Page 3 1 > of 9 ZOOM + Problem 1. You have been hired by Cornell Consolidated Company as a staff accountant. Your first assignment is to produce a statement of cash flows for the company. You have gathered the following information. Bond payable Par Value 240,000 Coupon 4.80% Market 5.50% Term 5 Carring value at December 31, 20X1 232,826 Consolidated Income Statement Sales $ Interest income Unrealized gain Dividend income Cost of goods sold Salary expense Marketing expense Utilities expense Amortization expense Depreciation expense Minority interest Interest expense Pretax income Tax expense Net income $ Consolidated Statement of Retained Earning Beginning retained earnings S Net income Dividends declared Ending retained earnings TE S $ Consolidated Balance Sheet Cash Accounts receivable Inventory Interest receivable Note receivable Investment Equipment Accumulated depreciation Land Patent Goodwill Total Accounts payable Salaries payable Marketing payable Utilities payable Taxes payable Deferred taxes payable - Depreciation Deferred taxes payable - Investment Dividends payable Bonds payable Common stock Additional paid-in capital Minority interest Retained earnings Total 20X2 603,000 9,100 2,200 4,220 186,900 132,660 82,610 56,680 6,570 45,600 7,890 12,805 86,805 26,042 60,763 20X2 72,000 60,763 (9,100) 123,663 Absolute Value 20X2 of Difference 49,300 54,870 9,870 17,010 890 1,000 200 173,540 16,310 30,300 2,200 480,700 66,300 (174,100) 45,600 106,000 86,920 29,910 6,570 95,100 863,630 132,615 1,260 10,610 1,210 6,610 390 6,230 730 8,112 589 19,460 3,270 1,500 660 1,400 200 234,111 1,285 95,640 17,220 134,590 24,230 89,090 6,790 51,663 863,630 20X1 40,400 $ 45,000 17,900 800 189,850 28,100 414,400 (128,500) ( 19,080 36,480 95,100 758,610S 133,874 S 9,400 7,000 5,500 8,700 16,190 840 1,200 232,826 78,420 110,360 82,300 72,000 758,610$ S S 123,663 S Page 3 > of 9 ZOOM + Problem 2 Parent bought some of the shares of Subsidiary as indicated below on December 31, 20X0. Sub's balance sheet at that time is shown below, along with the fair value (FV) of Sub's assets and liabilities at the date of acquisition. Difference 14,300 28,000 (2,800) 8,000 73,000 92,500 Subsidiary Company Balance Sheet as of December 31, 20X0 NBV FMV Cash 79,000 79,000 Equipment 96,700 87,000 Accumulated depreciation (24,000) Other assets 248,000 248,000 Note receivable 56,100 53,300 Patent 20,000 Goodwill 73,000 Total 475,800 568,300 Liabilities 152,000 152,000 Note payable 81,200 75,500 Common stock ($1 par) 48,000 340,800 APIC 55,000 Retain Earn 139,600 Total 475,800 568,300 Parent Subsidiary Net income for 20X1 116,000 55,000 Dividends for 20X1 17,000 8,000 Shares acquired 43,200 Market value per share Useful life of equipment 10 Useful life of patent 5 (5,700) 98,200 92,500 7.10 Page 3 Page 4 > of 9 ZOOM + Problem 3. Parent acquired some of Subsidiary on December 31, 20xo. Information relating to that acquisition is shown below. 