account for its investment in Sandbar. The financial statements for Peninsula and Sandbar are summarized as follows (in thousands): Combined Income and Retained earnings Statement for the year ended December 31, 2015 Sales Peninsula 26,000 Gain on land Gain on equipment Income from Sandbar Cost of Sales 1,380 (15,000) Depreciation expense (3,700) Other Expenses (4,280) Net Income Add: Beginning R/E Deduct: Dividends R/E December 31 Sandbar 11,0 00 700 800 5,100 12,250 (3,000) 14,350 (5,00 0) (2,00 0) (2,80 0) 2,00 0 4,00 0 (1,000 ) 5,00 0 Balance Sheet at December 31, 2015 Penisula Cash 1,170 A/R Net 2,000 Inventories 5,000 Land 4,000 Building net 15,000 Equipment net 10,000 Investment in Sandbar 14,280 Total Assets 51,450 A/P 4,100 Other Liabilities 7,000 Capital Stock 26,000 Retained Earnings 14,350 Total equities 51,450 Sandbar 500 1,500 2,000 1,000 4,000 4,000 13,000 1,000 2,000 5,000 5,000 13,000 Required: 1. Determine the schedule of amortization of ECOBV for the years 2011 to 2015 (2 points). 2. Reconstruct the balance for the account \"Investment in Sandbar\" at December 31, 2015. Use the T-account to present the calculations (5 points). 3. Reconstruct the balance of the account \"Income from Sandbar\" for the year 2015. Use the Taccount to present the calculations (3 points). 4. Prepare consolidation adjustment entries (12 points). 5. Complete a consolidated worksheet for Peninsular Company and its subsidiary Sandbar Company as of December 31, 2015. Use the format provided in the next page (You can write your own Excel worksheet, but with the indicated format) (18 points). Accounts Sales Peninsula Sandbar (26,000) (11,000) Consolidation Entries Debit Credit Consolidated Totals Cost of Sales 15,000 5,000 Gain on land (700) 0 0 (800) Depreciation expense 3,700 2,000 Other Expenses 4,280 2,800 (1,380) 0 (5,100) (2,000) Gain on equipment Equity in Sandbar's Income Net Income Retained Earnings 1/1/15 Peninsula Company (12,250) (4,000) Sandbar Company (5,100) (2,000) 3,000 1,000 (14,350) (5,000) Cash 1,170 500 A/R, net 2,000 1,500 Inventories 5,000 2,000 Land 4,000 1,000 Building, net 15,000 4,000 Equipment, net 10,000 4,000 Investment in Sandbar 14,280 0 51,450 13,000 A/P (4,100) (1,000) Other Liabilities (7,000) (2,000) Capital Stocks (26,000) (5,000) Retained Earnings 12/31/2015 (14,350) (5,000) (51,450) (13,000) Net Income (above) Dividend paid Retained Earnings 12/31 Total Assets Total Liabilities and Equities Case 4.2 Non-controlling Interests and Intercompany transactions Alpha effectively gained control over Beta by acquiring 55% of Beta's common shares issuing 500,000 shares with market value of $1.25 per share to Beta's shareholders on December 31, 2011. There was an assessment of $475,000 for the Beta's non-controlling shares. The balance sheets of Alpha (including the effect of the acquisition) and Beta on December 31, 2011 are shown below: Cash A/R Inventory Other Current Assets Equipment Accumulated Depreciation Equipment Land Post-Acquisition Alpha 300,000 170,000 330,000 240,000 620,000 (120,000) Buildings (net) 600,000 0 0 75,000 Goodwill Investment in Beta Account Payable 625,000 2,765,000 (750,000) LT Liabilities (830,000) Common Stock and APIC (625,000) Retained earnings, 12/31/11 (560,000) Total Assets Total Liabilities and equity Beta 125,000 500,000 120,000 50,000 375,000 (75,000) 100,000 (2,765,000) 0 1,270,000 (650,000 ) (102,000 ) (400,000 ) (118,000 ) (1,270,000) At the date of acquisition, the due diligence team determined the following fair values: BETA -FV Dec 31 2011 459,000 A/R 1 year turnover 150,000 Inventory 1 year turnover 170,000 Unrecorded patent 10 year useful life 150,000 Land Indefinite useful life 104,000 LT Liability 2 years All fair value differences are amortized using straight line. Alpha uses equity method to account for Investment in Beta in its books. During 2012 the following transactions took place: Alpha total sales were $600,000. All sales from Alpha were made to Beta. Alpha's sales