Peri Company acquired 60% of the outstanding common stock of Sam Company on June 30, 2011 for $283,800. On that date, the fair value of the non-controlling interest was $189,200. On the acquisition date, Sam Company had retained earnings in the amount of $60,000, and the fair value of its recorded assets and liabilities was equal to their book value. The excess of cost over the fair value of the recorded net assets was attributed to an unrecorded manufacturing formula held by Sam Company, which had an expected remaining useful life of five years from June 30, 2011.

On December 31, 2011, Peri company sold equipment (with an original cost of $200,000 and accumulated depreciation of $50,000) to Sam Company for $175,000. This equipment has since been depreciated at an annual rate of 20% of the purchase price.

During 2012, Sam Company sold land to Peri Company at a profit of $30,000. Peri still holds the land acquired from Sam.

The inventory of Peri Company on December 31, 2012 included goods purchased from Sam Company on which Sam recognized a profit of $7,500.

During 2013, Sam Company sold goods to Peri Company for $375,000, of which $160,000 was unpaid at December 31, 2013. The December 31, 2013 inventory of Paul Company included goods acquired from Sam Company on which Sam recognized a profit of $10,500.

During 2013 Peri Company sold goods to Sam Company for $600,000 at a markup on sales of 20%. At December 31, 2013, 30% of these goods remain unsold by Sam Company. Sam Company still owes Peri remain unsold by Sam Company. Sam Company still owes Peri Company $160,000 for these inventory purchases.

During 2013, Peri Company sold a trademark to Sam Company for $100,000. The trademark had a book value of $20,000 at the sale date. Sam still holds the trademark at 12/31/13. The trademark is not amortizable and is not impaired. Sam still owes Peri for the trademark sale.

On January 1, 2013 Sam Company reports $600,000 in bonds outstanding with a book value of $564,000. Peri purchases half of these bonds on the open market for $291,000. Attribute the income effects of this transaction to the parent company.

Required: Carefully Follow and label each step.

1.Prepare the acquisition analysis as of acquisition date. Compute the unamortized differential as of 1/1/2013.

2.Analyze each intercompany transaction. Label as either upstream downstream.

3.Calculate Net income to the controlling interest for the year 2013

4.Verify the calculation of the balance in the account equity in sub earnings and record the parent company entries with respect to its investment during 2013

5.Prepare all elimination entries for 2013.

6.Complete the consolidating spreadsheet for the year ended 2013.

