Beruflich Dokumente
Kultur Dokumente
LO1
2.
to
cost
the
Investment
attributable
to
LO1
3.
LO1
Use the following information to answer questions 4 through 9.
On January 1, 2005, Finch Corporation purchased 75% of the common stock
of Grass Co. Separate balance sheet data for the companies at the
combination date are given below:
Cash
Accounts Receivable
Inventory
Land
Plant assets
Accum. Depreciation
Investment in Lapp
Total assets
Accounts payable
Capital stock
Retained earnings
Total liabilities & equities
(
$
Finch
24,000
144,000
132,000
68,000
700,000
240,000 )
392,000
1,230,000
Grass
206,000
26,000
38,000
32,000
300,000
60,000 )
542,000
142,000
300,000
100,000
542,000
206,000
800,000
224,000
1,230,000
At the date of combination, the book values of Grasss net assets were
equal to the fair value except for Grasss inventory, which had a fair
value of $60,000.
Determine below what the consolidated balance would be for each of the
requested accounts.
4.
5.
6.
$ 69,333.
$100,000.
$130,666.
$150,000.
9.
$206,000.
$261,000.
$302,500.
$348,000.
8.
$10,500.
$20,000.
$42,000.
$75,500.
7.
$170,000.
$169,000.
$186,500.
$192,000.
$224,000.
$299,000.
$324,000.
$346,666.
$1,244,500.
$1,380,000.
$1,472,000.
$1,762,000.
LO2
10.
$ 25,000
5,000
8,000
15,000
10,000
$0.
$10,000.
$30,000.
$63,000.
LO3
12.
LO3
13.
LO4
14.
LO4
15.
$135,800.
$136,800.
$143,000.
$144,000.
LO4
16.
LO5
17.
LO5
18.
LO5
19.
LO6
20.
new
LO1
Exercise 1
Parrot Corporation acquired 80% of Hollow Co. on January 1, 2005 for
$24,000 cash when Hollows stockholders equity consisted of $10,000
of Common Stock and $3,000 of Retained Earnings. The difference
between the price paid by Parrot and the underlying equity acquired
in Hollow was allocated solely to a patent amortized over 10 years.
The separate company statements for Parrot and Hollow appear in the
first two columns of the partially completed consolidation working
papers.
Required:
Complete the consolidation working papers for Parrot and Hollow for
the year 2005.
Income of Hollow
Cost of Sales
Other Expenses
Net income
Retained
Earnings 1/1
Add:
Net income
Less:
Dividends
Retained
Earnings 12/31
BALANCE SHEET
Cash
Accounts
Receivable-net
Inventories
20,000
NonCntl.
$15,000
3,680
(
(
(
$
9,200) (
2,300) (
4,700)
4,000)
12,180
6,300
11,000
3,000
12,180
6,300
3,000) (
2,000)
20,180
$ 7,300
2,000
1,900
12,000
5,500
14,000
8,000
27,000
42,000
60,000
43,000
Patent
Land
Equipment and
Buildings-net
Investment in
Hollow Co.
TOTAL ASSETS
LIAB. & EQUITY
Accounts payable
Capital
Stock
Retained
Earnings
1/1 Noncontrol.
Interest
26,080
$ 141,080 $100,400
90,900
83,100
30,000
10,000
20,180
7,300
12/31 Noncontrol.
Interest
Earnings
$
TOTAL LIAB. &
EQUITY
141,080 $100,400
2009 Pearson Education, Inc. publishing as Prentice Hall
4-9
Consolidated
LO2
Exercise 2
Cuckoo Company acquired all the voting stock of Perch Corporation on
January 1, 2004 for $70,000 when Perch had Capital Stock of $50,000
and Retained Earnings of $8,000. The excess of cost over book value
was allocated $3,000 to inventories that were sold in 2004, $4,000 to
equipment with a 4-year remaining useful life under the straight-line
method, and the remainder to goodwill.
Financial statements for Cuckoo and Perch at the end of the fiscal
year ended December 31, 2005 (two years after acquisition), appear in
the first two columns of the partially completed consolidation
working papers. Cuckoo has accounted for its investment in Slim using
an incomplete equity method of accounting.
