Question
Please help me on the last part the WORKSHEET. THAT IS THE ONLY PART i DONT KNOW ALL THE ANSWERS Consolidation subsequent to date of
Please help me on the last part the WORKSHEET. THAT IS THE ONLY PART i DONT KNOW ALL THE ANSWERS
Consolidation subsequent to date of acquisitionEquity method with noncontrolling interest and AAP
Assume, on January 1, 2015, a parent company acquired a 90% interest in its subsidiary. The total fair value of the controlling and noncontrolling interest was $495,000 over the book value of the subsidiary's Stockholders' Equity on the acquisition date. The parent assigned the excess to the following [A] assets:
[A] Asset | Original Amount | Original Useful Life |
---|---|---|
Property, plant, and equipment | $ 170,000 | 10 years |
Customer list | 100,000 | 5 years |
Goodwill | 225,000 | Indefinite |
$ 495,000 |
90% of the Goodwill is allocated to the parent. The parent and the subsidiary report the following pre-consolidation financial statements at December 31, 2019:
Parent | Subsidiary | Parent | Subsidiary | ||
---|---|---|---|---|---|
Income statement: | Balance sheet: | ||||
Sales | $5,760,000 | 1,530,000 | Assets | ||
Cost of goods sold | (4,000,000) | (960,000) | Cash | $ 400,000 | $ 90,000 |
Gross profit | 1,760,000 | 570,000 | Accounts receivable | 752,000 | 200,000 |
Equity income | 119,700 | Inventory | 960,000 | 440,000 | |
Operating expenses | (1,120,000) | (400,000) | Equity investment | 936,000 | |
Net income | 759,700 | 170,000 | Property, plant and equipment, net | 2,240,000 | 720,000 |
Statement of retained earnings: | $ 5,288,000 | $ 1,450,000 | |||
Beginning retained earnings: | 1,408,300 | 400,000 | Liabilities and stockholders' equity | ||
Net income | 759,700 | 170,000 | Accrued liabilities | 800,000 | 320,000 |
Dividends | (160,000) | (40,000) | Long-term liabilities | 1,600,000 | 400,000 |
Ending retained earnings | $2,008,000 | $ 530,000 | Common stock | 160,000 | 80,000 |
APIC | 720,000 | 120,000 | |||
Retained earnings | 2,008,000 | 530,000 | |||
$ 5,288,000 | $1,450,000 |
b. Calculate and organize the profits and losses on intercompany transactions and balances.
(No intercompany transactions)
c. Compute the pre-consolidation Equity Investment account beginning and ending balances starting with the stockholders' equity of the subsidiary.
Equity investment account at 1/1/19 | |
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p% book value of subsidiary's net assets | Answer
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Unamortized p% AAP | Answer
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Answer
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Equity investment account at 12/31/19 | |
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p% book value of subsidiary's net assets | Answer
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Unamortized p% AAP | Answer
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Answer
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d. Reconstruct the activity in the parent's pre-consolidation Equity Investment T-account for the year of consolidation.
Equity Investment | |||
---|---|---|---|
Answer
| Answer
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Answer
| Answer
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Answer
| Answer
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e. Independently compute the owners' equity attributable to the noncontrolling interest beginning and ending balances starting with the owners' equity of the subsidiary.
Noncontrolling interests at 1/1/19 | |
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nci% book value of subsidiary's net assets | Answer
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Unamortized nci% AAP | Answer
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Answer
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Noncontrolling interests at 12/31/19 | |
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nci% book value of subsidiary's net assets | Answer
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Unamortized nci% AAP | Answer
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Answer
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f. Independently calculate consolidated net income, controlling interest net income and noncontrolling interest net income. Note:Use a negative sign with your answer to indicate a reduction to net income.
Parent's stand-alone net income | Answer
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Subsidiary's stand-alone net income | Answer
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100% AAP amortization | Answer
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Consolidated net income | Answer
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Parent's stand-alone net income | Answer
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p% of subsidiary's stand-alone net income | Answer
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p% AAP amortization | Answer
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Consolidated net income attributable to the controlling interest | Answer
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nci% of subsidiary's stand-alone net income | Answer
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nci% AAP amortization | Answer
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Consolidated net income attributable to the noncontrolling interest | Answer
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g. Complete the complete the consolidation worksheet. Note: Use negative signs with your answers in the Consolidated column when appropriate (Cost of goods sold, Operating expenses and Dividends).
Consolidation Entries | |||||||
---|---|---|---|---|---|---|---|
Parent | Subsidiary | Dr | Cr | Consolidated | |||
Income Statement: | |||||||
Sales | $5,760,000 | $1,530,000 | Answer
| ||||
Cost of Goods sold | (4,000,000) | (960,000) | Answer
| ||||
Gross profit | 1,760,000 | 570,000 | Answer
| ||||
Income (loss) from subsidiary | 119,700 | [C] | Answer
| Answer
| |||
Operating expenses | (1,120,000) | (400,000) | [D] | Answer
| Answer
| ||
Net Income | $759,700 | $170,000 | Answer
| ||||
Consolidated NI atrib to NCI | [C] | Answer
| Answer
| ||||
Consolidated NI attrib to CI | Answer
| ||||||
Statement of Ret Earnings: | |||||||
BOY retained earnings | $1,408,300 | $400,000 | [E] | Answer
| Answer
| ||
Net income | 759,700 | 170,000 | Answer
| ||||
Dividends | (160,000) | (40,000) | Answer
| [C] | Answer
| ||
EOY retained earnings | $2,008,000 | $530,000 | Answer
| ||||
Balance Sheet: | |||||||
Cash | $400,000 | $90,000 | Answer
| ||||
Accounts receivable | 752,000 | 200,000 | Answer
| ||||
Inventory | 960,000 | 440,000 | Answer
| ||||
Equity investment | 936,000 | Answer
| [C] | Answer
| |||
Answer
| [E] | ||||||
Answer
| [A] | ||||||
PPE, net | 2,240,000 | 720,000 | [A] | Answer
| Answer
| [D] | Answer
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Customer List | [A] | Answer
| Answer
| [D] | Answer
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Goodwill | [A] | Answer
| Answer
| ||||
$5,288,000 | $1,450,000 | Answer
| |||||
Current liabilities | $800,000 | $320,000 | Answer
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Long-term liabilities | 1,600,000 | 400,000 | Answer
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Common stock | 160,000 | 80,000 | [E] | Answer
| Answer
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APIC | 720,000 | 120,000 | [E] | Answer
| Answer
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Retained earnings | 2,008,000 | 530,000 | Answer
| ||||
Noncontrolling interest | Answer
| [C] | Answer
| ||||
Answer
| [E] | ||||||
Answer
| [A] | ||||||
$5,288,000 | $1,450,000 | Answer
| Answer
| Answer
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