Question 1: Starbucks acquired 100% of Dunkin's outstanding shares on December 31, 2018, by paying $390,000 in cash. Prior to the acquisition, here is the GAAP Book Value and Fair Value financial information as of December 31, 2018.
Question 1A: (see picture below)
Question 1B: (see picture below)
Question 1C: (see picture below)
December 31, 2018 STARBUCKS Dunkin Remaining Useful Life Book Value Fair Value Book Value Cash $36,000 $18,000 $18.000 Receivables 116,000 52,000 52,000 Inventory 140,000 90,000 90,000 Investment in Dunkin 495,000 N/A N/A Computers Buildings (net) Equipment (net) 210,000 70,000 20,000 5 years 595,000 130,000 130,000 10 years 308,000 60,000 5 years 40,000 Goodwill Total assets $1,900,000 $350,000 Accounts payable Notes payable Common stock ($10.00 par) Common stock ($1.00 par) Additional paid-in capital Retained earnings Total liabilities and equities S(88.000) $(25,000) $(25,000) (510,000) (380,000 (60,000) (60,000) (100,000) (100,000) (170,000) |(25.000) (140.000 (25,000) (140,000 ($350,000 (752.000) ($1.900,000) A) Prepare the Fair Value Allocation Schedule as of the acquisition date, 12/31/18 This Schedule should be also used for answering the following questions 1. B), C), D) and E), as necessary Fair Value Allocation Schedule as of the acquisition date, 12/31/18 B) Scenario II STARBUCKS and Dunkin remain to separate legal entities. Prepare Starbucks's (the parent company) Journal Entries - on Starbucks's books alone for this acquisition of Dunkin on December 31, 2018 Credit Debit STARBUCKS General Ledger Consolidation as of December 31, 2018 C) Scenario IV STARBUCKS and Dunkin remain to separate legal entities since the acquisition date of Dec 31, 2018 Prepare Consolidation Entries as of December 31, 2020, using the additional information below, as necessary Dunkin reported Net Income of $100,000 in 2019 Dunkin reported Net income of $150, 000 in 2020 and paid dividends of $50,000 Dunkin Retained Earnings 12/31/18 $140,000 12/31/19 240,000 (Same as Jan 1,2020 beginning balance) 12/31/20 340,000 C C C Consolidation as of December 31, 2020 Debit Credit December 31, 2018 STARBUCKS Dunkin Remaining Useful Life Book Value Fair Value Book Value Cash $36,000 $18,000 $18.000 Receivables 116,000 52,000 52,000 Inventory 140,000 90,000 90,000 Investment in Dunkin 495,000 N/A N/A Computers Buildings (net) Equipment (net) 210,000 70,000 20,000 5 years 595,000 130,000 130,000 10 years 308,000 60,000 5 years 40,000 Goodwill Total assets $1,900,000 $350,000 Accounts payable Notes payable Common stock ($10.00 par) Common stock ($1.00 par) Additional paid-in capital Retained earnings Total liabilities and equities S(88.000) $(25,000) $(25,000) (510,000) (380,000 (60,000) (60,000) (100,000) (100,000) (170,000) |(25.000) (140.000 (25,000) (140,000 ($350,000 (752.000) ($1.900,000) A) Prepare the Fair Value Allocation Schedule as of the acquisition date, 12/31/18 This Schedule should be also used for answering the following questions 1. B), C), D) and E), as necessary Fair Value Allocation Schedule as of the acquisition date, 12/31/18 B) Scenario II STARBUCKS and Dunkin remain to separate legal entities. Prepare Starbucks's (the parent company) Journal Entries - on Starbucks's books alone for this acquisition of Dunkin on December 31, 2018 Credit Debit STARBUCKS General Ledger Consolidation as of December 31, 2018 C) Scenario IV STARBUCKS and Dunkin remain to separate legal entities since the acquisition date of Dec 31, 2018 Prepare Consolidation Entries as of December 31, 2020, using the additional information below, as necessary Dunkin reported Net Income of $100,000 in 2019 Dunkin reported Net income of $150, 000 in 2020 and paid dividends of $50,000 Dunkin Retained Earnings 12/31/18 $140,000 12/31/19 240,000 (Same as Jan 1,2020 beginning balance) 12/31/20 340,000 C C C Consolidation as of December 31, 2020 Debit Credit
