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PROBLEM 1
FV 1200000
BV 640000
560000
TM -80000
480000 GW
a.
What is the consolidated net income in each of these two years
2009: 70000+220000-(8000) = 282000
2010: 90000+260000-(8000) = 342000
b.
d.
SE 640000
Inv in sub (.9*640000) = 576000
NCI (.1*640000) = 64000
Beginning write-ups/write-downs/goodwill
TM 80000
GW 480000
Inv in sub 549000
NCI
11000
TM 80000
GW 480000
Ps
72000
477000
549000
NCI
8000
3000
11000
NCI in NI 6200
Dividends PD (.1*30000) = 3000
NCI
3200
NCI account = 64000 + 11000 + 3200 = 78200
Exp
8000
TM
8000
Equity in NI 55800
Div to P .9 * 30000 =27000
Inv in sub
28800
2010:
Ps
NCI
TM 72000
64800
7200
GW 480000 477000
3000
541800
10200
TM 72000
GW 480000
Inv in sub 541800
NCI 10200
Problem 2
Miller Company acquired an 80 percent interest in Taylor Company on
January 1, 2009. Miller paid $664,000 cash to the owners of Taylor to
acquire these shares. In addition, the remaining 20 percent of Taylor shares
continued to trade at a total value of $166,000 both before and after Millers
acquisition.
On January 1, 2009, Taylor reported a book value of $600,000 (Common
stock = $300,000, Additional paid in capital - $90,000, Retained earnings $210,000). Several of Taylors buildings that had a remaining life of 20
years were undervalued by a total of $80,000.
During the next three years, Taylor reported the following figures:
Year
2009
2010
2011
Net Income
$ 70,000
90,000
100,000
Dividends Paid
$ 10,000
15,000
20,000
d. Assume that the parent company has been applying the equity method
to this investment. On December 31, 2011, the separate financial
statements of the two companies present the following information:
Miller
Company
Common stock $500,000
Additional paid in capital 280,000
Retained earnings 620,000
Taylor
Company
$300,000
90,000
425,000
Prepare the consolidated Stockholders Equity section for Miller and sub on
December 31, 2011.
e. Calculate the balance of Investment in Taylor on Millers books on
December 31, 2011 (Miller uses the equity method).
PROBLEM 3
Adams Corporation acquired 90 percent of the outstanding voting shares of
Barstow, Inc., on December 31, 2009. Adams paid a total of $603,000 in
cash for these shares. The 10 percent noncontrolling interest shares traded
on a daily basis at fair value of $67,000 both before and after Adams
acquisition.
Barstow account values on
12/31/09
Fair
Book
Market
Value
Value
$
$
Current assets
160,000 160,000
Land
120,000
150,000
220,000
200,000
160,000
200,000
50,000
(200,000) (180,000)
Common stock
Retained earnings,
12/31/09
(180,000)
(280,000)
Barstow,
Adams
Inc.
Corporation Corporation
12/31/2011 12/31/2011
Debits
Current assets
$
610,000
$
250,000
Land
380,000
150,000
Buildings
490,000
250,000
Equipment
Investment in Barstow,
Inc.
873,000
150,000
480,000
90,000
Depreciation expense
100,000
55,000
Interest expense
40,000
15,000
Dividends paid
110,000
70,000
Total debits
$3,758,000
$1,030,000
Notes Payable
860,000
230,000
Common stock
Retained earnings,
1/1/11
510,000
180,000
1,353,500
340,000
Revenues
940,000
280,000
Investment income
94,500
Total credits
$3,758,000
675,000
Credits
$1,030,000
a.
Prepare schedules for acquisition-date fair-value allocations and
amortizations for Adams investment in Barstow.
b.
Show how Adams calculated the equity method accounts for 2011.
c.
Prepare a consolidation worksheet for Adams Corporation and
Barstow, Inc., as of December 31, 2011.