Practice Problem On January 1, 2014, Plant Company purchased 80% of the common stock of Sun Company for $775,000. Sun reported the following: Income Dividends 2014 $350,000 $45,000 2015 $360,000 $55,000 2016 $325,000 $65,000 On December 31, 2013, just prior to the acquisition, the balance sheets of Plant Company and Sun Company were as follows: Cash Accounts receivable (net) Inventory Plant $1,650,000 400,000 600,000 900,000 $3,550,000 Sun (Book) $515,000 190,000 125,000 100,000 $930,000 Sun (Market) $515,000 190,000 125,000 150,000 $980,000 Land $230,000 No amortization required Liabilities Common stock Additional paid in capital Retained earnings $0 500,000 250,000 2.800.000 $3,550,000 $200,000 300,000 100,000 330,000 $930,000 Required: 1. Assume that Plant accounts for the acquisition using the Initial Value method (i.e., the Cost method). Use the information above as well as the appropriate incomplete worksheet information to consolidate the financial statements for Plant and Sun for 2014, 2015 and 2016. Please provide all the same information as #1 above. In working the consolidations, please provide the following information: The Equity method entries that Plant would make each year The Allocation Schedule to allocate excess fair values The consolidation entries - The Completed worksheets showing the consolidated totals 12/31/14 Trial Balances DI Sun Eliminations & Adjustment Consolidated Debit Credit alance Sheet Cost Method Entries Plant Co. FV Allocation INCOME STATEMENT Net sales Cost of sales Other expenses Dividend Income Consolidated NI To NCI To Controlling Interest 800,000 410,000 215,000 36,000 211,000 650,000 250,000 50,000 350,000 C* - Convert to Equity STATEMENT OF RETAINED EARNINGS Retained earnings, January 2,800,000 211,000 Divs 50,000 NI 330,000 350,000 45,000 End RE 2,961,000 635,000 S - Stockholder's Equity BALANCE SHEET Cash Accounts receivable net Inventory Land Goodwill Investment in Sun 1,433,000 425,000 800,000 900,000 735,000 230,000 270,000 100,000 775,000 A- Allocations Total Assets 4,333,000 1,335,000 Liabilities Common stock Other paid in capital Retained Earnings NCI 622,000 500,000 250,000 2,961,000 300,000 300,000 100,000 635,000 I - Income Elimination Total L+E 4,333,000 1,335,000 D - Div Elimination E - Expense Allocation FV Allocation 12/31/15 Trial Balances Plant Sun iminations & Adjustmen.onsolidated Debit Credit alance Sheet INCOME STATEMENT Net sales Cost of sales Other expenses Div Income Consolidated NI To NCI To Controlling Interest Total Consolidated Net Income 785,000 362,000 218,000 44,000 249,000 684,000 287,000 37,000 360,000 C - Convert to Equity STATEMENT OF RETAINED EARNINGS Retained earnings, January 1 NI 2,961,000 249,000 70,000 635,000 360,000 55,000 Divs S-Stockholder's Equity End RE 3,140,000 940,000 BALANCE SHEET Cash Accounts receivable net Inventory Land Goodwill Investment in Sun 2,000,000 442,000 683,000 900,000 968,000 310,000 208,000 100,000 A- Allocations 775,000 Total Assets 4,800,000 1,586,000 1 - Income Elimination Liabilities Common stock Other paid in capital Retained Earnings NCI 910,000 500,000 250,000 3,140,000 246,000 300,000 100,000 940,000 D-Div Elimination Total L+E 4,800,000 1,586,000 E - Expense Allocation FV Allocation 12/31/16 Trial Balances Plant Sun liminations & Adjustment Consolidated Debit Credit Balance Sheet INCOME STATEMENT Net sales Cost of sales Other expenses Dividend Income Consolidated NI To NCI To Controlling Interest Total Consolidated Net Income 785,000 362,000 218,000 52,000 257,000 656,000 292,000 39,000 325,000 C* - Convert to Equity STATEMENT OF RETAINED EARNINGS Retained earnings, January 1 NI 3,140,000 257,000 70,000 940,000 325,000 65,000 Divs S-Stockholder's Equity End RE 3,327,000 1,200,000 BALANCE SHEET Cash Accounts receivable net Inventory Land Goodwill Investment in Sun 1,946,000 421,000 610,000 1,200,000 985,000 400,000 250,000 100,000 A- Allocations 775,000 Total Assets 4,952,000 1,735,000 - Income Elimination Liabilities Common stock Other paid in capital Retained Earnings NCI 875,000 500,000 250,000 3,327,000 135,000 300,000 100,000 1,200,000 D-Div Elimination Total LE 4,952,000 1,735,000 E - Expense Allocation