30. (continued)
A Liabilities ………..………..………..………..……….………. 32,000
Equipment ………….………..……….………..………..…… 15,000
Brand names ………..………..…………….…..….…..….. 45,000
Investment in Kirby ……………………….…..….…. 82,800
Noncontrolling interest in Kirby (10%) ………. 9,200
(To recognize unamortized balance of excess allocations as of 1/1/15.
Figures have been reduced by one year of amortization)
Tl Sales ……………….………..………..………..…………….… 160,000
Cost of goods sold ……………..……………….…... 160,000
(To eliminate intra-entity transfers for 2015)
G Cost of goods sold ……………..…..….…..…..…..…... 12,800
(To adjust depreciation for current year created by transfer of building)
30. continued: Worksheet (not part of requirements)
Moore Company and Subsidiary
Consolidated Worksheet
December 31, 2015
Moore Kirby NCI Consolidated
Sales and other income (800,000) (600,000) (TI) 160,000 (1,240,000)
Cost of goods sold 500,000 400,000 (G) 12,800 (G*) 8,700 744,100
(TI)160,000
Retained earnings, 1/1 (990,000) (TA*) 12,000 (*C) 47,970 (1,025,970)
(550,000) (S) 541,300
Inventory 224,000 160,000 (G) 12,800 371,200
Investment in Kirby 657,000 0 (*C) 47,970 (S) 622,170 0
(A) 82,800
Equipment (net) 600,000 420,000 (A) 15,000 (E) 5,000 1,030,000
Buildings 1,000,000 650,000 (TA*) 75,000 1,725,000
Common stock (600,000) (150,000) (S)150,000 (600,000)
Noncontrolling interest , 1/1 (S) 69,130
(A) 9,200 (78,330)
Noncontrolling interest,12/31 (80,120) (80,120)
31. (55 Minutes) (Investment account balance and consolidated worksheet
with downstream inventory transfers when parent uses equity method)
Acquisition-date fair value allocation and excess amortizations
a. Consideration transferred ……..….…..…...... $372,000
Noncontrolling interest fair value..….…....... 248 ,000
Remaining ………………………..…...Annual Excess
Excess fair value assignments…………… Life Amortizations
to patents………..………..…..….…..…..…..…. 70,000
10 yrs…………………..……….…..…..…$7,000
$10 ,000
Determination of Investment in Stinson account balance
Consideration transferred ……………..……….…………..…..…...
$372,000
Increase in Stinson’s retained earnings 1/1/14 to 1/1/15
[(280,000 – 220,000) × 60%]…………..………..………..…….. $36,000
Excess fair value amortization × 60%…………….…………. (6,000)
$411,000
* Stinson’s 2015 net income……..………..………..…………….. $60,000
Excess fair value amortization…………..………….…..…..… (10 ,000)
Adjusted net income………………………….…..….…..…..…... $50,000
McIlroy’s percentage ownership…….………..…….…..….... 60 %
McIlroy’s equity in earnings of Stinson…………………….. $28 ,000
Intra-entity profits (downstream) 2014 2015
Intra-entity transfers remaining in inventory $50,000 $40,000
31. (continued)
b. McIlroy Stinson Adj. & Elim. NCI Consolidated
Sales (700,000) (335,000) (TI)160,000 (875,000)
Cost of goods sold 460,000 205,000 (G) 12,000 (*G) 10,000 507,000
(TI) 160,000
to noncontrolling interest (20,000) 20 ,000
to McIlroy, Inc. (80 ,000)
Retained earnings, 1/1 (695,000) (280,000) (S) 280,000 (695,000)
Net income (above) (80,000) (60,000) (80,000)
(I) 28,000
Buildings (net) 308,000 202,000 510,000
Equipment (net) 220,000 86,000 306,000
Patents (net) -0- 20,000 (A) 63,000 (E) 7,000 76,000
Customer list (A) 42,000 (E) 3,000 39,000
(282,000)
Retained earnings, 12/31 (730 ,000) (325 ,000) (730 ,000)