Required:
Complete the
Subsidiary.
consolidation
working
papers
for
Cuckoo
Company
and
$ 60,000
Cost of Sales
(150,000) ( 30,000)
Other expenses
( 38,000) ( 18,000)
Net income
Cuckoo Retained
Earnings 1/1
Perch Retained
Earnings
Add:
Net income
Less:
Dividends
Retained
Earnings 12/31
BALANCE SHEET
Other current
assets
30,000
12,000
24,000
10,000
$
30,000
( 20,000) (
$ 12,000
34,000
4,000)
$ 18,000
14,000
7,000
Inventories
21,000
15,000
Land
Equipment and
Buildings-net
Investment in
Perch Corp.
11,000
6,000
64,000
55,000
TOTAL ASSETS
LIAB. & EQUITY
Liabilities
Capital Stock
Retained
Earnings
TOTAL LIAB. &
EQUITY
NonCntl
80,000
$ 190,000
$ 83,000
56,000
15,000
100,000
50,000
34,000
18,000
190,000
83,000
Consolidated
LO2
Exercise 3
Owl Corporation acquired 90% of the voting stock of Hunt Corporation
on January 1, 2004 for $7,000 when Hunt had Capital Stock of $5,000
and Retained Earnings of $1,500. The excess of cost over book value
was allocated $150 to inventories that were sold in 2004, $200 to
undervalued land, $400 to undervalued equipment with a remaining
useful life of 5 years under the straight-line method, and the
remainder to goodwill.
Financial statements for Owl and Hunt Corporations at the end of the
fiscal year ended December 31, 2005 appear in the first two columns
of the partially completed consolidation working papers. Owl has
accounted for its investment in Hunt using the equity method of
accounting. Owl Corporation owed Hunt Corporation $100 on open
account at the end of the year. Dividends receivable in the amount
of $450 payable from Hunt to Owl is included in Owls net
receivables.
Required:
Complete the consolidation working papers for Owl Corporation and
Subsidiary.
10,000
$ 6,500
1,270
Cost of Sales
Depreciation
expense
4,000) (
3,300)
1,000) (
1,000)
Other expenses
1,800) (
700)
Net income
Retained
Earnings 1/1
Add:
Net income
Less:
Dividends
Retained
Earnings 12/31
BALANCE SHEET
Cash
(
$
4,470
1,500
2,510
2,000
4,470
1,500
2,000) (
1,000)
4,980
$ 2,500
1,440
1,900
Receivables-net
1,550
600
Inventories
1,500
1,200
Land
Equipment and
Buildings-net
Investment in
Hunt Corporation
TOTAL ASSETS
$
LIAB. & EQUITY
Accounts payable
Dividends
payable
1,000
600
7,500
5,700
7,590
20,580
$10,000
3,000
2,000
1,000
500
11,600
5,000
4,980
20,580
2,500
$10,000
Capital Stock
Retained
Earnings
LIAB. & EQUITY
NonCntl
Consolidated
LO3
Exercise 4
Koel Corporation acquired all the voting stock of Rain Company for
$500,000 on January 1, 2005 when Rain had Capital Stock of $300,000
and Retained Earnings of $150,000. Rains assets and liabilities were
fairly valued except for the plant assets. The entire cost-book
differential is allocated to plant assets and is fully depreciated on
a straight-line basis over a 10-year period.
During 2005, Koel borrowed $25,000 on a short-term non-interestbearing note from Rain, and on December 31, 2005, Koel mailed a check
to Rain to settle the note. Rain deposited the check on January 5,
2006, but receipt of payment of the note was not reflected in Rains
December 31, 2005 balance sheet.
Required:
Complete the consolidation working papers.
$400,000
Cost of Sales
(350,000) (200,000)
Other expenses
(100,000) (60,000)
Net income
185,000
Koel Retained
Earnings 1/1
Rain Retained
Earnings
Add:
Net income
Less:
Dividends
Retained
Earnings 12/31
150,000
$ 185,000
$140,000
(70,000)
$ 485,000
$220,000
25,000
210,000
300,000
200,000
425,000
565,000
$
Capital Stock
Retained
Earnings
TOTAL EQUITIES
140,000
300,000
BALANCE SHEET
Note Receivable
from Koel
Other current
assets
Plant assetsnet
Investment in
Rain Company
TOTAL ASSETS
EQUITIES
Liabilities
NonCntl
975,000
$750,000
290,000
230,000
200,000
300,000
485,000
220,000
975,000
$750,000
Balance
Sheet
LO4
Exercise 5
Owl Corporation acquired 90% of Barn Corporation on January 1, 2005
for $72,000 cash when Barns stockholders equity consisted of
$30,000 of Common Stock and $30,000 of Retained Earnings. The
difference between the price paid by Owl and the underlying equity
acquired in Barn was allocated to a plant asset with a remaining 10year straight-line life that was overvalued by $5,000. The remainder
was attributable to goodwill.