152, 100 $ 6.10 10 4.60% 5 Excess Fair Value 98,000 $ 405,000 836,000 167,000 Number of shares of Subsidiary acquired by Parent Price per share Useful life of the equipment Interest rate on the note payable Term of the note payable Subsidiary Company December 31, 20X0 Book Value Cash $ 98,000 $ Other assets 405,000 Equipment 969,000 Accumulated depreciation (300,000) Goodwill Total $ 1,172,000 $ Accounts payable S 138,000 Other liabilities 169,000 Note payable 106,000 Common stock 169,000 Additional paid-in capital 513,000 Retained earnings 77,000 Total $ 1,172,000 $ 98,500 265,500 98,500 1,437,500 $ 138,000 $ 169,000 99,600 1,030,900 (6,400) 271,900 1,437,500 $ 265,500 Page 4 Page of 9 ZOOM + Problem 3 (continued) Separate Company Financial Statements $ Sales Dividend income Expenses Depreciation Interest Net income $ $ Beginning retained earnings Net income Dividends declared Ending retained earnings Parent Subsidiary 20X1 20X2 20X3 20X1 20X2 20x3 955,000 $ 1,003,000 $ 1,053,000 $ 764,000 $ 802,000 $ 842,000 9,900 10,800 10,800 774,000 813,000 818,000 619,000 650,000 682,000 121,000 127,100 137,300 96,900 101,700 109,800 18,000 17,000 16,000 4,876 3,986 3,056 51,900S 56,700S 92,500 $ 43,224 46,314 $ 47,144 20X1 20X2 20X3 20X1 20X2 20X3 96,000 $ 134,900 $ 177,600 77,000 $ 109,224 $ 143,538 51,900 56,700 92,500 43,224 46,314 47,144 (13,000) (14,000) (23,000) (11,000) (12,000) (12,000) 134,900S 177,600 $ 247,100 $ 109,224 $ 143,538 $ 178,682 20X1 20X2 20X3 20X1 20X2 20X3 129,000 $ 135,000 $ 141,000 $ 103,000 $ 108,000 $ 113,000 531,000 558,000 585,000 425,000 446,000 468,000 1,271,000 1,373,000 1,579,000 1,017,000 1,098,000 1,186,000 (496,000) (623,100) (760,400) (396,900)| (498,600) (608,400) S $ Cash Other assets Equipment Accumulated depreciation Goodwill Investment in Subsidiary Total Accounts payable Other liabilities Note payable Common stock Additional paid-in capital Retained earnings Total 927,810 927,810 927,810 $ 2,362,810 $ 2,370,710 $ 2,472,410 $ 1,148,100 $ 1,153,400 $ 1,158,600 $ 263,910 $ 177,110 $ 153,310 $ 93,213 $ 75.426 $ 57,639 575,000 605,000 634,000 177,000 186,000 195,000 368,000 339,000 312,000 86,663 66,436 45,279 380,000 399,000 419.000 169,000 169,000 169,000 641,000 673,000 707,000 513,000 513,000 513,000 134,900 177,600 247,100 109,224 143,538 178,682 $ 2,362,810 $ 2,370,710 $ 2,472,410 $ 1,148,100 $ 1,153,400 $ 1,158,600 Page 5 Page of 9 ZOOM + Problem 3 (continued) 90% Parent 10% Minority Interest Equity Fair Value Difference 759.000 271,900 1,030,900 (11,000) 927,810 19,9001 (11,000) December 31, 20X0 Subsidiary's dividends for 20x1 Subsidiary's income for 20x1 Amortization of excess for 20X1 Depreciation 103,090 (1,1001 4,322 43,224 43,224 39,902 (16,7001 [15,0301 (1,670) (16,700) (1,976) Interest expense (1,976) (1,778) (198) 791,224 253,224 104,445 December 31, 20X1 Subsidiary's dividends for 20x2 Subsidiary's income for 20x2 1,044,448 (12,000) 940,003 (10,8001 41,683 (12,000) 46,314 (1,200) 46,314 4,631 Amortization of excess for 20X2 Depreciation (16,700) (15,030) (16,7001 (1,671) (1,670) (1671 Interest expense (1,6711 (1,5041 825,538 234,853 954,352 106,039 (12,0001 1,060,391 (12,000) 47,144 (1,200) (10,800] 42,430 47,144 December 31, 20X2 Subsidiary's dividends for 20x3 Subsidiary's income for 20X3 Amortization of excess for 20x3 Depreciation Interest expense (16,700) (16,700) ( (15,030) (1,193) (1,6701 (133) (1,325 (1,325 December 31, 20X3 860,682 20XD Balance 167,000 99,500 6,400 271,900 1,077,510 20X1 Amortization (16,700) 216,828 20X1 Balance 150,300 99,500 