On 1/1/E, Problem Co. purchased 80 percent of the common stock of Solution, Inc. at a price that created a purchase differential of $75k. On that date, the fmv of S Equipment was estimated to be $65k. These assets had been acquired by S on 1/1/D at $75k and are being depreciated SYD, -0- salvage value over a 5-year useful life. The stockholders' equity of S and P on the date of combination was as follows: Common stock APIC Retained Earnings $220k 150k 100k $470k P Co.: $800k 500k 200k $1.5M At 12/31/D, S' financial statements showed Goodwill of $20k. During years E and F, S& P Net Income and dividends were as follows: Yr E S 30k/5k P 50k/10k Yr F 40k/10k 60k/20k During year E, S had sold inventory to P for $20k; the inventory had cost S $5k. At the end ofyear E, P still possessed 60% of this inventory, having sold 40% to nonaffiliates. As of the end ofyear F, only 20% of the inventory remained unsold. On 12/31/E, P sold a portable building to S for $55k; P's net book value for the building on that date had been $25k. S used this building in their general operations and depreciated it S-L over its remaining useful life of 6 years (-0- salvage value). In addition to the above, note that S had issued $200k in 10% 10-year ordinary coupon debenture bonds on 1/1/A at a price to yield 12%. On 1/1/E, 100 of these bonds were purchased by P for $84,445.33 and carried subsequently as an investment "held-to- maturity." A Goodwill Impairment Loss of $13k (P's %) was estimated in year E; also, in year F, S calculated an upstream gain on a Land sale of $6k. This gain was confirmed in year F Provide the following Problem+Solution problem solution: a. How much did P pay to acquire its 80 percent share in S? b. What should be reported at DOA for MI/NCI-S? c. What should be reported on the consolidated Balance Sheet for the M1% of S Goodwil at DOA? d. Provide P's (basic) equity method entries for years E and H. e. Calculate the amount of II that P will report on P's (unconsolidated) Income Statement. f. Calculate the 12/31/F balance in P's 'Investment in Solution, Inc. CS' account. g. Provide P's confirmed separate income for years E, F. h. Provide S' confirmed Net Income for years E, F. i. Calculate Total Consolidated Net Income for years E, F. P's % of Consolidated Net Income in year F may be ~$69046.] On 1/1/E, Problem Co. purchased 80 percent of the common stock of Solution, Inc. at a price that created a purchase differential of $75k. On that date, the fmv of S Equipment was estimated to be $65k. These assets had been acquired by S on 1/1/D at $75k and are being depreciated SYD, -0- salvage value over a 5-year useful life. The stockholders' equity of S and P on the date of combination was as follows: Common stock APIC Retained Earnings $220k 150k 100k $470k P Co.: $800k 500k 200k $1.5M At 12/31/D, S' financial statements showed Goodwill of $20k. During years E and F, S& P Net Income and dividends were as follows: Yr E S 30k/5k P 50k/10k Yr F 40k/10k 60k/20k During year E, S had sold inventory to P for $20k; the inventory had cost S $5k. At the end ofyear E, P still possessed 60% of this inventory, having sold 40% to nonaffiliates. As of the end ofyear F, only 20% of the inventory remained unsold. On 12/31/E, P sold a portable building to S for $55k; P's net book value for the building on that date had been $25k. S used this building in their general operations and depreciated it S-L over its remaining useful life of 6 years (-0- salvage value). In addition to the above, note that S had issued $200k in 10% 10-year ordinary coupon debenture bonds on 1/1/A at a price to yield 12%. On 1/1/E, 100 of these bonds were purchased by P for $84,445.33 and carried subsequently as an investment "held-to- maturity." A Goodwill Impairment Loss of $13k (P's %) was estimated in year E; also, in year F, S calculated an upstream gain on a Land sale of $6k. This gain was confirmed in year F Provide the following Problem+Solution problem solution: a. How much did P pay to acquire its 80 percent share in S? b. What should be reported at DOA for MI/NCI-S? c. What should be reported on the consolidated Balance Sheet for the M1% of S Goodwil at DOA? d. Provide P's (basic) equity method entries for years E and H. e. Calculate the amount of II that P will report on P's (unconsolidated) Income Statement. f. Calculate the 12/31/F balance in P's 'Investment in Solution, Inc. CS' account. g. Provide P's confirmed separate income for years E, F. h. Provide S' confirmed Net Income for years E, F. i. Calculate Total Consolidated Net Income for years E, F. P's % of Consolidated Net Income in year F may be ~$69046.]
