On January 1, 2011, Porter Company purchased an 70% interest in the capital stock of Salem Company for $850,000. The fair value of the noncontrolling interest was proportionate to the consideration paid by the controlling interest. At that time, Salem Company had capital stock of $550,000 and retained earnings of $80,000. Differences between the fair value and the book value of the identifiable assets of Salem Company were as follows: Under (Over) Valued Equipment 120,000 Land 25,000 Inventory 40,000 In-Process Research & Development 40,000 Bonds payable (10,000) The book values of all other assets and liabilities of Salem Company were equal to their fair values on January 1, 2011 The inventory was sold in 2011 and the equipment has a 5-year remaining life as of January 1, 2011. The bonds payable mature in 5 years from January 1, 2011. Any goodwill is not impaired as of 12/31/13 The In-Process Research & Development is not impaired as of 12/31/13. At 12/31/13, Salem owes Porter $35,000 Required for the year ended December 31, 2013: 1. Prepare the analysis as of acquisition date including unamortized differential at 1/1/11. 2. Prepare the journal entries Porter recorded with respect to its investment in Porter for the year ended 12/31/13. 3. Calculate Net income to controlling interest and Net income to non controlling interest for the year 2013. 4. Prepare all necessary elimination entries for the year ended 2013. 5. Complete the consolidated workpapers for the year ended 12/31/13. Use formulas in all calculations. Clearly label each part in the spreadsheet tab below

On January 1, 2011, Porter Company purchased an 70% interest in the capital stock of Salem Company for $850,000. The fair value of the noncontrolling interest was proportionate to the consideration paid by the controlling interest. At that time, Salem Company had capital stock of $550,000 and retained earnings of $80,000. Differences between the fair value and the book value of the identifiable assets of Salem Company were as follows: Equipment Land Inventory In-Process Research & Development Bonds payable Under (Over) Valued 120,000 25,000 40,000 40,000 (10,000) The book values of all other assets and liabilities of Salem Company were equal to their fair values on January 1, 2011 The inventory was sold in 2011 and the equipment has a 5-year remaining life as of January 1, 2011. The bonds payable mature in 5 years from January 1, 2011. Any goodwill is not impaired as of 12/31/13 The In-Process Research & Development is not impaired as of 12/31/13. At 12/31/13, Salem owes Porter $35,000 Required for the year ended December 31, 2013: 1. 2. 3. 4. 5. Prepare the analysis as of acquisition date including unamortized differential at 1/1/11. Prepare the journal entries Porter recorded with respect to its investment in Porter for the year ended 12/31/13. Calculate Net income to controlling interest and Net income to non controlling interest for the year 2013. Prepare all necessary elimination entries for the year ended 2013. Complete the consolidated workpapers for the year ended 12/31/13. Use formulas in all calculations. Clearly label each part in the spreadsheet tab below Partial credit is awarded for all questions. MI Exam INCOME STATEMENT 12/31/2013 (000's) Sales Equity in sub earnings P CO. S CO. ELIMINATIONS DR. CR. CONS.TOT. 2,100.00 100.80 450.00 2,200.80 450.00 950.00 50.00 60.00 200.00 30.00 50.00 1,060.00 280.00 Total Net income 1,140.80 Less net income to noncontrolling interest Net income to controlling interest RETAINED EARNINGS STATEMENT Retained Earnings 1/1/13 552.60 170.00 1,310.80 0.00 1,310.80 230.00 782.600 Net income 1,140.80 170.00 1,310.80 90.00 60.00 150.00 1,603.40 340.00 1,943.40 76.00 445.00 780.00 949.40 215.00 65.00 190.00 175.00 360.00 280.00 2,825.40 1,030.00 141.00 635.00 955.00 949.40 535.00 0.00 640.00 0.00 3,855.40 132.00 90.00 1,000.00 110.00 30.00 550.00 1,603.40 340.00 2,825.40 0.00 1,030.00 Total revenues Cost of goods sold Depreciation exp Other Expenses Total expenses Dividends declared Retained Earnings 12/31/13 2,550.000 100.800 0.000 2,650.80 1,150.00 80.00 110.00 0.00 1,340.00 BALANCE SHEET Cash Accounts receivable Inventory Investment in Sub Land IPR&D Plant and Equipment Goodwill Total assets Accounts payable bonds payable Common stock Paid in capital Retained earnings Noncontrolling interest in sub Total liabilities and equity NTD Spring 2008 320.00 0.00 0.00 0.00 242.000 120.000 1,550.000 0.000 1,943.400 0.000 3,855.40 0.00 Answer Sheet: Must use cell formulas except for Q9 below enter all amounts as positive. enter here WARNING! INSERTING OR CHANGING ANY FORMAT ON THIS SPREADSHEET WILL IMPACT YOUR GRADE 1. Net income to the controlling interest from consolidated statement of income 2. Net income to the controlling interest from Step 3 3. Consolidated Retained Earnings Balance at end of year 4. Consolidated Total Assets 5. Consolidated Total Liabilities and Equity 6. Net income to noncontrolling interest (AKA NCI expense) (from consolidated total) 7. Noncontrolling Interest on Sub Equity (from consolidated total) 8. Consolidated Accounts Receivable 9. How many journal entries did the parent record during the year with respect to its investment in the sub? Enter 1,2,3,or 4 (do not combine any entries) 10. What was the total debits for all of the parent co entries