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Student Name: Instructor

Class: McGraw-Hill/Irwin
Problem 04-32

FATHER, INC. AND SAM CORPORATION


- Purchase price allocation and annual amortization
Acquisition-date subsidiary fair value
Book value of subsidiary
Fair value in excess of book value

Allocations to specific accounts based on difference


between fair value and book value:
Land
$
165,000
Buildings and equipment
(25,000)
Copyright
100,000
Notes payable
10,000
Total
$

850,000
(600,000)
250,000 Correct!

250,000
Correct!

Annual excess amortizations:


Buildings and equipment
Copyright
Notes payable
Total

$
$
$

25,000
100,000
10,000

Life
Excess
(years)
Amortizations
10 $
(2,500)
20
5,000
8
1,250
$
3,750
Correct!

Student Name: Instructor


Class: McGraw-Hill/Irwin
Problem 04-32

Totals for the business combination for the year ending December 31, 2006
FATHER, INC. AND SAM CORPORATION

Revenues

Account Name

Balance
Explanation
$ 1,900,000 Add the two book values

Cost of goods sold

$ 1,085,000 Add the two book values

Depreciation expense

267,500 Add the two book values less $2,500 excess adjustment

Amortization expense

10,000 Add the two book values plus $5,000 excess adjustment

Interest expense

50,250 Add the two book values plus $1,250 excess adjustment

Equity in income of Sam

Net income

- Eliminated so that the individual revenues and expenses


of the subsidiary can be included in the consolidated
figures
487,250 Revenues less expenses

Retained earnings, 1/1

$ 1,265,000 Parent company balance; subsidiary's operations prior to


acquisition do not affect consolidated figures

Noncontrolling interest in income


of subsidiary

Dividends paid

26,250 $135,000 reported income of the subsidiary less $3,750


amortization expense multiplied by 20% outside ownership

Current assets

260,000 parent company balance; subsidiary's payments to parent


are intercompany, payments to outside owners decrease
noncontrolling interest balance
$ 1,466,000 Consolidated balance on 1/1/09 plus consolidated net income
less noncontrolling interest in subsidiary's income less
consolidated dividends
$ 1,493,000 Add the two book values

Investment in Sam

Land

Buildings and equipment (net)

$ 1,119,500 Add the book values less the $25,000 allocation [asset was
overvalued] plus the excess amortization

Copyright

Total assets

$ 3,319,500

Accounts payable

339,000 Add book values

Notes payable

581,250 Add the book values less $10,000 excess allocation plus
amortization

Noncontrolling interest in Sam

Common stock

183,250 20% of fair value as of 1/1/09 [$170,000] plus noncontrolling


interest in income of subsidiary [$26,250] less dividends paid to
outside owners [$13,000]
300,000 Parent company balance

Additional paid-in capital

450,000 Parent company balance

Retained earnings, 12/31

$ 1,466,000 Computed above

Total liabilities & equities

$ 3,319,500

Retained earnings, 12/31

- Eliminated so that the individual assets and liabilities


of the subsidiary can be included in the consolidated figures
517,000 Add the two book values plus the $165,000 allocation

190,000 Book value plus $100,000 excess allocation less amortization


for the year

Student Name: Instructor


Class: McGraw-Hill/Irwin
Problem 04-32

FATHER, INC. AND SAM CORPORATION


Consolidation Worksheet

Accounts
Revenues
Cost of goods sold
Depreciation expense
Amortization expense
Interest expense
Equity in income of Sam
Separate company net income
Consolidated net income

NonFather,
Sam
Consolidation Entries
controlling Consolidated
Inc.
Corporation
Debit
Credit
Interest
Totals
(1,360,000)
(540,000)
(1,900,000)
700,000
385,000
1,085,000
260,000
10,000
[E]
2,500
267,500
5,000 [E]
5,000
10,000
44,000
5,000 [E]
1,250
50,250
(105,000)
- [ I ] 105,000
(461,000)
(135,000)
(487,250)

Noncontrolling interest in Sam's income


Controlling interest in CNI
Retained earnings, 1/1
Net income
Dividends paid
Retained earnings, 12/31
Current assets
Investment in Sam

Land
Buildings and equipment (net)
Copyright
Total assets
Accounts payable
Notes payable
NCI in Sam 1/1
NCI in Sam 12/31
Common stock
Additional paid-in capital
Retained earnings, 12/31
Total liabilities and equity
Parentheses indicate a credit balance.