4,424 253,224 969,759 20x2 Amortization (16,700) Equipment Goodwill Note payable 107,751 20x2 Balance 133,600 99,500 2,753 234,853 20x3 Amortization (16,700) 20x3 Balance 116,900 98,500 1,428 216,828 (1,976) ( (1,6711 (1,3251 Page 6 Page 7 > of 9 ZOOM + Problem 3 (continued) Consolidation entries for 20X2 Parent Subsidiary Total Dividend income 10,800 Depreciation 127,100 101,700 Interest 17,000 3,986 Minority interest Net income 56,700 46,314 Beginning retained earnings 134,900 109,224 Dividends declared 14,000 12,000 Equipment 1,373,000 1,098,000 Accumulated depreciation 623,100 498,600 Note payable 339,000 66,436 Minority interest equity Page 7 Page 8 > of 9 ZOOM + Problem 3 (continued) Consolidation entries for 20x3 Parent Subsidiary Total Dividend income 10,800 Depreciation 137,300 109,800 Interest 16,000 3,056 Minority interest income Net income 92,500 47,144 Beginning retained earnings 177,600 143,538 Dividends declared 23,000 12,000 Equipment 1,579,000 1,186,000 Accumulated depreciation 760,400 608,400 Note payable 312,000 45,279 Minority interest equity Page 8 Page 9 > of 9 ZOOM + Accumulated depreciation 760,400 608,400 Note payable 312,000 45,279 Minority interest equity Page 8 Problem 1 What is the total operating cash flows? What is total financing cash flows? Problem 2 What is consolidated income assuming the cost method? Problem 3 Consolidated balances for 20X2 Depreciation Parent Consolidated Subsidiary 101,700 127,100 17,000 3,986 Interest Minority interest Net income Equipment 56,700 46,314 1,098,000 1,373,000 (623,100) 339,000 Accumulated depreciation Note payable (498,600) 66,436 Page 3 1 > of 9 ZOOM + Problem 1. You have been hired by Cornell Consolidated Company as a staff accountant. Your first assignment is to produce a statement of cash flows for the company. You have gathered the following information. Bond payable Par Value 240,000 Coupon 4.80% Market 5.50% Term 5 Carring value at December 31, 20X1 232,826 Consolidated Income Statement Sales $ Interest income Unrealized gain Dividend income Cost of goods sold Salary expense Marketing expense Utilities expense Amortization expense Depreciation expense Minority interest Interest expense Pretax income Tax expense Net income $ Consolidated Statement of Retained Earning Beginning retained earnings S Net income Dividends declared Ending retained earnings TE S $ Consolidated Balance Sheet Cash Accounts receivable Inventory Interest receivable Note receivable Investment Equipment Accumulated depreciation Land Patent Goodwill Total Accounts payable Salaries payable Marketing payable Utilities payable Taxes payable Deferred taxes payable - Depreciation Deferred taxes payable - Investment Dividends payable Bonds payable Common stock Additional paid-in capital Minority interest Retained earnings Total 20X2 603,000 9,100 2,200 4,220 186,900 132,660 82,610 56,680 6,570 45,600 7,890 12,805 86,805 26,042 60,763 20X2 72,000 60,763 (9,100) 123,663 Absolute Value 20X2 of Difference 49,300 54,870 9,870 17,010 890 1,000 200 173,540 16,310 30,300 2,200 480,700 66,300 (174,100) 45,600 106,000 86,920 29,910 6,570 95,100 863,630 132,615 1,260 10,610 1,210 6,610 390 6,230 730 8,112 589 19,460 3,270 1,500 660 1,400 200 234,111 1,285 95,640 17,220 