The separate company statements for
Owl and Barn appear in the first two columns of the partially
completed consolidation working papers.
Required:
Complete the consolidation working papers for Owl and Barn for the
year 2005.
60,000
$22,000
3,510
( 13,000) (
9,500)
2,000) (
3,000)
( 23,000) (
6,100)
25,510
3,400
25,000
30,000
25,510
3,400
( 15,000) (
3,000)
35,510
$30,400
26,520
7,000
22,000
10,000
20,000
14,000
Land
27,000
Equipment and
70,000
Buildings-net
Investment in
72,810
Barn Corporation
TOTAL ASSETS
$ 238,330
LIAB. & EQUITY
Accounts payable
32,820
Capital
Stock
170,000
Retained
Earnings
35,510
Noncontrolling
Interest
$
TOTAL LIAB. &
EQUITY
238,330
42,000
Inventories
38,000
$111,000
50,600
30,000
30,400
$111,000
Min
Int
Consolidated
LO4
Exercise 6
Lorikeet Company has the following information collected in order to
do make a cash flow statement and uses the direct format for Cash
Flow from Operations.
The annual report year end is December 31,
2005.
Noncontrolling Interest Dividends
Dividends Received from Equity Investees
Cash Paid to Employees
Cash Paid for Other Operating Activities
Cash Paid for Interest Expense
Cash Proceeds from the Sale of Equipment
Cash Paid to Suppliers
Cash Received from Customers
$20,000
17,000
37,000
34,000
22,300
70,000
192,700
412,600
Required:
1. Prepare the Cash Flow for Operations part of the cash flow
statement for Lorikeet.
LO4
Exercise 7
Bronzewing Company has the following information collected in order
to do make a cash flow statement and uses the indirect format for
Cash Flow from Operations.
The annual report year end is December
31, 2005.
Noncontrolling Interest Dividends
Undistributed Income of Equity Investees
Depreciation Expense
Consolidated Net Income
Increase in Accounts Payable
Amortization of Patent
Decrease in Accounts Receivable
Increase in Inventories
Gain on sale of equipment
Noncontrolling Interest Expense
$17,000
7,500
65,000
175,000
15,000
13,000
48,000
27,500
45,000
17,000
Required:
1. Prepare the Cash Flow for Operations part of the cash flow
statement for Bronzewing.
LO6
Exercise 8
Swift Corporation paid $88,500 for a 70% interest in Cave Corporation
on January 1, 2005, when Caves Capital Stock was $70,000 and its
Retained Earnings $30,000. The fair values of Cave's identifiable
assets and liabilities were the same as the recorded book values on
the acquisition date. Trial balances at the end of the year on
December 31, 2005 are given below:
Cash
Accounts Receivable
Inventory
Investment in Cave
Cost of Goods Sold
Operating Expenses
Dividends
$
Liabilities
Capital stock, $10 par value
Additional Paid-in Capital
Retained Earnings
Sales Revenue
Dividend Income
Swift
Inc.
4,500 $
25,000
100,000
88,500
60,000
22,000
15,000
315,000 $
47,000 $
100,000
10,000
31,000
120,000
7,000
315,000 $
Cave
Inc.
20,000
30,000
80,000
40,000
37,000
10,000
217,000
27,000
70,000
30,000
90,000
217,000
During 2005, Swift made only two journal entries with respect to its
investment in Cave. On January 1, 2005, it debited the Investment in
Cave account for $88,500 and on November 1, 2005, it credited
Dividend Income for $7,000.
Required:
1. Prepare a consolidated income statement and a statement of
retained earnings for Swift and Subsidiary for the year ended
December 31, 2005.
