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Problem
on for $120,000 cash. At that date, the fair value of the non-controlling interest was $30,000.
The book value of Scalar's net assets at acquisition was $125,000. The book values and fair
values of Scalar's assets and liabilities were equal, except for buildings and equipment, which
were worth $15,000 more than book value. Buildings and equipment are depreciated on a 10-
year basis. Although goodwill is not amortized, the management of Vector concluded at
December 31, 20X8, that goodwill from its acquisition of Scalar shares had been impaired
and the correct carrying amount was $5,000. Goodwill and goodwill impairment were
Trial balance data for Vector and Scalar on December 31, 20X9, are as follows:
Required:
Solution:
Primary Computations
At Acquisition Date January 1, 2008
1- Fair Value of Consideration Transferred
From Controlling 120,000
From Non-Controlling 30,000
150,000
a. eliminating entries needed to prepare a full set of consolidated financial statements for
20X5.
Basic Elimination Entry
Common Stock 100,000
Retained Earnings 50,000
Income From Scalar 19,200
NCI in NI of Scalar 4,800
Dividends Decleard 10,000
Investment In Bromze 131,200
NCI in NA of Scalar 32,800
b. Work Sheet
Chapter 5 : Advanced Accounting
20X8, for $200,000. At that date, Dipper reported common stock outstanding of $75,000 and
retained earnings of $150,000. The fair value of the non-controlling interest was $50,000. The
differential is assigned to equipment, which had a fair value $25,000 greater than book value
and a remaining economic life of five years at the date of the business combination. Canton
Dipper reported net income of $40,000 and paid dividends of $20,000 in 20X8.
Required:
1) Provide the journal entries recorded by Magellan during 20X8 on its books if it accounts for
2) Give the eliminating entries needed at December 31, 20X8, to prepare consolidated
financial statements.
1)
Chapter 5 : Advanced Accounting
2)