Question
Miller Company acquired an 80 percent interest in Taylor Company on January 1, 2019. Miller paid $800,000 in cash to the owners of Taylor to
Miller Company acquired an 80 percent interest in Taylor Company on January 1, 2019. Miller paid $800,000 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 $200,000 both before and after Millers acquisition.
On January 1, 2019, Taylor reported a book value of $738,000 (Common Stock = $369,000; Additional Paid-In Capital = $110,700; Retained Earnings = $258,300). Several of Taylors buildings that had a remaining life of 20 years were undervalued by a total of $98,300.
During the next three years, Taylor reports income and declares dividends as follows:
Year | Net Income | Dividends | ||||
2019 | $ | 86,200 | $ | 12,400 | ||
2020 | 111,600 | 18,700 | ||||
2021 | 124,600 | 25,000 | ||||
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 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.
-
As of December 31, 2020, Millers Buildings account on its separate records has a balance of $1,000,000 and Taylor has a similar account with a $375,000 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 Company | Taylor Company | ||||||
Common stock | $ | 625,000 | $ | 369,000 | |||
Additional paid-in capital | 350,000 | 110,700 | |||||
Retained earnings, 12/31/21 | 775,000 | 524,600 | |||||
What will be the consolidated balance of each of these accounts?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started