2. Prepare a consolidated balance sheet for Swift and Subsidiary as
of December 31, 2005.
LO6
Exercise 9
Emu Corporation paid $77,000 for a 60% interest in Chick Inc. on
January 1, 2005, when Chicks Capital Stock was $80,000 and its
Retained Earnings $20,000. The fair values of Chick's identifiable
assets and liabilities were the same as the recorded book values on
the acquisition date. Trial balances at the end of the year on
December 31, 2005 are given below:
Cash
Accounts Receivable
Inventory
Investment in Cave
Cost of Goods Sold
Operating Expenses
Dividends
$
Liabilities
Capital stock, $10 par value
Additional Paid-in Capital
Retained Earnings
Sales Revenue
Dividend Income
Emu
Inc.
4,500 $
25,000
100,000
77,000
71,500
22,000
15,000
315,000 $
Chick
Inc.
20,000
30,000
70,000
47,000 $
100,000
11,000
31,000
120,000
6,000
315,000 $
27,000
80,000
50,000
37,000
10,000
217,000
20,000
90,000
217,000
During 2005, Emu made only two journal entries with respect to its
investment in Chick. On January 1, 2005, it debited the Investment in
Chick account for $77,000 and on November 1, 2005, it credited
Dividend Income for $6,000.
Required:
1. Prepare a consolidated income statement and a statement of
retained earnings for Emu and Subsidiary for the year ended
December 31, 2005.
2. Prepare a consolidated balance sheet for Emu and Subsidiary as
of December 31, 2005.
SOLUTIONS
Multiple Choice Questions
1
(25%)x($400,000) = $100,000
Cash
Accounts Receivable
Inventory $132,000+$38,000+
$16,500=
Land
Plant assets-net
Goodwill
Total assets
10
11
12
13
$230,000
170,000
186,500
100,000
700,000
75,500
$1,472,000
14
15
16
17
18
19
20
150,000
6,000 )
(
$
1,000 )
143,000
Exercise 1
Parrot Corporation and Subsidiary
Consolidated Balance Sheet Working Papers
at December 31, 2005
Eliminations
Parrot
Hollow
Debit
Credit
INCOME STATEMENT
Sales
20,000
Income of Hollow
$ 35,000
a
9,200) (
4,700)
2,300) (
4,000) c
$ 3,680
(
13,900)
7,660)
$1,260 (
1,260)
1,360
Minority Income
Net income
Retained
Earnings 1/1
Add:
Net income
Less:
Dividends
Retained
Earnings 12/31
BALANCE SHEET
Cash
Accounts
Receivable-net
(
$
Inventories
12,180
6,300
11,000
3,000
12,180
6,300
3,000) (
$ 12,180
b
$ 1,600 (
400)
$ 7,300
$ 20,180
2,000
1,900
12,000
5,500
17,500
14,000
8,000
22,000
27,000
42,000
60,000
43,000
13,600
1,360
3,900
12,240
69,000
103,000
a
b
2,080
24,000
141,080
$100,400
$227,640
90,900
83,100
$174,000
30,000
10,000
20,180
7,300
10,000
30,000
20,180
b
2,600
2,600
3,460
3,000
20,180
26,080
$
11,000
12,180
TOTAL ASSETS
LIB. & EQUITY
Accounts payable
Capital
Stock
Retained
Earnings
1/1 Noncontrol.
Interest
12/31 Noncontrol.
Interest
TOTAL LIAB. &
EQUITY
3,000
2,000)
Patent
Land
Equipment and
Buildings-net
Investment in
Hollow Co.
Consolidated
$ 15,000
3,680
Cost of Sales
Other
Expenses
NonCntl.
