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 Millers acquisition.
On January 1, 2019, Taylor reported a book value of $370,000 (Common Stock = $185,000; Additional Paid-In Capital = $55,500; Retained Earnings = $129,500). Several of Taylors buildings that had a remaining life of 20 years were undervalued by a total of $49,300.
During the next three years, Taylor reports income and declares dividends as follows:
Year | Net Income | Dividends | ||||
2019 | $ | 43,200 | $ | 6,200 | ||
2020 | 55,800 | 9,300 | ||||
2021 | 62,000 | 12,400 | ||||
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 $496,000 and Taylor has a similar account with a $186,000 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 | $ | 310,000 | $ | 185,000 | |||
Additional paid-in capital | 173,600 | 55,500 | |||||
Retained earnings, 12/31/21 | 384,400 | 262,600 | |||||
What will be the consolidated balance of each of these accounts?
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