had a 100% markup on the cost of goods sold. At the end of 2012, Beta's held inventory balance of $300,000 from the items purchased from Alpha. Alpha sold equipment to Beta on January 1, 2012 for $100,000 in cash. This equipment had a net book value of $90,000 ($180,000 original costs and $90,000 accumulated depreciation) and a useful life of 10 years at the time of the sale. Beta reported net income for $375,000 and paid dividends of $50,000. Alpha reported net income of $133,500 (including Equity's in Beta's income) and paid dividends of $50,000. During 2013 the following transactions took place: All sales from Alpha were made to Beta. Alpha's sales had a 100% markup on the cost of goods sold. The entire inventory from 2012 was sold during the year. At the end of 2013, Beta's entire ending balance of inventory consisted of items purchased from Alpha. As a result of these sales, there was a balance of $100,000 in intercompany accounts receivable and payable. Beta sold land to Alpha for $125,000. This land had a book value of $100,000. The financial statements of Alpha and Beta for 2013 were as follows: Sales Alpha 2013 750,000 COGS (375,000) Operating Expenses (Including Depreciation) (421,000) Income Statement Gain on Sale of Land Equity in Beta's income Net Income Balance Sheet Cash 167,950 121,950 2013 Alpha 980,000 Beta 2013 1,225,0 00 (700,00 0) (160,00 0) 25,000 0 390,000 2013 Beta 1,120,0 00 A/R Inventory Other Current Assets Equipment Accumulated Depreciation Equipment 270,000 30,000 240,000 440,000 (112,000) Land 125,000 Buildings (net) 540,000 Goodwill (Sub) 0 Investment in Beta Total Assets Account Payable 782,450 3,295,450 (1,125,000) LT Liabilities (830,000) Common Stock and APIC (625,000) Retained earnings, 12/31/12 (715,450) Total Liabilities and equity (3,295,450) 500,000 350,000 50,000 475,000 (155,00 0) 75,000 2,415,000 (1,130,0 00) (102,0 00) (400,0 00) (783,0 00) (2,415,000) Required: 1. Determine the Goodwill assigned to Non-controlling interest at the acquisition date (2 points). 2. Determine the schedule of amortization of ECOBV for the years 2012 and 2013 (2 points). 3. What is the balance of \"Investment in Beta\" at December 31, 2012? Use the T-account to present the calculations (3 points). 4. What is the balance of \"Equity in Beta's income\" in 2012? Use the T-account to present the calculations (2 points). 5. Calculate the balance of NCI at December 31, 2013. Provide detail calculations of the three components of this balance (3 points). 6. Prepare consolidation adjustment entries (12 points) 7. Complete a consolidated worksheet for Alpha Company and its subsidiary Beta Company as of December 31, 2013. Use the format provided in the next page (You can write your own Excel worksheet, but with the indicated format) (16 points). Accounts Sales Alpha (750,000 Beta (1,225,000 Consolidation Entries Debit Cr edit NCI Consolidated Totals ) ) Cost of Goods Sold 375,000 700,000 Operating Expenses (Incl. Depreciation) 421,000 160,000 Gain on Sale of Land (25,000 ) Equity in Beta's Income (167,950 ) Separate company net income (121,950 ) 0 (390,000 ) Consolidated Net Income NCI in Beta Income Net Income to Controlling Interest Retained Earnings 1/1/13 Alpha Company (643,500 ) Beta Company (443,000 ) Net Income (above) (121,950 ) (390,000 ) Dividend paid 50,000 50,000 (715,450 ) (783,000 ) Retained Earnings 12/31 Cash 980,000 1,120,000 A/R 270,000 500,000 30,000 350,000 0 0 Other Current Assets 240,000 50,000 Equipment 440,000 475,000 Inventory Unrecorded Patent Accumulated Depreciation Equipment (112,000 ) (155,000 ) Land 125,000 0 Buildings (net) 540,000 0 Goodwill (Sub) 0 75,000 782,450 0 3,295,450 2,415,000 Investment in Beta Goodwill Total Assets Account Payable (1,125,000 ) (1,130,000 ) LT Liabilities (830,000 ) (102,000 ) Common Stock and APIC (625,000 ) (400,000 ) NCI in Beta 1/1/2013 NCI in Beta 12/31/2013 Retained Earnings 12/31/2013 Total Liabilities and Equities (715,450 ) (783,000 ) (3,295,450 ) (2,415,000 )