Need someone to check my work for assignments 3.1 & 3.2 to make sure i did everything right.

Value Added Accounting Practices in Strategic Business Decisions Case 3 Fall 2016 Names Section: Points: Case 3.1 - 15 points Case 3.2 - 25 points Case 3.3 - 20 points Total (60 points) Case 3.1 Non-controlling interests On January 1, 2011, Peres Company purchased 80% of the common stock of Soap Company for $308,000. On this date, Soap has common stock, APIC, and RE of $50,000, $100,000, and $150,000, respectively. Net Income and Dividends for two years for Soap Company are as follows: Net Income Dividends $ $ 2011 60,000 20,000 $ $ 2012 90,000 30,000 On January 1, 2011, the only undervalued tangible assets of Soap are inventory and the building. Inventory, for which FIFO is used, is worth $10,000 more than cost. The inventory is sold in 2011. The building, which is worth $25,000 more than book value, has a remaining life of 10 years, and straight-line depreciation is used. The remaining excess of cost over book value is attributable to goodwill. The trial balances for Peres and Soap are as follows: Inventory, December 31 Other Current Assets Investment in Soap Land Buildings and Equipment, net Goodwill Other Intangibles Current Liabilities Bond Payable Other Long-Term Liabilities Common Stock APIC RE Net Sales COGS Operating expenses Equity in investee income Dividend Declared Peres Company 100,000 148,000 ? 50,000 250,000 20,000 (120,000) (200,000) (200,000) (100,000) (204,000) (520,000) 300,000 120,000 ? 50,000 Soap Company 50,000 180,000 50,000 260,000 (40,000) (100,000) (50,000) (100,000) (190,000) (450,000) 260,000 100,000 30,000 Required: 1. Determine the Goodwill assigned to Non-controlling interest at the acquisition date (2 points). 2. Find the balance in the Equity in investee income and Investment accounts if Peres accounts for its investment using the equity method (3 points). 3. Calculate the balance of NCI at December 31, 2012. Provide detail calculations (5 points). 4. Complete a consolidated worksheet as of December 31, 2012. (5 points). Case 3.2 Intraperiod Purchase Alpha Company purchased 95% of the common stock of Beta Company on May 1, 2013, for a cash payment of $515,000. December 31, 2013, trial balances for Alpha and Beta were: Alpha December 31, 2013 Beta December 31, 2013 Current Assets 352,600 179,200 Investment in Beta 549,845 BALANCE SHEET Property and Equipment Total Assets Account and Notes Payable 1,334,000 562,000 2,236,445 741,200 270,240 124,000 Dividend Payable 60,000 Common Stock ($ 10 par) 1,000,000 200,000 Other Contributed Capital 364,000 90,000 Treasury Stock at Cost, 500 shares (32,000) R/E January 1, 2013 315,360 209,200 Net Income 286,845 150,000 0 (60,000) 2,236,445 741,200 Dividend Declared Total Liabilities + Equity INCOME STATEMENT Sales Cost of Goods Sold Other Expenses Equity in Subsidiary Income Net Income Alpha Beta 2013 2013 1,940,000 976,000 (1,261,000) (584,000) (484,000) (242,000) 91,845 286,845 150,000 Beta Company declared a $60,000 cash dividend on December 20, 2013, payable on January 10, 2014, to stockholders of record on December 31, 2013. Alpha Company recognized the dividend on its declaration date. Any difference between book value and the value implied by the purchase price relates to subsidiary equipment with 5-year remaining life, included in property and equipment. Revenues and expenses are distributed evenly through the year Required: 1. Calculate the balance of NCI at December 31, 2013. Provide detail calculations (5 points). 