134,590 24,230 89,090 6,790 51,663 863,630 20X1 40,400 $ 45,000 17,900 800 189,850 28,100 414,400 (128,500) ( 19,080 36,480 95,100 758,610S 133,874 S 9,400 7,000 5,500 8,700 16,190 840 1,200 232,826 78,420 110,360 82,300 72,000 758,610$ S S 123,663 S Page 3 > of 9 ZOOM + Problem 2 Parent bought some of the shares of Subsidiary as indicated below on December 31, 20X0. Sub's balance sheet at that time is shown below, along with the fair value (FV) of Sub's assets and liabilities at the date of acquisition. Difference 14,300 28,000 (2,800) 8,000 73,000 92,500 Subsidiary Company Balance Sheet as of December 31, 20X0 NBV FMV Cash 79,000 79,000 Equipment 96,700 87,000 Accumulated depreciation (24,000) Other assets 248,000 248,000 Note receivable 56,100 53,300 Patent 20,000 Goodwill 73,000 Total 475,800 568,300 Liabilities 152,000 152,000 Note payable 81,200 75,500 Common stock ($1 par) 48,000 340,800 APIC 55,000 Retain Earn 139,600 Total 475,800 568,300 Parent Subsidiary Net income for 20X1 116,000 55,000 Dividends for 20X1 17,000 8,000 Shares acquired 43,200 Market value per share Useful life of equipment 10 Useful life of patent 5 (5,700) 98,200 92,500 7.10 Page 3 Page 4 > of 9 ZOOM + Problem 3. Parent acquired some of Subsidiary on December 31, 20xo. Information relating to that acquisition is shown below. 152, 100 $ 6.10 10 4.60% 5 Excess Fair Value 98,000 $ 405,000 836,000 167,000 Number of shares of Subsidiary acquired by Parent Price per share Useful life of the equipment Interest rate on the note payable Term of the note payable Subsidiary Company December 31, 20X0 Book Value Cash $ 98,000 $ Other assets 405,000 Equipment 969,000 Accumulated depreciation (300,000) Goodwill Total $ 1,172,000 $ Accounts payable S 138,000 Other liabilities 169,000 Note payable 106,000 Common stock 169,000 Additional paid-in capital 513,000 Retained earnings 77,000 Total $ 1,172,000 $ 98,500 265,500 98,500 1,437,500 $ 138,000 $ 169,000 99,600 1,030,900 (6,400) 271,900 1,437,500 $ 265,500 Page 4 Page of 9 ZOOM + Problem 3 (continued) Separate Company Financial Statements $ Sales Dividend income Expenses Depreciation Interest Net income $ $ Beginning retained earnings Net income Dividends declared Ending retained earnings Parent Subsidiary 20X1 20X2 20X3 20X1 20X2 20x3 955,000 $ 1,003,000 $ 1,053,000 $ 764,000 $ 802,000 $ 842,000 9,900 10,800 10,800 774,000 813,000 818,000 619,000 650,000 682,000 121,000 127,100 137,300 96,900 101,700 109,800 18,000 17,000 16,000 4,876 3,986 3,056 51,900S 56,700S 92,500 $ 43,224 46,314 $ 47,144 20X1 20X2 20X3 20X1 20X2 20X3 96,000 $ 134,900 $ 177,600 77,000 $ 109,224 $ 143,538 51,900 56,700 92,500 43,224 46,314 47,144 (13,000) (14,000) (23,000) (11,000) (12,000) (12,000) 134,900S 177,600 $ 247,100 $ 109,224 $ 143,538 $ 178,682 20X1 20X2 20X3 20X1 20X2 20X3 129,000 $ 135,000 $ 141,000 $ 103,000 $ 108,000 $ 113,000 531,000 558,000 585,000 425,000 446,000 468,000 1,271,000 1,373,000 1,579,000 1,017,000 1,098,000 1,186,000 (496,000) (623,100) (760,400) (396,900)| (498,600) (608,400) S $ Cash Other assets Equipment Accumulated depreciation Goodwill Investment in Subsidiary Total Accounts payable Other liabilities Note payable Common stock Additional paid-in capital Retained earnings Total 