I need help in the attached case 4 questions.
Value Added Accounting Practices in Strategic Business Decisions Case 4 Fall 2014 Names Section: Points: Case 3.1 - 40 points Case 3.2 - 40 points Total (80 points) Case 4.1 Alpha Corporation acquired 75% of Beta Corporation's common stock for $20,100,000 on January 2, 2011. The estimated fair value of the noncontrolling interest was $5,900,000. Beta's book value at date of acquisition was $10,000,000, and its identifiable net assets were fairly stated except for previously unreported completed technology, valued at $4,000,000, with a remaining life of 5 years, straight-line. It is now December 31, 2014, and you are preparing consolidated financial statements for Alpha and Beta. Following is information on intercompany transactions: 1. On January 2, 2012, Alpha sold equipment to Beta for $6 million and recorded a gain of $2 million. The equipment had a remaining life of 10 years at that time. 2. Beta supplies Alpha with component parts for its products, at a markup of 20% on cost. During 2014, Beta made sales totaling $20 million to Alpha. Alpha had parts purchased for $1.8 million and $2.4 million in its 2014 beginning and ending inventory balances, respectively (Hint: $1.8 million is the unsold inventory from last year and $2.4 is the unsold inventory of this year). 3. Alpha sells materials to Beta for use in its manufacturing processes, at a markup of 20% on selling price. During 2014, Alpha made sales totaling $15 million to Beta. Beta had materials purchased for $3 million and $2.8 million in its 2014 beginning and ending inventory balances, respectively. (Hint: $3 million is the unsold inventory from last year and $2.8 is the unsold inventory of this year). Goodwill arising from this acquisition was impaired by $3 million during the years 2011-2013, and no further goodwill impairment occurred in 2014. The separate December 31, 2014 trial balances of Alpha and Beta appear below, before Alpha's end-year-adjustment to record its equity in Beta's income for 2014. Balance Sheet at December 31, 2014 Income Statement 2014 Alpha Beta Alpha Cash 1,000 2,500 A/R, net 5,600 10,000 Cost of Sales 70,000 30,000 Other Expenses 460,000 150,000 Inventories Plant and Equipment, net Investment in Beta 20,225 Total Assets Capital Stocks 556,825 192,500 2,800 489,825 Long-term debt 163,700 5,000 Net Income Total equities 20,000 (3,000) 8,000 Dividend 2,000 90,000 (40,000) Retained earnings, January 1 150,000 7,000 556,825 192,500 50,000 (100,000) (35,000) (42,000) (8,000) 8,000 7,000 Income from Sandbar Net Income 4,000 Current Liabilities Sales Beta Required: 1. Determine the Goodwill assigned to Non-controlling interest at the acquisition date (2 points). 2. Determine the balance for the account \"Investment in Beta\" at December 31, 2014 after Alpha's end-year-adjustment to record its equity in Beta's income for 2014 (Hint: Dividend adjustment is already included in the balance of investment). Show your calculations (3 points). 3. Determine the balance of the account \"Equity in Beta's Income\" for the year 2014. Show your calculations (2 points). 4. Calculate the balance of NCI at December 31, 2014. Provide detail calculations of the three components of this balance (3 points). 5. Prepare consolidation adjustment entries (15 points). 6. Complete a consolidated worksheet for Alpha Corporation and its subsidiary Beta as of December 31, 2014. Use the format provided in the next page (You can write your own Excel worksheet, but with the indicated format) (15 points). Alpha Sales Cost of Sales Operating Expenses (Including Depreciation) Beta (150,000) 100,000 Accounts (50,000) 35,000 42,000 8,000 Equity in Beta's Income (7,000) Separate company net income Consolidated Net Income NCI in Beta Income Net Income to Controlling Interest Retained Earnings 1/1/14 (90,000) Alpha Company (20,000) Beta Company 40,000 (7,000) 3,000 (24,000) 1,000 5,600 70,000 460,000 2,500 10,000 30,000 150,000 (4,000) (489,825) (5,000) 