(26,250)

(1,265,000)
(461,000)
260,000
(1,466,000)

(440,000) [S]
(135,000)
65,000
(510,000)

965,000
733,000

528,000
-

292,000
877,000
2,867,000

60,000
265,000
95,000
948,000

(191,000)
(460,000)

(300,000)
(450,000)
(1,466,000)
(2,867,000)

440,000

[D]

52,000

[A]
[E]
[A]

165,000
2,500
100,000

(148,000)
(130,000) [A]

10,000

(100,000) [S]
(60,000) [S]
(510,000)
(948,000)

100,000
60,000

[D]

52,000

[S]
[I]
[A]

480,000
105,000
200,000

[A]
[E]

25,000
5,000

[E]
[S]
[A]

1,250
120,000
50,000

13,000

(170,000)
(183,250)

Correct!
Correct!
Correct!
Correct!
Correct!
Correct!
Correct!

26,250
(461,000)

Correct!
Correct!

(1,265,000)
(461,000)
260,000
(1,466,000)

Correct!
Correct!
Correct!
Correct!

1,493,000
-

Correct!
Correct!

517,000
1,119,500
190,000
3,319,500

Correct!
Correct!
Correct!
Correct!

(339,000)
(581,250)

Correct!
Correct!

(183,250)

Correct!

(300,000)
(450,000)
(1,466,000)
(3,319,500)

Correct!
Correct!
Correct!
Correct!

Given Data P04-32


Sam Corporation outstanding common stock
acquired by Father, Inc.
Cash paid by Father, Inc. for
Sam Corporation shares
Sam's assessed fair value
Book value of Sam Corporation

80%
$

680,000

$
$

850,000
600,000

Sam accounts values on 1/1/11

Land
Buildings and equipment
(10-year remaining life)
Copyright (20-year life)
Notes payable (due in 8 years)

Book
Value
$
60,000
275,000

Fair
Value
$ 225,000
250,000

100,000
(130,000)

200,000
(120,000)

Revenues
Cost of goods sold
Depreciation expense
Amortization expense
Interest expense
Equity in income of Sam
Net income

Father,
Inc.
12/31/2011
$ (1,360,000)
700,000
260,000
44,000
(105,000)
$ (461,000)

Sam
Corporation
12/31/2011
$ (540,000)
385,000
10,000
5,000
5,000
$ (135,000)

Retained earnings, 1/1/11


Net income
Dividends paid
Retained earnings, 12/31/11

$ (1,265,000) $ (440,000)
(461,000)
(135,000)
260,000
65,000
$ (1,466,000) $ (510,000)

Current assets
Investment in Sam
Land
Buildings and equipment (net)
Copyright
Total assets

Accounts payable
Notes payable
Common stock
Additional paid-in capital
Retained earnings
Total liabilities and equity

965,000
733,000
292,000
877,000
$ 2,867,000

528,000
60,000
265,000
95,000
948,000

(191,000) $ (148,000)
(460,000)
(130,000)
(300,000)
(100,000)
(450,000)
(60,000)
(1,466,000)
(510,000)
$ (2,867,000) $ (948,000)

Note: Credits are indicated by parentheses.

Student Name: Instructor


Class: McGraw-Hill/Irwin
Problem 04-33
ADAMS CORPORATION AND BARSTOW, INC.
- Purchase price allocation and excess amortizations
Consideration transferred by Adams
Noncontrolling interest fair value
Acquisition-date total fair value
Book value of Barstow
Excess fair value over book value

Land
Buildings
Equipment
Patents
Notes payable
Goodwill
Total

603,000
67,000
$ 670,000
(460,000)
$ 210,000

30,000
(20,000)
40,000
50,000
20,000
$

120,000
90,000
Correct!

Correct!
Correct!

