VERSION BACK NEXT Exercise 4-11 On January 1, 2017, Plutonium Corporation acquired 80 % of the outstanding stock of Sulfurst Inc. for $248,500 cash. The following balance sheet shows Sulfurst Inc.'s book values immediately prior to acquisition, as well as the appraised values of its assets and liabilities by Plutonium's experts. Sulfurst Inc.'s Sulfurst Inc.'s Book Values Market Values Current assets $88,600 $88,600 Property, plant & equipment: Land udy 85,400 105,300 Building & machinery (net) 182,300 182,300 Total assets $356,300 Total liabilities $93,600 $93,600 Common stock, $5 par value 97,500 Additional paid-in-capital 19,100 Retained earnings 146,100 Total liabilities and equities $356,300 (a) Your answer is correct. Your answer is correct. PRINTER VERSION RCES Prepare a Computation and Allocation Schedule for the Difference between Book Value and the Value Implied by the Purchase Price. 11 Non- Controlling Share Parent Share Entire Value Purchase Price and Implied Value 248500 62125 310625 Study Book Value of Equity Acquired Less 52540 210160 262700 Difference Between Implied and Book Value 38340 9585 47925 Land 15920 19900 3980 Balance 22420 5605 28025 Goodwill 5605 22420 28025 Balance 0 0 0 SHOW LIST OF ACCOUNTS CALCULATOR PRINTER V S Your answer is correct. Prepare the entry to be made on the books of Plutonium Corporation to record its investment in Sulfurst Inc. Assume that during the first two years after acquisition of Sulfurst Inc., Sulfurst reports the following changes in its retained earnings: Retained earnings, January 1, 2017 $146,100 Net income, 2017 39,900 Less: dividends, 2017 (22,100) dy Net income, 2018 45,000 Less: dividends, 2018 (23,200) Retained earnings, December 31, 2018 $185,700 (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select " account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit Investment in Subsidiary 248500 Cash 248500 SHOW LIST OF ACCOUNTS (c) Prepare journal entries under each of the following methods to record the information above on the books of Plutonium Corporation for the years 2017 and 2018, assuming that all depreciable assets have a remaining life of 20 years. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) (1) Plutonium uses the cost method to account for its investment in Sulfurst Date Account Titles and Explanation Debit Credit 2017 2018 (2) Plutonium uses the partial equity method to account for its investment in Sulfurst Date Account Titles and Explanation Debit Credit 2017 CALCULATOR PRINTER (2) Plutonium uses the partial equity method to account for its investment in Suifurst. OURCES on (Fall Date Account Titles and Explanation Debit Credit 2017 (To record equity income (loss) y Study (To record dividend income) 2018 (To record equity income (loss)) (To record dividend income) CALCULATOR TRESOURCES lidation ition (Fall (3) Plutonium uses the complete equity method to account for its investment in Sulfurst. Date Account Titles and Explanation Debit Credit -5 -8 -11 -2 2017 (To record equity income (loss) re sults by Study (To record dividend income) 2018 (To record equity income (loss) (To record dividend income) VERSION BACK NEXT Exercise 4-11 On January 1, 2017, Plutonium Corporation acquired 80 % of the outstanding stock of Sulfurst Inc. for $248,500 cash. The following balance sheet shows Sulfurst Inc.'s book values immediately prior to acquisition, as well as the appraised values of its assets and liabilities by Plutonium's experts. Sulfurst Inc.'s Sulfurst Inc.'s Book Values Market Values Current assets $88,600 $88,600 Property, plant & equipment: Land udy 85,400 105,300 Building & machinery (net) 182,300 182,300 Total assets $356,300 Total liabilities $93,600 $93,600 Common stock, $5 par value 97,500 Additional paid-in-capital 19,100 Retained earnings 146,100 Total liabilities and equities $356,300 (a) Your answer is correct. Your answer is correct. PRINTER VERSION RCES Prepare a Computation and Allocation Schedule for the Difference between Book Value and the Value Implied by the Purchase Price. 11 Non- Controlling Share Parent Share Entire Value Purchase Price and Implied Value 248500 62125 310625 Study Book Value of Equity Acquired Less 52540 210160 262700 Difference Between Implied and Book Value 38340 9585 47925 Land 15920 19900 3980 Balance 22420 5605 28025 Goodwill 5605 22420 28025 Balance 0 0 0 SHOW LIST OF ACCOUNTS CALCULATOR PRINTER V S Your answer is correct. Prepare the entry to be made on the books of Plutonium Corporation to record its investment in Sulfurst Inc. Assume that during the first two years after acquisition of Sulfurst Inc., Sulfurst reports the following changes in its retained earnings: Retained earnings, January 1, 2017 $146,100 Net income, 2017 39,900 Less: dividends, 2017 (22,100) dy Net income, 2018 45,000 Less: dividends, 2018 (23,200) Retained earnings, December 31, 2018 $185,700 (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select " account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit Investment in Subsidiary 248500 Cash 248500 SHOW LIST OF ACCOUNTS (c) Prepare journal entries under each of the following methods to record the information above on the books of Plutonium Corporation for the years 2017 and 2018, assuming that all depreciable assets have a remaining life of 20 years. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) (1) Plutonium uses the cost method to account for its investment in Sulfurst Date Account Titles and Explanation Debit Credit 2017 2018 (2) Plutonium uses the partial equity method to account for its investment in Sulfurst Date Account Titles and Explanation Debit Credit 2017 CALCULATOR PRINTER (2) Plutonium uses the partial equity method to account for its investment in Suifurst. OURCES on (Fall Date Account Titles and Explanation Debit Credit 2017 (To record equity income (loss) y Study (To record dividend income) 2018 (To record equity income (loss)) (To record dividend income) CALCULATOR TRESOURCES lidation ition (Fall (3) Plutonium uses the complete equity method to account for its investment in Sulfurst. Date Account Titles and Explanation Debit Credit -5 -8 -11 -2 2017 (To record equity income (loss) re sults by Study (To record dividend income) 2018 (To record equity income (loss) (To record dividend income)