Peri Company acquired 60% of the outstanding common stock of Sam Company on June 30, 2011 for $283,800. On that date, the fair value of the non-controlling interest was $189,200. On the acquisition date, Sam Company had retained earnings in the amount of $60,000, and the fair value of its recorded assets and liabilities was equal to their book value. The excess of cost over the fair value of the recorded net assets was attributed to an unrecorded manufacturing formula held by Sam Company, which had an expected remaining useful life of five years from June 30, 2011. On December 31, 2011, Peri company sold equipment (with an original cost of $200,000 and accumulated depreciation of $50,000) to Sam Company for $175,000. This equipment has since been depreciated at an annual rate of 20% of the purchase price. During 2012, Sam Company sold land to Peri Company at a profit of $30,000. Peri still holds the land acquired from Sam. The inventory of Peri Company on December 31, 2012 included goods purchased from Sam Company on which Sam recognized a profit of $7,500. During 2013, Sam Company sold goods to Peri Company for $375,000, of which $160,000 was unpaid at December 31, 2013. The December 31, 2013 inventory of Paul Company included goods acquired from Sam Company on which Sam recognized a profit of $10,500. During 2013 Peri Company sold goods to Sam Company for $600,000 at a markup on sales of 20%. At December 31, 2013, 30% of these goods remain unsold by Sam Company. Sam Company still owes Peri remain unsold by Sam Company. Sam Company still owes Peri Company $160,000 for these inventory purchases. During 2013, Peri Company sold a trademark to Sam Company for $100,000. The trademark had a book value of $20,000 at the sale date. Sam still holds the trademark at 12/31/13. The trademark is not amortizable and is not impaired. Sam still owes Peri for the trademark sale. On January 1, 2013 Sam Company reports $600,000 in bonds outstanding with a book value of $564,000. Peri purchases half of these bonds on the open market for $291,000. Attribute the income effects of this transaction to the parent company. Required: Carefully Follow and label each step. 1. Prepare the acquisition analysis as of acquisition date. Compute the unamortized differential as of 1/1/2013. 2. Analyze each intercompany transaction. Label as either upstream downstream. 3. Calculate Net income to the controlling interest for the year 2013 4. Verify the calculation of the balance in the account equity in sub earnings and record the parent company entries with respect to its investment during 2013 5. Prepare all elimination entries for 2013. 6. Complete the consolidating spreadsheet for the year ended 2013. Peri Company acquired 60% of the outstanding common stock of Sam Company on June 30, 2011 for $283,800. On that date, the fair value of the non-controlling interest was $189,200. On the acquisition date, Sam Company had retained earnings in the amount of $60,000, and the fair value of its recorded assets and liabilities was equal to their book value. The excess of cost over the fair value of the recorded net assets was attributed to an unrecorded manufacturing formula held by Sam Company, which had an expected remaining useful life of five years from June 30, 2011. On December 31, 2011, Peri company sold equipment (with an original cost of $200,000 and accumulated depreciation of $50,000) to Sam Company for $175,000. This equipment has since been depreciated at an annual rate of 20% of the purchase price. During 2012, Sam Company sold land to Peri Company at a profit of $30,000. Peri still holds the land acquired from Sam. The inventory of Peri Company on December 31, 2012 included goods purchased from Sam Company on which Sam recognized a profit of $7,500. During 2013, Sam Company sold goods to Peri Company for $375,000, of which $160,000 was unpaid at December 31, 2013. The December 31, 2013 inventory of Paul Company included goods acquired from Sam Company on which Sam recognized a profit of $10,500. During 2013 Peri Company sold goods to Sam Company for $600,000 at a markup on sales of 20%. At December 31, 2013, 30% of these goods remain unsold by Sam Company. Sam Company still owes Peri Company $160,000 for these inventory purchases. During 2013, Peri Company sold a trademark to Sam Company for $100,000. The trademark had a book value of $20,000 at the sale date. Sam still holds the trademark at 12/31/13. The trademark is not amortizable and is not impaired. Sam still owes Peri for the trademark sale. On January 1, 2013 Sam Company reports $600,000 in bonds outstanding with a book value of $564,000. Peri purchases half of these bonds on the open market for $291,000. Attribute the income effects of this transaction to the parent company. Required: Carefully Follow and label each step. 1. Prepare the acquisition analysis as of acquisition date. Compute the unamortized differential as of 1/1/2013. 2. Analyze each intercompany transaction. Label as either upstream downstream. 