2. Complete a consolidated worksheet for Alpha Company and its subsidiary Beta Company as of December 31, 2013. Prepare supporting amortization schedules (20 points). Case 3.3 Step Acquisitions On January 1, 2012, Porter Company bought a 20% interest in Salem Company for $275,000. Any difference between book value and the value implied by the price paid relates to the investee's inventory (turnover 1 year). During 2012, Salem reported net income of $110,000 and paid cash dividends of $33,000. On January, 1 2013, Porter acquired an additional 70% by $1,347,500 cash. The consideration transferred by Porter in its second acquisition of Salem represents the best available evidence for measuring the fair value of Salem Company at January 1, 2013. Also, as of January 1, 2013, Porter assessed a $440,000 value to an unrecorded customer contract recently negotiated by Salem. The customer contract is anticipated to have a remaining life of 4-years. Salem's other assets and liabilities were judged to have fair values equal to their book values. Porter elects to continue applying the equity method to this investment for internal reporting purposes. At December 31, 2013, the following financial information is available for consolidation: BALANCE SHEET Porter Salem December 31, 2013 December 31, 2013 316,800 594,000 Current Assets Investment in Salem Company ? 0 Property, plant, and equipment 908,600 649,000 Patented Technology 935,000 407,000 Total Assets Liabilities ? 1,650,000 1,430,000 99,000 Common Stock 990,000 550,000 APIC 198,000 220,000 R/E January 1, 2013 942,700 660,000 Net Income ? 165,000 Dividend Paid (154,000) (44,000) Total Liabilities + Equity ? INCOME STATEMENT 1,650,000 Porter Salem Revenue 2013 1,024,100 2013 418,000 Operating Expenses (676,500) (253,000) Income in Salem's earning ? Gain (Loss) on revaluation of Investment IN Salem to fair value ? Net Income ? 165,000 Required: 1. Calculate the following amounts on Porter pre-consolidation 2013 statement (6 points) a. Investment in Salem b. Income in Salem's earnings c. Gain (Loss) on Revaluation of Investment in Salem to fair value 2. Calculate the balance of NCI at December 31, 2013. Provide detail calculations (2 points). 3. Prepare a worksheet to consolidate the financial statements of these two companies as of December 31, 2013 (12 points). Case 3.1 80% 20% Company FV FV of Net Assets ECOBV 308,000 77,000 385,000 300,000 85,000 Identifiable Inventory Building Goodwill Parent 308,000 268,000 $ 40,000 Company FV FV Acquis date Goodwill 10,000 25,000 50,000 10 Balance Amortization Balance 12/31/11 12/31/12 2,500 22,500 20,000 1 - The Goodwill assigned to NCI at the acquisition date is $10,000 22011 Net Income Dividends NI Inventory sold 80% Entry S C/S Soap APIC Soap R/E Soap Invest in Soap NCI 1/01/2012 2012 60,000 90,000 20,000 30,000 60,000 (10,000) 50,000 40,000 Dr 50,000 100,000 190,000 Investment 308,000 40,000 2011 12/31/11 330,000 72,000 2012 12/31/12 376,000 Cr 272,000 68,000 3-NCI @ 12/31/2012 Sub at the Beg CY 20% of Soap beg BV 20% of Unamortized ECOBV Goodwill Entry A Building Investment in Soap NCI in Sub 1/1/12 22,500 18,000 4,500 Sub CY Income 20% of Soap NI less: 20% of Amortiz Entry A1 Goodwill Investment in Soap NCI in Sub 1/1/12 50,000 40,000 10,000 Sub