Pop Corporation acquired 80% of Soda Company's common stock for $32,800 on January 1, 2017.
The reported equity of Soda on January 1, 2017 was $3,000 in common stock and $7,000 in
retained earnings. The fair value of the noncontrolling interest was $8,200. Soda's assets and
liabilities were reported at fair value at the date of acquisition, except for these items:
Pop Corporation acquired 80%% of Soda Company's common stock for $32,800 on January 1, 2017. The reported equity of Soda on January 1, 2017 was $3,000 in common stock and $7,000 in retained earnings. The fair value of the noncontrolling interest was $8,200. Soda's assets and liabilities were reported at fair value at the date of acquisition, except for these items: Book Value Fair Value Land $2,000 $8,000 Buildings (Accumulated Depreciation was $200) 8,000 1,000 Identifiable intangibles 0 7,000 The buildings had a remaining useful life of 7 years, and the identifiable intangibles are amortized over 5 years as of the date of acquisition, both straight-line. Goodwill was impaired by $2,000 in 2017 and is unimpaired in 2018. The land, buildings, and identifiable intangibles are still held by Soda. It is now December 31, 2018 (two years since the acquisition took place). The trial balances of Pop and Soda are in the consolidation working paper below. Soda reported net income of $3,100 and dividends of $400 during 2018. Information on intercompany transactions is as follows: 1. On January 2, 2017, Pop sold Soda equipment for a price of $800. The equipment had a book value of $300 (cost of 400 less accumulated depreciation of $100) at the time of sale, and a remaining life of 5 years, straight-line. 2. Soda sells merchandise to Pop on a continuing basis, at a markup of 20% on cost. Pop's 2018 beginning inventory contains $90 in goods purchased from Soda (cost was $75). Pop's 2018 ending inventory contains $120 in goods purchased from Soda (cost was $100). Total intercompany sales for 2018 were $3,000. Pop uses the complete (full) equity method of accounting. Required a. Calculate the total goodwill arising from this acquisition. b . Prepare a schedule roll forwarding the excess of fair value over book value items. b. Present a schedule computing Pop's equity in net income of Soda for 2018, and the noncontrolling interest in net income for 2018. Pop uses the who C. Prepare the equity entries On Pop's books for 2018 d. Present all consolidation entries that would appear in a three-part consolidation worksheet as of December 31, 2018. Note: Below (and included as a separate excel file) is the worksheet for this problem. You do not have to complete it. If you fill it in, it is not a substitute for requirement d. Consolidation working paper, December 31, 2018Pop Soda Consolidated Dr (Cr) Dr (Cr) Dr Cr Dr (Cr) Current assets 17,380 5.000 Land 8,000 5,000 Buildings & equipment (net) 145,200 25,100 Investment in Soda 34,804 Identifiable intangibles Goodwill Current liabilities (9,000) (4,500) Long-term debt (158,048) (15,900) Capital stock 10,000 (3,000 Retamed earnings, Jan 1 (19,680 (10,000 ) AOCI, Jan 1 (2,000 NCI in Net Assets of Soda Dividends 800 400 Revenues (155,000) (40,100 ) Net Income of Soda (2,256) Cost of goods sold 118,000 28,000 Operating expenses 32,000 9,000 OCI (200) NCI in Net Income of Soda Total