3. Calculate Net income to the controlling interest for the year 2013 4. Verify the calculation of the balance in the acccount equity in sub earnings and record the parent company entries with respect to its investment during 2013 5. Prepare all elimination entries for 2013. 6. Complete the consolidating spreadsheet for the year ended 2013. total Points 10 15 20 20 20 15 100 Template INCOME STATEMENT FYE 12/31/13 Sales Equity in sub earnings Interest income-bonds Gain on sale of trademark Total revenues P CO. S CO. 2,475,500 56,340 33,000 80,000 2,644,840 1,120,000 1,730,000 654,500 690,500 251,000 2,384,500 260,340 72,000 1,013,500 106,500 260,340 106,500 Retained Earnings 1/1 811,360 211,500 Net income 260,340 106,500 Dividends declared 100,000 60,000 Retained Earnings 12/31 971,700 258,000 119,500 442,000 362,000 40,500 150,000 383,700 825,000 (207,000) 708,000 125,000 201,000 13,000 Cost of goods sold Expenses loss from bond extinguishment Interest expense-bonds Total expenses Total net income Less income to NCI Net income to controlling interes 1,120,000 RETAINED EARNINGS STATEMENT BALANCE SHEET Cash Accounts receivable Inventory Other current assets Land Investment in S Property and equipment Accumulated depreciation MFG formula Trademark 241,000 (53,000) 100,000 ELIMINATIONS DR. CR. Template Investment in S bonds Total assets Accounts payable Other liabilities Bonds payable Discount on bonds payable Common stock Paid in capital Retained earnings Noncontrolling interest in sub Total liabilities and equity 294,000 2,409,700 395,000 43,000 1,000,000 0 971,700 2,409,700 1 0 1,335,000 132,000 19,000 600,000 (24,000) 300,000 50,000 258,000 1,335,000 1 0 0 1 Template CONS.TOT. 3,595,500 56,340 33,000 80,000 3,764,840 2,420,500 905,500 0 72,000 3,398,000 366,840 0 366,840 1,022,860 366,840 160,000 1,229,700 827,500 567,000 563,000 53,500 150,000 383,700 1,066,000 (260,000) 0 100,000 Acquisition analysis on June 30, 2011 60% Acquisition cost 283,800 NCI 189,200 Total fair value 473,000 Book value 24,000 difference 449,000 amort 2011 manufacturing formula Template 294,000 3,744,700 527,000 62,000 600,000 (24,000) 1,300,000 50,000 1,229,700 0 3,744,700 1 Answer Sheet: Must use cell references 1. What is the unamortized differential at January 1, 2013? 2. What amount of the intercompany Equipment gain or loss that must be confirmed in 201 Enter as a positive value if gain or a negative value if loss. 3. What is the amount of the parent company intercompany inventory profit that must be unconfirmed in 2013? Enter as a positive value. 4. What is the amount of the subsidiary intercompany inventory profit that is confirmed in 2 5. What is the amount of the subsidiary intercompany inventory profit that is unconfirmed in 2013? Enter as a positive value. 6. What is the gain or loss on the extinguishment of the bond? Enter as a positive value if a gain and as as negative value if a loss. 7. What is the NonControlling Interest Claim on the Subsidiary's Net Income? Enter as a positive amount. 8. What is the Net Income Attributed to the Controlling Interest? 9. What are the total debits/credits for the entries by the parent company with respect to its subsidiary recorded in 2013? (do not combine entries) 10. What are consolidated total assets in the Consolidated Balance Sheet? 11. What is the NonControlling Interest Claim on the Subsidiary's Equity at 12/31/13 as presented in the Consolidated Balance Sheet? 12. What is the adjustment to the Parent Company's Retained Earnings at 1/1/13 to reflect the "full" equity method? Enter as a positive amount. 13. What is the adjustment to the land account in the elimination entries? Enter as a positive amount. 14. What is the total elimination for intercompany sales in 2013? Included both upstream and downstream sales. 15. What is the total intercompany receivable and payables eliminated? 16. What is the amortization of the differential in 2013? Enter Here WARNING! INSERTING OR CHANGING ANY FORMAT ON this sheet will impact your grade!!! G ANY FORMAT ON 0 The Grading is Subject to Final Review by Instructor. Peri Company acquired 60% of the outstanding common stock of Sam Company on June 30, 2011 for $283,800. On that date, the fair value of the non-controlling interest was $189,200. On the acquisition date, Sam Company had retained earnings in the amount of $60,000, and the fair value of its recorded assets and liabilities was equal to their book value. The excess of cost over the fair value of the recorded net assets was attributed to an unrecorded manufacturing formula held by Sam Company, which had an expected remaining useful life of five years from June 30, 2011. On December 31, 2011, Peri company sold equipment (with an original cost of $200,000 and accumulated depreciation of $50,000) to Sam Company for $175,000. This equipment has since been depreciated at an annual rate of 20% of the purchase price. During 2012, Sam Company sold land to Peri Company at a profit of $30,000. Peri still holds the land acquired from Sam. The inventory of Peri Company on December 31, 2012 included goods purchased from Sam Company on which Sam recognized a profit of $7,500. During 2013, Sam Company sold goods to Peri Company