Question
Miller Company acquired an 80 percent interest in Taylor Company on January 1, 2019. Miller paid $912,000 in cash to the owners of Taylor to
Miller Company acquired an 80 percent interest in Taylor Company on January 1, 2019. Miller paid $912,000 in cash to the owners of Taylor to acquire these shares. In addition, the remaining 20 percent of Taylor shares continued to trade at a total value of $228,000 both before and after Miller's acquisition.
On January 1, 2019, Taylor reported a book value of $598,000 (Common Stock = $299,000; Additional Paid-In Capital = $89,700; Retained Earnings = $209,300). Several of Taylor's buildings that had a remaining life of 20 years were undervalued by a total of $79,700.
During the next three years, Taylor reports income and declares dividends as follows:
Year Net Income Dividends
2019 $69,800$10,000
202090,00015,000
2021100,00020,000
Determine the appropriate answers for each of the following questions:
- What amount of excess depreciation expense should be recognized in the consolidated financial statements for the initial years following this acquisition?
- If a consolidated balance sheet is prepared as of January 1, 2019, what amount of goodwill should be recognized?
- If a consolidation worksheet is prepared as of January 1, 2019, what Entry S and Entry A should be included?
- On the separate financial records of the parent company, what amount of investment income would be reported for 2019 under each of the following accounting methods?
- The equity method.
- The partial equity method.
- The initial value method.
- On the parent company's separate financial records, what would be the December 31, 2021, balance for the Investment in Taylor Company account under each of the following accounting methods?
- The equity method.
- The partial equity method.
- The initial value method.
- As of December 31, 2020, Miller's Buildings account on its separate records has a balance of $800,000 and Taylor has a similar account with a $300,000 balance. What is the consolidated balance for the Buildings account?
- What is the balance of consolidated goodwill as of December 31, 2021?
- Assume that the parent company has been applying the equity method to this investment. On December 31, 2021, the separate financial statements for the two companies present the following information:
Miller CompanyTaylor CompanyCommon stock$500,000$299,000Additional paid-in capital280,00089,700Retained earnings, 12/31/21620,000424,100
What will be the consolidated balance of each of these accounts?
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