Topic: Calculation of and Allocation of Goodwill

The follow facts will be used for questions 1 through 3.

3 years ago on January 1, 2011, Daisy Company acquired 80 percent of Rose Company for $594,000 in cash.Rose's net book value on that date was $610,000 and the fair value of the non-controlling interest was $148,500.Rose possessed a trademark (10-year remaining life) that although unrecorded on Rose's accounting records, had a fair value of $75,000.There were no other unrecorded assets or liabilities and the book value of the remaining assets and liabilities approximated fair value.

1. (3 Points) Calculate the amount of total goodwill associated with the acquisition of Rose by Daisy and allocate the goodwill to Daisy and the non-controlling interest.

Total Goodwill CI NCI

Topic: Calculation of Equity in Income

A. Rose had net income of $120,000 in 2013.

B. Daisy acquired Rose so that Rose could provide Daisy with vital component parts for its production of Captain Kirk lounge chairs.

a. At the beginning of 2013, Daisy had inventory on hand from Rose that it paid Rose $30,000 for.Rose's cost to make that inventory was $20,000.

b. During 2013, Daisy purchased $160,000 of inventory from Rose that cost Rose $120,000 to make.Of the inventory purchased in 2013, Daisy had $68,000 of it left unused at the end of the year.The cost to Rose to make this unused inventory was $51,000.

C. On January 1, 2012, Daisy sold Rose several pieces of equipment that had a 10 year remaining useful life.All equipment in the controlled group is considered to have no salvage value and is depreciated on a straight line basis.The equipment originally cost Daisy $100,000 and had accumulated depreciation of $56,000 at the time of the transfer.The transfer price was $80,000.

D. On January 1, 2013 Daisy sold land on credit to Rose for $50,000.The original cost of the land was $22,000.At December 31, 2013, Rose had yet to pay for the land.

2. (8 Points) Calculate the equity in income for the controlling and non-controlling interest

Description Total CI NCI

Total

Use the following page for computations.

Topic: Comprehensive Consolidation

3. (37 points) Using the information you have developed thus far and this page space for computations, complete the consolidated worksheet on the following page for the year ended December 31, 2013. Remember, 3 years have passed since the initial acquisition.2011, 2012 and the current year 2013.This is an important point to consider for the preparation of the R entry.Goodwill has NOT been impaired in any year.

Daisy Rose Dr CR Consolidated

Cash And Receivables 348,000.0 410,000.0

Inventory 430,400.0 190,000.0

Land 454,000.0 280,000.0

PP&E 270,000.0 190,000.0

Accumulated Depreciation (180,000.0) (50,000.0)

Trademark

Investment in Sub 737,600.0

Goodwill

Total Assets 2,060,000.0 1,020,000.0

Current Liabilities 715,000.0 120,000.0

Common Stock 600,000.0 400,000.0

Retained Earnings (Jan 1) 620,000.0 430,000.0

Dividends (55,000.0) (50,000.0)

Current year earnings 180,000.0 120,000.0

Non-Controlling Interest

Total Liabilities and owners equity 2,060,000.0 1,020,000.0

Revenues 900,000.0 500,000.0

Equity in income(loss) of Sub 60,000.0

Gain on sale of Land 28,000.0

Cost of Goods Sold (598,000.0) (300,000.0)

Operating Expenses (210,000.0) (80,000.0)

Depreciation Expense

Amortization Expense

Non-controlling interest in net income

Net Income 180,000.0 120,000.0