Dividend 20% Dividend NCI Balance at 12/31 Entry I Equity in Soap Earnings Investment in Soap 70,000 Entry D Investment in Soap Dividend Paid 24,000 Entry E Depreciatin Expense Building 2,500 70,000 24,000 2,500 NCI 77,000 67,000 $ 10,000 Investment Equity 72,000 2,000 16,000 2,000 2,000 24,000 12/31/2012 ub at the Beg CY 68,000 4,500 10,000 82,500 ub CY Income 18,000 (500) 17,500 ub Dividend (6,000) 94,000 70,000 4Inventory, December 31 Other Current Assets Investment in Soap Trial Balance Parent Sub 100,000 50,000 148,000 180,000 376,000 Land Buildings and Equipment (net) 50,000 250,000 Goodwill Other Intangibles Current Liabilities Bonds Payable Other Long-Term Liabilities Common Stock APIC NCI in Soap 1/1 NCI in Soap 12/31 Retained Earning Net Sales Cost of Goods Sold Operating Expenses Equity in Soap Earnings NCI in Soap Income Dividends Declared 50,000 260,000 Dr Cr 24,000 272,000 18,000 40,000 70,000 22,500 2,500 50,000 20,000 (120,000) (40,000) (100,000) (200,000) (200,000) (50,000) (100,000) (100,000) 50,000 100,000 68,000 4,500 10,000 (204,000) (190,000) 190,000 (520,000) (450,000) 300,000 260,000 120,000 100,000 (70,000) 2,500 70,000 50,000 30,000 - - 24,000 509,000 509,000 Noncontrolling Interest Consolidation 150,000 328,000 - 100,000 530,000 50,000 20,000 (160,000) (100,000) (200,000) (200,000) (100,000) (82,500) (94,000) (204,000) (17,500) 6,000 (970,000) 560,000 222,500 17,500 50,000 (94,000) - Case 3.2 Dividends 95% 5% FV Betta's Net Assets BV as of 5/13/13 ECOVB Equipment Goodwill May 1, 2013 515,000 27,105 542,105 517,200 24,905 24,905 0 1-NCI @ 12/31/2013 Sub at the Beg CY 5% of Beta beginning BV 5% of Unamortized ECOBV Goodwill R/E 1/2013 Net Income R/E 5/2013 yrs 5 25,860 1,245 27,105 Sub CY Income 5% of Beta net income after Acquisition Less: 5% of Amortization 5,000 (166) 4,834 Subsidiary Dividend 5% Dividend after Acq (3,000) NCI Balance at 12/31 28,939 Entry S Common Stock Other Contributed Capital Retained earnings 1/1/13 Sales before Acquisition Db Cr 200,000 90,000 209,200 325,333 COGS before Acquisition Other Exp before Acquisition Treasury Stock Investment in Beta NCI in Sub 01/01/2013 824,533 194,667 80,667 32,000 491,340 25,860 ### Entry A Equipment Investment in Beta 24,905 23,660 Non-Controlling Interest 1,245 Entry I Equity in Beta's income Investment in Beta 91,845 Investment in Beta Dividends 57,000 Other Expenses Equipment 3,321 91,845 Entry D 57,000 Entry E 3,321 60,000 209,200 50,000 259,200 4,981 2) 2013 Amortization 95% 5% Account Income Statement Sales Cost of Goods Sold Other expenses Equity in Beta Income Consolidated Net Income NCI in Beta Income Net Income to Controlling Interest Retained Earnings 1/1/2013 Net Income Dividend Paid Retained Earnings 12/31/13 Current Assets Property and Equipment Investment in Beta Total Assets Account and Notes Payable Dividend Payable Common Stock ($10 Par) Other Contributed Capital Treasury Stock at Cost, 500 Shares NCI in Beta 1/1/13 NCI 12/31/13 2014 4,981 4,732 249 3,321 3,155 166 Parent Sub 2015 4,981 4,732 249 Debit (1,940,000) 1,261,000 484,000 (91,845) (286,845) (976,000) 584,000 242,000 (315,360) (286,845) (602,205) (209,200) (150,000) 60,000 (299,200) 352,600 1,334,000 549,845 179,200 562,000 2,236,445 741,200 (270,240) (124,000) (60,000) (1,000,000) (364,000) (200,000) (90,000) 32,000 325,333 3,321 91,845 (150,000) 209,200 24,905 57,000 200,000 90,000 Retained Earning 