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On January 1, 2018, Pickle Corp. paid $80,000 to purchase 80% of the common stock of Sickle Company. On date of the acquisition Sickle's Land
| On January 1, 2018, Pickle Corp. paid $80,000 to purchase 80% of the common stock of Sickle Company. | ||||||||
| On date of the acquisition Sickle's Land was undervalued $3,800, and its Building (7 year life) was undervalued $4,200, and its Equipment (five-year life) was undervalued $2,000. | ||||||||
| Part 1: Identify the component parts of the cost of the investment on the date of acquisition. Show your computations. Organize your analysis in good form. | ||||||||
| Purchase Price of Sickle Stock | 80000 | |||||||
| Book value of Sickle sock | (80,000 x 80%) | 64000 | ||||||
| Part II: Update the component accounts making up the BOOK VALUE ELEMENT from the date of acquisision (12/1) through 12/31(in equation format). | ||||||||
| Part III: Update the component accounts making up the EXCESS COST ELEMENT [under(over)valuation] from the date of acquisision (12/1) through 12/31(in equation format). | ||||||||
| Part IV: Complete the consolidation worksheet. Using the above analysis, enter the necessary 12/31/2018 consolidation entries. Label your entries (S,A,I,D,E) in narrow column beside entries. Enter formulas in the consolidation total column to complete the worksheet. | ||||||||
| 12/31/2018 Pickle Company | 12/31/2009 Sickle Company | Consolidation Entries | Noncontrolling | Consolidated 12/31/2018 | ||||
| Debit | Credit | Interest | ||||||
| Income Statement | ||||||||
| Revenues | (1,510,000) | (518,750) | ||||||
| Depreciation Expense | 500,000 | 234,950 | E | |||||
| Operating Expenses | 954,280 | 260,000 | ||||||
| Equity in Net Income of Sub | (18,240) | |||||||
| Separate Net Income | (73,960) | (23,800) | ||||||
| Consolidated Net Income | ||||||||
| Noncontrolling Interest in Sub's Net Income | ||||||||
| Controlling Interest in Sub's Net Income | ||||||||
| Statement of Retained Earnings | ||||||||
| Retained Earnings 1/1 | (122,500) | (10,500) | ||||||
| Net Income (above) | (73,960) | (23,800) | ||||||
| Dividends Declared | 25,000 | 15,000 | D | |||||
| Retained Earnings 12/31 | (171,460) | (19,300) | ||||||
| Balance Sheet | ||||||||
| Current Assets | 38,220 | 14,000 | ||||||
| Investment in Sickle Company | 86,240 | |||||||
| Land | ||||||||
| Buildings-net | 37,500 | 8,650 | E | A | ||||
| Equipment - net | 98,000 | 81,800 | A | |||||
| Goodwill | 35,500 | 24,800 | ||||||
| Total Assets | 295,460 | 129,250 | ||||||
| Current Liabilities | (18,340) | (24,500) | ||||||
| Long-term Liabilities | (26,160) | (10,950) | A | E | ||||
| Common Stock | (44,500) | (20,000) | S | 20,000 | ||||
| Additional Paid-in Capital | (35,000) | (54,500) | ||||||
| Noncontrolling Interest 1/1 | S | |||||||
| A | ||||||||
| Noncontrolling Interest 12/31 | ||||||||
| Retained Earnings-above | (171,460) | (19,300) | ||||||
| Total Liabilities & Equities | (295,460) | (129,250) | ||||||
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Advanced Accounting
Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik
10th edition
0-07-794127-6, 978-0-07-79412, 978-0077431808