141,080
$100,400
3,460
$227,640
Exercise 2
Cuckoo Company and Subsidiary
Consolidated Balance Sheet Working Papers
at December 31, 2005
Eliminations
INCOME STATEMENT
Sales
Income from
Perch
Cuckoo
Perch
$ 206,000
$60,000
12,000
Cost of Sales
(150,000)
( 38,000)
( 18,000)
Net income
Cuckoo Retained
Earnings 1/1
Perch Retained
Earnings
Add:
Net income
Less:
Dividends
Retained
Earnings 12/31
BALANCE SHEET
Cash
30,000
12,000
24,000
10,000
30,000
( 20,000)
$
Credit
$266,000
a
b
$ 1,000
11,000
1,000
( 30,000)
Other expenses
Debit
Balance
Sheet
( 180,000)
(
57,000)
29,000
4,000
10,000
20,000
$12,000
(
29,000
4,000)
b $( 4,000)
20,000)
34,000
$18,000
$ 29,000
14,000
7,000
21,000
Inventories
21,000
15,000
36,000
Land
Equipment and
Buildings-net
Investment in
Perch Corporation
11,000
6,000
17,000
64,000
55,000
Capital Stock
Retained
Earnings
TOTAL LIAB. &
EQUITY
3,000
5,000
80,000
Goodwill
TOTAL ASSETS
LIAB. & EQUITY
Liabilities
d
a
b
c
1,000
5,000
7,000
68,000
121,000
5,000
190,000
$83,000
$200,000
56,000
15,000
71,000
100,000
50,000
34,000
18,000
29,000
190,000
$83,000
$200,000
50,000
100,000
Exercise 3
INCOME STATEMENT
Sales
Balance
Sheet
10,000
$16,500
$6,500
1,270
a $1,270
Cost of Sales
Depreciation
expense
4,000)
3,300)
1,000)
1,000)
Other expenses
1,800)
700)
4,470
1,500
Retained Earnings
Add:
Net income
Less:
Dividends
Retained
Earnings 12/31
BALANCE SHEET
Cash
2,510
2,000
4,470
2,500
2,000)
$ 2,500
1,440
1,900
Receivables-net
1,550
600
Inventories
Goodwill
1,500
1,200
Land
Equipment and
Buildings-net
Investment in
Hunt Corporation
TOTAL ASSETS
1,000
2,080)
2,500)
$(150) (
150)
4,470
2,000
2,510
4,470
1,000)
4,980
7,300)
80
Minority income
Net income
$ 900
(100) (
$4,980
d
e
$3,340
100
450
1,600
400
2,700
400
600
200
1,800
7,500
5,700
320
8,490
21,480
$10,000
3,000
1,000
2,000
500
d
e
100
450
11,600
5,000
5,000
5,880
3,500
c
a
b
13,440
80
1,270
7,220
$ 23,280
$
4,980
700
700
850
21,480
4,900
1,050
11,600
b
$
2,000)
$10,000
750
$ 23,280
Exercise 4
Koel Corporation and Subsidiary
Consolidated Balance Sheet Working Papers
at December 31, 2005
Eliminations
Koel
Rain
Debit
Credit
INCOME STATEMENT
Sales
Income from
Rain
500,000
$400,000
135,000
(350,000)
(200,000)
Other expenses
(100,000)
( 60,000)
185,000
140,000
Koel Retained
Earnings 1/1
Rain Retained
Earnings
Add:
Net income
Less:
Dividends
Retained
Earnings 12/31
$135,000
(550,000)
5,000
(165,000)
185,000
300,000
300,000
150,000
185,000
150,000
$140,000
185,000
( 70,000)
$
BALANCE SHEET
Note Receivable
from Koel
Other current
assets
Plant assetsnet
Investment in
Rain Company
TOTAL ASSETS
$900,000
b
Cost of Sales
Net income
Balance
Sheet
485,000
$220,000
$485,000
25,000
210,000
200,000
300,000
a
c
25,000
50,000
25,000
5,000
b
c
65,000
500,000
$535,000
425,000
670,000
565,000
$
$70,000
975,000
$750,000
$1,205,000
290,000
230,000
520,000
Capital Stock
Retained
Earnings
200,000
300,000
485,000
220,000
485,000
975,000
$750,000
$1,205,000
300,000
200,000
Exercise 5
Owl Corporation and Subsidiary
Consolidated Balance Sheet Working Papers at December 31, 2005
Eliminations
Min
Owl
Barn
Int
Debit
Credit
INCOME STATEMENT
Sales
60,000
$ 22,000
3,510
Cost of Sales
Depreciation
Expense
Other
Expenses
$ 82,000
a
13,000)
9,500)
2,000)
3,000)
23,000)
6,100)
$ 3,510
450
Minority Income
Net income
Retained
Earnings 1/1
Add:
Net income
