Question
Miller Company acquired an 80 percent interest in Taylor Company on January 1, 2019. Miller paid $840,000 in cash to the owners of Taylor to
Miller Company acquired an 80 percent interest in Taylor Company on January 1, 2019. Miller paid $840,000 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 $210,000 both before and after Millers acquisition.
On January 1, 2019, Taylor reported a book value of $658,000 (Common Stock = $329,000; Additional Paid-In Capital = $98,700; Retained Earnings = $230,300). Several of Taylors buildings that had a remaining life of 20 years were undervalued by a total of $87,800.
During the next three years, Taylor reports income and declares dividends as follows:
Year | Net Income | Dividends | ||||
2019 | $ | 77,200 | $ | 11,100 | ||
2020 | 99,900 | 16,700 | ||||
2021 | 111,300 | 22,300 | ||||
Determine the appropriate answers for each of the following questions:
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What amount of excess depreciation expense should be recognized in the consolidated financial statements for the initial years following this acquisition?
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If a consolidated balance sheet is prepared as of January 1, 2019, what amount of goodwill should be recognized?
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If a consolidation worksheet is prepared as of January 1, 2019, what Entry S and Entry A should be included?
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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.
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On the parent companys 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.
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As of December 31, 2020, Millers Buildings account on its separate records has a balance of $892,000 and Taylor has a similar account with a $334,500 balance. What is the consolidated balance for the Buildings account?
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What is the balance of consolidated goodwill as of December 31, 2021?
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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 Company | Taylor Company | ||||||
Common stock | $ | 557,500 | $ | 329,000 | |||
Additional paid-in capital | 312,200 | 98,700 | |||||
Retained earnings, 12/31/21 | 691,300 | 468,600 | |||||
What will be the consolidated balance of each of these accounts?
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