Question 3. On 01/01/2020, Corina's Co. purchase 90% of Joe's Co. common stock for $35,000 cash and $200,000 long-term note. Corina's also paid $3000 cash for investment banking fee. Joe's was not dissolved after the purchase. During 2020, Joe's reported net income of $50,000 and paid dividends of $30,000. During 2021, Joe's reported net income of $75,000 and paid dividends of $45,000. Corina's Co. uses the EQUITY method to track its investment in Joe's.
Note: At the time of acquisition, Joe's had land with fair value higher than book value by $8,000, an equipment with fair value lower than book value by $4,000 and a building with fair value higher than book value by $12,000. The equipment and building has 5 years and 10 years of useful life each. Joe's has a book value of $204,000 on 01/01/2020. The fair value of Joe's's net assets was $220,000 at time of acquisition.
Hint: The ending balance of "Investment in Joe's" account in 2013 need to be calculated all the way starting from 01/01/2020 and making adjustments in 2020 and then in 2021.
Please use the acquisition method to consolidate the books of Corina's and Joe's Co. on 12/31/2021.
Value Analysis Schedule
		Total price		Corina's's price		NCI implied price
		(100%)		(90%)		(10%)
Market price of Joe's
Joe's's net assets fair value
Difference -Goodwill
Fair Value Adjustment Schedule
Fair value of 100% Joe's
Total equity of Joe's (BV)
Excess of fair value over book value
Adjustment of Chase's identifiable accounts
	Adjustment to FV	Worksheet Key	Amortization
			Life	Current year	Prior year	Total	WorksheetKey
Land
Building
Equipment
Goodwill
Total
Journal entries related to adjustments to its investment interest in Joe's using EQUITY method during 2021 before consolidation
		Debit	Credit
Investment in Joe's				subsidary's current year net income
Equity in Joe's's earnings
Cash				dividdend received in current year
Investment in Joe's
Equity in subisidiary earnings				building's current year depreciation expense
Investment in Joe's
Investment in Joe's				equipment's current year depreciation expense
Equity in subisidiary earnings
Corina's COMPANY AND CONSOLIDATED SUBSIDIARY
Consolidation Worksheet
December 31, 2021
	Seth	Joe's	Consolidation Entries				Noncontrolling	Consolidated
Accounts	Company	Company		Debit		Credit	Interest	Totals
Revenue	-546000	-273000
Cost of goods sold	370000	185000
Gross Profit	-176000	-88000
SGA expenses	34600	13000
Equity in subsidairy earnings
Noncontrolling interest earning
Net income	-141400	-75000
		Changes in Retained earnings
Retained earnings-begining balance---Corina's	-180024
Retained earnings-begining balance---Joe's		-144000
Net income		-75000
Dividends paid	84840	45000
Retained earnings-ending balance		-174000
Cash	40,784	51,000
Inventory	298,600	134,000
Land	150,000	170,000
Buildings	370,760	117,000
Accum. Depre - Buildijng	(50,000)	(30,000)
Equipment	194,440	69,000
Accum. Depre - Equipment	(30,000)	(20,000)
Investment in Joe's
Goodwill
Total debits		491,000
Credit Balances
Accounts payable	(286,620)	(47,000)
Long-term liabilities	(554,020)	(190,000)
Noncontrolling interest-beg.
Noncontrolling interest-end.
Common stock	(150,000)	(80,000)
Retained earnings, ending		(174,000)
Total credits		(491,000)
		-