12/31/13 Total liabilities + Equity (602,205) (2,236,445) (299,200) (741,200) 1,001,604 2016 4,981 4,732 249 Credits 2017 ### ### ### NCI 194,667 80,667 (4,834) 57,000 3,000 2018 1,660 1,577 83 Consolidated (2,590,667) 1,650,333 648,654 0 (291,679) (4,834) (296,513) (315,360) (286,845) (602,205) 531,800 1,917,584 (0) 3,321 491,340 23,660 91,845 2,449,384 (394,240) (60,000) 32,000 25,860 1,245 (1,000,000) (364,000) (27,105) (28,939) 1,001,604 (602,205) (2,449,384) Case 3.3 Purchase Price on 1/1/2012 Book Value of Portion Being Acquired ECOBV 275,000 270,600 4,400 01/01/2013 FV 90% FV NCI 10% Total FV at Acquisition Net Assets ECOBV Customer Contracts Goodwill 1,732,500 192,500 1,925,000 1,430,000 495,000 440,000 55,000 Purchase Price Income earned Dividends paid Excess of Amortization Investment in Salem 12/31/2012 Investment in Salem 1/1/2012 275,000 22,000 (6,600) (4,400) 286,000 FV Salem in 12/31/2012 1C) Gain on Reevaluation 385,000 99,000 Year: 2012 Entry S Common Stock APIC Retained Earnings 1/1/13 Investment NCI Entry A1 Customer Contracts Investment NCI Dr 550,000 220,000 660,000 440,000 Entry A2 Goodwill 55,000 Investment in Salem NCI Entry I Equity in Salem Income Investment in Salem 49,500 Entry D Investment in Salem 39,600 Dividends paid Entry E Amortization 99,000 Customer Contracts Year: 2013 Investment Reevaluation Purchase Price Income earned Dividends paid Excess of Amortization 1A) Investment in Salem 385,000 1,347,500 148,500 (39,600) (99,000) 1,742,400 Equity Income Amortization of Customer Contract 1B) Income in Salem's Earnings 148,500 (99,000) 49,500 NCI as of 01/01/13 NCI Income Earned NCI dividends Paid 2. NCI balance Dec 31, 2013 192,500 5,500 (4,400) 193,600 1/01/2013 R/E Less: NI Dividends 01/01/2012 R/E 660,000 (110,000) 33,000 583,000 Common Stock APIC BV 01/01/2012 20% Aquired 550,000 220,000 1,353,000 270,600 Cr 1,287,000 143,000 396,000 44,000 49,500 5,500 49,500 39,600 99,000 3. Prepare a worksheet to consolidate the financial statements of these two companies as of December 31, 2013: Income Statement Revenues Operating Expenses Income in Salem' s Earnings Gain on revaluation of investment Amortization Net Income NCI in Salem Income Net income to controlling interest Statement of Retained Earnings Retained Earnings 1/1/2013 Net Income Dividend Paid Retained Earnings 12/31/13 Balance Sheet Current assets PPE Patent Customer contract Investment in Salem Porter (Parent) (1,024,100) 676,500 (49,500) (99,000) Salem (Subsidiary) Debit (418,000) 253,000 49,500 110,000 (496,100) (165,000) (942,700) (496,100) 154,000 (1,284,800) (660,000) (165,000) 44,000 (781,000) 316,800 908,600 935,000 594,000 649,000 407,000 660,000 440,000 39,600 1,742,400 Goodwill 55,000 Total Assets Liabilities Common Stock APIC NCI in Salem 1/1 3,902,800 1,650,000 (1,430,000) (99,000) (990,000) (198,000) (550,000) (220,000) 550,000 220,000 (1,284,800) (3,902,800) (781,000) (1,650,000) 2,124,100 Non-controlling interest in Salem 12/31 Retained Earning 12/31/13 Total Liabilities and Equity mber 31, 2013: Credits NCI Consolidation (1,442,100) 929,500 (5,500) (39,600) 4,400 (99,000) 110,000 (501,600) 5,500 (496,100) (942,700) (496,100) 154,000 (1,284,800) 910,800 1,557,600 1,342,000 330,000 (110,000) (1,287,000) (396,000) (49,500) (49,500) 55,000 4,195,400 (1,529,000) (990,000) (198,000) (143,000) (44,000) (5,500) (192,500) (193,600) (2,124,100) (1,284,800) (4,195,400)