Practice Problem On January 1, 2014, Plant Company purchased 80% of the common stock of Sun Company for $775,000. Sun reported the following: Income Dividends 2014 $350,000 $45,000 2015 $360,000 $55,000 2016 $325,000 $65,000 On December 31, 2013, just prior to the acquisition, the balance sheets of Plant Company and Sun Company were as follows: Cash Accounts receivable (net) Inventory Plant $1,650,000 400,000 600,000 900,000 $3,550,000 Sun (Book) $515,000 190,000 125,000 100,000 $930,000 Sun (Market) $515,000 190,000 125,000 150,000 $980,000 Land $230,000 No amortization required Liabilities Common stock Additional paid in capital Retained earnings $0 500,000 250,000 2.800.000 $3,550,000 $200,000 300,000 100,000 330,000 $930,000 Required: 1. Assume that Plant accounts for the acquisition using the Initial Value method (i.e., the Cost method). Use the information above as well as the appropriate incomplete worksheet information to consolidate the financial statements for Plant and Sun for 2014, 2015 and 2016. Please provide all the same information as #1 above. In working the consolidations, please provide the following information: The Equity method entries that Plant would make each year The Allocation Schedule to allocate excess fair values The consolidation entries - The Completed worksheets showing the consolidated totals 12/31/14 Trial Balances DI Sun Eliminations & Adjustment Consolidated Debit Credit alance Sheet Cost Method Entries Plant Co. FV Allocation INCOME STATEMENT Net sales Cost of sales Other expenses Dividend Income Consolidated NI To NCI To Controlling Interest 800,000 410,000 215,000 36,000 211,000 650,000 250,000 50,000 350,000 C* - Convert to Equity STATEMENT OF RETAINED EARNINGS Retained earnings, January 2,800,000 211,000 Divs 50,000 NI 330,000 350,000 45,000 End RE 2,961,000 635,000 S - Stockholder's Equity BALANCE SHEET Cash Accounts receivable net Inventory Land Goodwill Investment in Sun 1,433,000 425,000 800,000 900,000 735,000 230,000 270,000 100,000 775,000 A- Allocations Total Assets 4,333,000 1,335,000 Liabilities Common stock Other paid in capital Retained Earnings NCI 622,000 500,000 250,000 2,961,000 300,000 300,000 100,000 635,000 I - Income Elimination Total L+E 4,333,000 1,335,000 D - Div Elimination E - Expense Allocation FV Allocation 12/31/15 Trial Balances Plant Sun iminations & Adjustmen.onsolidated Debit Credit alance Sheet INCOME STATEMENT Net sales Cost of sales Other expenses Div Income Consolidated NI To NCI To Controlling Interest Total Consolidated Net Income 785,000 362,000 218,000 44,000 249,000 684,000 287,000 37,000 360,000 C - Convert to Equity STATEMENT OF RETAINED EARNINGS Retained earnings, January 1 NI 2,961,000 249,000 70,000 635,000 360,000 55,000 Divs S-Stockholder's Equity End RE 3,140,000 940,000 BALANCE SHEET Cash Accounts receivable net Inventory Land Goodwill Investment in Sun 2,000,000 442,000 683,000 900,000 968,000 310,000 208,000 100,000 A- Allocations 775,000 Total Assets 4,800,000 1,586,000 1 - Income Elimination Liabilities Common stock Other paid in capital Retained Earnings NCI 910,000 500,000 250,000 3,140,000 246,000 300,000 100,000 940,000 D-Div Elimination Total L+E 4,800,000 1,586,000 E - Expense Allocation FV Allocation 12/31/16 Trial Balances Plant Sun liminations & Adjustment Consolidated Debit Credit Balance Sheet INCOME STATEMENT Net sales Cost of sales Other expenses Dividend Income Consolidated NI To NCI To Controlling Interest Total Consolidated Net Income 785,000 362,000 218,000 52,000 257,000 656,000 292,000 39,000 325,000 C* - Convert to Equity STATEMENT OF RETAINED EARNINGS Retained earnings, January 1 NI 3,140,000 257,000 70,000 940,000 325,000 65,000 Divs S-Stockholder's Equity End RE 3,327,000 1,200,000 BALANCE SHEET Cash Accounts receivable net Inventory Land Goodwill Investment in Sun 1,946,000 421,000 610,000 1,200,000 985,000 400,000 250,000 100,000 A- Allocations 775,000 Total Assets 4,952,000 1,735,000 - Income Elimination Liabilities Common stock Other paid in capital Retained Earnings NCI 875,000 500,000 250,000 3,327,000 135,000 300,000 100,000 1,200,000 D-Div Elimination Total LE 4,952,000 1,735,000 E - Expense Allocation