Less:
Dividends
Retained
Earnings 12/31
BALANCE SHEET
Cash
Accounts
Receivable-net
$ 340
(
$
Inventories
25,510
3,400
25,000
30,000
25,510
3,400
15,000)
22,500)
4,550)
29,100)
340)
30,000
25,000
25,510
a
2,700
$(
300) (
15,000)
35,510
$30,400
$ 35,510
26,520
7,000
33,520
22,000
10,000
32,000
20,000
14,000
34,000
b
TOTAL ASSETS
EQUITIES
Accounts payable
Capital
Stock
Retained
Earnings
1/1 Minority
Interest
12/31 Minority
Interest
Earnings
TOTAL EQUITIES
25,510
3,000)
Goodwill
Land
Equipment and
Buildings-net
Investment in
Barn Corporation
Consolidated
27,000
42,000
70,000
38,000
22,500
22,500
69,000
450
b
b
4,500
72,000
810
103,950
72,810
$
238,330
$111,000
294,970
32,820
50,600
83,420
170,000
30,000
170,000
35,510
30,400
35,510
b
6,000
6,000
6,040
238,330
$111,000
6,040
$294,970
Preliminary computations
Investment cost on January 1, 19X4
Less: Book value acquired = (90%)x($60,000) =
Excess cost over book value acquired =
Excess allocated to:
Overvalued equipment ($5,000) x (90%)=
Remainder to goodwill
Excess cost over book value
Income from Barn Corporation:
Equity in Barns net income (90%)x(3,400)=
Depreciation savings on equipment $4,500/10 yrs =
Income from Barn
Investment in Barn account:
Initial investment cost
Plus: Income from Barn
Less: Dividends (3,000)x(90%)=
Investment in Barn at December 31
Exercise 6
Lorikeet
Company
and
Subsidiary
Consolidated
Cash Flows for the Year Ended December 31,2005
Cash Flows from Operating Activities
Cash Received from Customers
Dividends Received from Equity Investees
Less
Cash Paid to Suppliers
Cash Paid to Employees
Cash Paid for Other Operating Activities
Cash Paid for Interest Expense
Net cash flows from operating activities
72,000
54,000
18,000
$(
$
4,500)
22,500
18,000
3,060
450
1,260
$
(
$
72,000
3,510
2,700)
72,810
Statement
of
$412,600
17,000
$192,700
37,000
34,000
22,300
(286,000)
$143,600
Exercise 7
Bronzewing Company and Subsidiary Consolidated
Cash Flows for the Year Ended December 31,2005
Statement
of
$175,000
(
(
$17,000
7,500 )
65,000
15,000
13,000
48,000
27,500 )
45,000 )
78,000
253,000
Exercise 8
Requirement 1
Swift and Subsidiary Corporation
Consolidated Income Statement
for the year ended December 31, 2005
Sales Revenue
Cost of Goods Sold
Gross Profit
Operating Expenses
Minority Interest Income
Total Expenses and Minority Income
Consolidated Net Income
Retained Earnings, January 1, 2005
Dividends
Retained Earnings, December 31, 2005
$
$
59,000
3,900
210,000
100,000
110,000
62,900
47,100
31,000
( 15,000)
63,100
Requirement 2
Swift and Subsidiary Corporation
Consolidated Balance Sheet
December 31, 2005
Assets
Cash
Accounts Receivable
Inventory
Goodwill
Total Assets
Equities
Liabilities
Capital Stock
Additional Paid-in Capital
Retained Earnings
Minority Interest
Total Liabilities and Equities
24,500
55,000
180,000
18,500
278,000
74,000
100,000
10,000
63,100
30,900
278,000
$
$ 59,000
1,200
210,000
121,500
88,500
60,200
28,300
31,000
( 15,000)
44,300
Requirement 2
Emu and Subsidiary Corporation
Consolidated Balance Sheet
December 31, 2005
Assets
Cash
Accounts Receivable
Inventory
Goodwill
Total Assets
Equities
Liabilities
Capital Stock
Additional Paid-in Capital
Retained Earnings
Minority Interest
Total Liabilities and Equities
24,500
55,000
170,000
17,000
266,500
74,000
100,000
11,000
44,300
37,200
266,500