927,810 927,810 927,810 $ 2,362,810 $ 2,370,710 $ 2,472,410 $ 1,148,100 $ 1,153,400 $ 1,158,600 $ 263,910 $ 177,110 $ 153,310 $ 93,213 $ 75.426 $ 57,639 575,000 605,000 634,000 177,000 186,000 195,000 368,000 339,000 312,000 86,663 66,436 45,279 380,000 399,000 419.000 169,000 169,000 169,000 641,000 673,000 707,000 513,000 513,000 513,000 134,900 177,600 247,100 109,224 143,538 178,682 $ 2,362,810 $ 2,370,710 $ 2,472,410 $ 1,148,100 $ 1,153,400 $ 1,158,600 Page 5 Page of 9 ZOOM + Problem 3 (continued) 90% Parent 10% Minority Interest Equity Fair Value Difference 759.000 271,900 1,030,900 (11,000) 927,810 19,9001 (11,000) December 31, 20X0 Subsidiary's dividends for 20x1 Subsidiary's income for 20x1 Amortization of excess for 20X1 Depreciation 103,090 (1,1001 4,322 43,224 43,224 39,902 (16,7001 [15,0301 (1,670) (16,700) (1,976) Interest expense (1,976) (1,778) (198) 791,224 253,224 104,445 December 31, 20X1 Subsidiary's dividends for 20x2 Subsidiary's income for 20x2 1,044,448 (12,000) 940,003 (10,8001 41,683 (12,000) 46,314 (1,200) 46,314 4,631 Amortization of excess for 20X2 Depreciation (16,700) (15,030) (16,7001 (1,671) (1,670) (1671 Interest expense (1,6711 (1,5041 825,538 234,853 954,352 106,039 (12,0001 1,060,391 (12,000) 47,144 (1,200) (10,800] 42,430 47,144 December 31, 20X2 Subsidiary's dividends for 20x3 Subsidiary's income for 20X3 Amortization of excess for 20x3 Depreciation Interest expense (16,700) (16,700) ( (15,030) (1,193) (1,6701 (133) (1,325 (1,325 December 31, 20X3 860,682 20XD Balance 167,000 99,500 6,400 271,900 1,077,510 20X1 Amortization (16,700) 216,828 20X1 Balance 150,300 99,500 4,424 253,224 969,759 20x2 Amortization (16,700) Equipment Goodwill Note payable 107,751 20x2 Balance 133,600 99,500 2,753 234,853 20x3 Amortization (16,700) 20x3 Balance 116,900 98,500 1,428 216,828 (1,976) ( (1,6711 (1,3251 Page 6 Page 7 > of 9 ZOOM + Problem 3 (continued) Consolidation entries for 20X2 Parent Subsidiary Total Dividend income 10,800 Depreciation 127,100 101,700 Interest 17,000 3,986 Minority interest Net income 56,700 46,314 Beginning retained earnings 134,900 109,224 Dividends declared 14,000 12,000 Equipment 1,373,000 1,098,000 Accumulated depreciation 623,100 498,600 Note payable 339,000 66,436 Minority interest equity Page 7 Page 8 > of 9 ZOOM + Problem 3 (continued) Consolidation entries for 20x3 Parent Subsidiary Total Dividend income 10,800 Depreciation 137,300 109,800 Interest 16,000 3,056 Minority interest income Net income 92,500 47,144 Beginning retained earnings 177,600 143,538 Dividends declared 23,000 12,000 Equipment 1,579,000 1,186,000 Accumulated depreciation 760,400 608,400 Note payable 312,000 45,279 Minority interest equity Page 8 Page 9 > of 9 ZOOM + Accumulated depreciation 760,400 608,400 Note payable 312,000 45,279 Minority interest equity Page 8 Problem 1 What is the total operating cash flows? What is total financing cash flows? Problem 2 What is consolidated income assuming the cost method? Problem 3 Consolidated balances for 20X2 Depreciation Parent Consolidated Subsidiary 101,700 127,100 17,000 3,986 Interest Minority interest Net income Equipment 56,700 46,314 1,098,000 1,373,000 (623,100) 339,000 Accumulated depreciation Note payable (498,600) 66,436