Life
(years)
10
5
10
5
indefinite

Annual
Excess
Amortizations
$
(2,000)
8,000
5,000
4,000

15,000
Correct!

Student Name: Instructor


Class: McGraw-Hill/Irwin
Problem 04-33
ADAMS CORPORATION AND BARSTOW, INC.
Consolidation Worksheet
For Year Ending December 31, 2011

Accounts
Revenues
Cost of goods sold
Depreciation expense
Amortization expense
Interest expense
Investment income
Separate company net income
Consolidated net income
Income to noncontrolling interest
Income to controlling interest

Adams
Corp.
(940,000)
480,000
100,000
40,000
(108,000)
(428,000)

Barstow
Inc.
(280,000)
90,000
55,000 [E]
[E]
15,000 [E]
[I]
(120,000)

(1,367,000)

Net income
Dividends paid
Retained earnings, 12/31

(428,000)
(110,000)
(1,685,000)

(340,000) [*C]
[S]
(120,000)
70,000
(390,000)

Current assets
Investment in Barstow

610,000
702,000

250,000

Land
Buildings
Equipment
Patents
Goodwill
Total assets

380,000
490,000
873,000

150,000
250,000
150,000

3,055,000

800,000

Total liabilities and equity


Parentheses indicate a credit balance.

Credit

6,000
5,000
4,000
108,000

(10,500)

Retained earnings, 1/1

Notes payable
Common stock
Retained earnings, 12/31
Noncontrolling interest

Debit

Noncontrolling Consolidated
Interest
Totals
(1,220,000)
570,000
161,000
5,000
59,000
-

(860,000)
(510,000)
(1,685,000)

(3,055,000)

[D]

[A]
[E]
[A]
[A]
[A]

(230,000) [A]
(180,000) [S]
(390,000)

(800,000)

13,500
340,000

(1,353,500)

[D]

63,000

63,000 [*C]
[S]
[A]
[I]
30,000
2,000 [A]
32,000 [E]
45,000 [E]
90,000

13,500
468,000
175,500
108,000

16,000
180,000

(425,000)
10,500
(414,500)

7,000

860,000
-

560,000
724,000
1,047,000
40,000
90,000
3,321,000

18,000
8,000
5,000

[E]

4,000

[S]
[A]

52,000
19,500

(414,500)
110,000
(1,658,000)

(1,078,000)
(510,000)
(1,658,000)
(71,500)
(75,000)

(75,000)
(3,321,000)

Correct!
Correct!
Correct!
Correct!
Correct!
Correct!
Correct!
Correct!
Correct!
Correct!
Correct!
Correct!
Correct!
Correct!
Correct!

Correct!
Correct!
Correct!
Correct!
Correct!
Correct!
Correct!
Correct!
Correct!
Correct!
Correct!

Given Data P04-33


Barstow, Inc. outstanding voting shares
acquired by Adams Corporation
Cash paid by Adams Corporation for
Barstow, Inc. shares

90%
$

603,000

Barstow account values on 12/31/09

Current assets
Land
Buildings (10-year life)
Equipment (5-year life)
Patents (10-year life)
Liabilities (5-year life)
Common stock
Retained earnings, 12/31/09

Book
Fair Market
Value
Value
$ 160,000 $ 160,000
120,000
150,000
220,000
200,000
160,000
200,000
50,000
(200,000)
(180,000)
(180,000)
(280,000)
Adams
Barstow, Inc.
Corporation Corporation
12/31/2011 12/31/2011

Debits
Current assets
Land
Buildings
Equipment
Investment in Barstow, Inc.
Cost of goods sold
Depreciation expense
Interest expense
Dividends paid
Total debits
Credits
Notes Payable
Common stock
Retained earnings, 1/1/11
Revenues
Investment income
Total credits

610,000
380,000
490,000
873,000
702,000
480,000
100,000
40,000
110,000
$ 3,785,000

860,000
510,000
1,367,000
940,000
108,000
$ 3,785,000

250,000
150,000
250,000
150,000
90,000
55,000
15,000
70,000
$ 1,030,000

230,000
180,000
340,000
280,000
$ 1,030,000

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