192,500 (2,800) (163,700) (2,000) Net Income (above) Dividend paid Retained Earnings 12/31 Cash A/R Inventory Plant and Equipment, net Investment in Beta Total Assets Current Liabilities Long-term debt Capital Stocks NCI in Beta 1/1/2014 NCI in Beta 12/31/2014 Retained Earnings 12/31/2014 Total Liabilities and Equities (24,000) (192,500) Consolidation Entries Debit Credit Noncontrolling Interest Consolidated Totals Case 4.2 Delta Company acquired 90% of the outstanding common stocks of Gamma Company on June 30, 2011, for $426,000. On that date, Gamma Company had retained earnings in the amount of $60,000, and the fair value of its recorded assets and liabilities was equal to their book value. The excess of implied over fair value of the recorded net assets was attributed to an unrecorded manufacturing formula held by Gamma Company, which had an expected remaining useful life of five years from June 30, 2011. Financial data for 2013 are presented here: Balance Sheet at December 31, 2013 Cash A/R, net Inventories Other Current Assets Land Plant and Equipment Accumulated Depreciation Investment in Gamma Total Assets Accounts Payable Other Liabilities Capital Stocks APIC Retained earnings, January 1 Dividend Net Income Total equities Income Statement 2013 Delta 119,500 342,000 362,000 40,500 150,000 825,000 (207,000) 524,250 2,156,250 295,000 43,000 1,000,000 591,200 (100,000) 327,050 2,156,250 Gamma 132,500 125,000 201,000 13,000 241,000 (53,500) Sales Cost of Goods Sold Other Expenses Equity in Gamma's Income Net Income Delta 2,555,500 (1,730,000) (654,500) Gamma 1,120,000 (690,500) (251,000) 156,050 327,050 178,500 659,000 32,000 19,000 300,000 50,000 139,500 (60,000) 178,500 659,000 On December 31, 2011, Delta Company sold equipment (with an original cost of $100,000 and accumulated depreciation of $50,000) to Gamma Company for $97,500. This equipment has since been depreciated at an annual rate of 20% of the purchase price. During 2012 Gamma Company sold land to Delta Company at a profit of $15,000. The inventory of Delta Company on December 31, 2012, included goods purchased from Gamma Company on which Gamma Company recognized a profit of $7,500. During 2013, Gamma Company sold goods to Delta Company for $375,000, of which $60,000 was unpaid on December 31, 2013. The December 31, 2013, inventory of Delta Company included goods acquired from Gamma Company on which Gamma Company recognized a profit of $10,500. Required: 1. Determine the Goodwill assigned to Non-controlling interest at the acquisition date (2 points). 2. Calculate the balance of NCI at December 31, 2013. Provide detail calculations of the three components of this balance (3 points). 3. Prepare consolidation adjustment entries (15 points) 4. Complete a consolidated worksheet for Delta Company and its subsidiary Gamma 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) (20 points). Delta Accounts Sales Cost of Goods Sold Operating Expenses (Incl. Dep) Equity in Gamma's Income Separate company net income Gamma (2,555,50 0) 1,730,00 0 654,500 (156,050) (327,050) (1,120,00 0) 690,500 Consolidated Net Income 251,000 (178,500 ) NCI in Gamma Income Net Income to Controlling Interest Retained Earnings 1/1/13 (591,200) Delta Company (139,500) Gamma Company Net Income (above) Dividend paid Retained Earnings 12/31 Cash A/R Inventory Other Current Assets Land Plant and Equipment Accumulated Depreciation Investment in Gamma Total Assets Accounts Payable Other Liabilities Capital Stocks APIC (327,050) 100,000 (818,250) 119,500 342,000 362,000 40,500 150,000 825,000 (207,000) 524,250 (178,500) 60,000 (258,000 ) 132,500 125,000 201,000 13,000 241,000 (53,500) 2,156,25 0 (295,000) (43,000) (1,000,00 0) 659,000 (32,000) (19,000) (300,000) (50,000) (818,250) (2,156,25 0) (258,000) (659,000 ) NCI in Gamma 1/1/2013 NCI in Gamma 12/31/2013 Retained Earnings 12/31/2013 Total Liabilities and Equities Consolidation Entries Debit Credit Noncontrolling Interest Consolidate d Totals