for $375,000, of which $160,000 was unpaid at December 31, 2013. The December 31, 2013 inventory of Paul Company included goods acquired from Sam Company on which Sam recognized a profit of $10,500. During 2013 Peri Company sold goods to Sam Company for $600,000 at a markup on sales of 20%. At December 31, 2013, 30% of these goods remain unsold by Sam Company. Sam Company still owes Peri Company $160,000 for these inventory purchases. During 2013, Peri Company sold a trademark to Sam Company for $100,000. The trademark had a book value of $20,000 at the sale date. Sam still holds the trademark at 12/31/13. The trademark is not amortizable and is not impaired. Sam still owes Peri for the trademark sale. On January 1, 2013 Sam Company reports $600,000 in bonds outstanding with a book value of $564,000. Peri purchases half of these bonds on the open market for $291,000. Attribute the income effects of this transaction to the parent company. Required: Carefully Follow and label each step. 1. Prepare the acquisition analysis as of acquisition date. Compute the unamortized differential as of 1/1/2013. 2. Analyze each intercompany transaction. Label as either upstream downstream. 3. Calculate Net income to the controlling interest for the year 2013 4. Verify the calculation of the balance in the acccount equity in sub earnings and record the parent company entries with respect to its investment during 2013 5. Prepare all elimination entries for 2013. 6. Complete the consolidating spreadsheet for the year ended 2013. total Points 10 15 20 20 20 15 100 Template INCOME STATEMENT FYE 12/31/13 Sales Equity in sub earnings Interest income-bonds Gain on sale of trademark Total revenues P CO. S CO. 2,475,500 56,340 33,000 80,000 2,644,840 1,120,000 Cost of goods sold Expenses loss from bond extinguishment Interest expense-bonds Total expenses Total net income Less income to NCI Net income to controlling interest 1,730,000 654,500 690,500 251,000 2,384,500 260,340 72,000 1,013,500 106,500 260,340 106,500 2,420,500 905,500 0 72,000 3,398,000 366,840 0 366,840 Retained Earnings 1/1 811,360 211,500 1,022,860 Net income 260,340 106,500 366,840 Dividends declared 100,000 60,000 160,000 Retained Earnings 12/31 971,700 258,000 1,229,700 119,500 442,000 362,000 40,500 150,000 383,700 825,000 (207,000) 708,000 125,000 201,000 13,000 827,500 567,000 563,000 53,500 150,000 383,700 1,066,000 (260,000) 0 100,000 1,120,000 ELIMINATIONS DR. CR. CONS.TOT. 3,595,500 56,340 33,000 80,000 3,764,840 RETAINED EARNINGS STATEMENT BALANCE SHEET Cash Accounts receivable Inventory Other current assets Land Investment in S Property and equipment Accumulated depreciation MFG formula Trademark 241,000 (53,000) 100,000 Template Investment in S bonds Total assets Accounts payable Other liabilities Bonds payable Discount on bonds payable Common stock Paid in capital Retained earnings Noncontrolling interest in sub Total liabilities and equity 294,000 2,409,700 395,000 43,000 1,000,000 0 971,700 2,409,700 1 0 294,000 3,744,700 1,335,000 132,000 19,000 600,000 (24,000) 300,000 50,000 258,000 1,335,000 1 0 527,000 62,000 600,000 (24,000) 1,300,000 50,000 1,229,700 0 0 3,744,700 1 1 Template CONS.TOT. Template Answer Sheet: Must use cell references 1. What is the unamortized differential at January 1, 2013? 2. What amount of the intercompany Equipment gain or loss that must be confirmed in 201 Enter as a positive value if gain or a negative value if loss. 3. What is the amount of the parent company intercompany inventory profit that must be unconfirmed in 2013? Enter as a positive value. 4. What is the amount of the subsidiary intercompany inventory profit that is confirmed in 2 5. What is the amount of the subsidiary intercompany inventory profit that is unconfirmed in 2013? Enter as a positive value. 6. What is the gain or loss on the extinguishment of the bond? Enter as a positive value if a gain and as as negative value if a loss. 7. What is the NonControlling Interest Claim on the Subsidiary's Net Income? Enter as a positive amount. 8. What is the Net Income Attributed to the Controlling Interest? 9. What are the total debits/credits for the entries by the parent company with respect to its subsidiary recorded in 2013? (do not combine entries) 10. What are consolidated total assets in the Consolidated Balance Sheet? 11. What is the NonControlling Interest Claim on the Subsidiary's Equity at 12/31/13 as presented in the Consolidated Balance Sheet? 12. What is the adjustment to the Parent Company's Retained Earnings at 1/1/13 to reflect the "full" equity method? Enter as a positive amount. 13. What is the adjustment to the land account in the elimination entries? Enter as a positive amount. 14. What is the total elimination for intercompany sales in 2013? Included both upstream and downstream sales. 15. What is the total intercompany receivable and payables eliminated? 16. What is the amortization of the differential in 2013? Enter Here WARNING! INSERTING OR CHANGING ANY FORMAT ON this sheet will impact your grade!!! G ANY FORMAT ON 0 The Grading is Subject to Final Review by Instructor