Total liabilities and equities (1 ,420,000)(585 ,000) 899 ,000 899 ,000 (1 ,862,000)
32. Investment balance and worksheet preparation—upstream sales, equity
method
a. 2015 net income reported by Sander $230,000
Excess patent fair value amortization ($350,000 ÷ 5 years) (70,000)
Deferred gross profit for 12/31/15 intra-entity inventory (160,000 × 25%) (40,000)
Adjustments
b. Plymouth Sander & Eliminations NCI Consolidated
Revenues (1,740,000) (950,000) (TI) 300,000 (2,390,000)
Cost of goods sold 820,000 500,000 (G) 40,000 (TI)300,000 1,025,000
(*G) 35,000
Depreciation expense 104,000 85,000 189,000
Consolidated net income (731,000)
to noncontrolling
interest (31,000) 31,000
to Plymouth Corp. (700,000)
Retained earnings 1/1 (2,800,000) (345,000) (S) 310,000 (2,800,000)
Cash 535,000 115,000 650,000
Accounts receivable 575,000 215,000 790,000
Inventory 990,000 800,000 (G) 40,000 1,750,000
Investment in Sander 1,420,000 (D) 20,000 (S)968,000
(A)348,000 0
Accounts payable (450,000) (200,000) (650,000)
Notes payable (545,000) (450,000) (995,000)
Noncontrolling interest 1/1 (S)242,000
(A) 87,000 (329,000)
33. (50 Minutes) (Prepare consolidation entries for a combination where upstream
inventory transfers have occurred as well as downstream equipment transfers.
Parent has applied initial value method)
Consideration transferred …………….………..….. $665,000
Noncontrolling interest fair value…………………. 285 ,000
to building…………………….………..………..…….. 50,000
5 yrs……………………………………………$10,000
to franchise agreements ………………….…..… 100 ,000
10 yrs…………………………………………. 10,000
-0- $20 ,000
Unrealized gain on transfer (1/1/14) ………………………..…………. $36,000
2014 excess depreciation ($36,000 ÷ 6 yrs.) …………..…..…..…. (6 ,000)
Unrealized gain January 1, 2015……………..………..………..…………… $30 ,000
Excess depreciation—2015 ($36,000 ÷ 6 yrs.) ……..……….…………. $6 ,000
Entry *G
Entry *TA
Retained earnings, 1/1/15 (Monica) ……………….. 30,000
33. (continued)
Entry *C
Investment in Young ………….…..….…..…..….... 123,480
Retained earnings, 1/1/15 (Monica) ..…..… 123,480
Because the parent uses the initial value method, its retained
earnings must be adjusted for the subsidiary’s increase in book
value less excess amortizations and upstream profits during 2013–
2014 as follows.
Removal of unrealized gross profit (Entry *G) ........ (3 ,600)
Realized retained earnings of Young,
December 31, 2014……….………..………..………..…… 626,400
Retained earnings at date of acquisition ………..…... (410 ,000)
Increase in retained earnings during 2013–2014..... 216,400
Entry S
Common stock (Young) ……….………..………..…….. 300,000
Additional paid-in capital (Young) …………….……. 90,000
Retained earnings, 1/1/15
(Young) (adjusted for *G) …………..……….…..… 626,400
Entry A
Franchise agreement…………..………..………..…..…. 80,000
Buildings ……….………..………..………..………..………. 30,000
excess amortizations.
33. (continued)
Entry I
Dividend income ………….………..…….…..…..…..….. 35,000
income under the initial value method.
Entry E
Depreciation expense………….………..………..……… 10,000
To recognize current year excess amortization expense.
Entry Tl
Sales ………..………..………..………….…..…..….…..….. 90,000
Cost of goods sold ……………..……………….…... 90,000
(computed above).
Entry ED
Accumulated depreciation …………..……………..…. 6,000
Depreciation expense ………………..….…..…..… 6,000
To remove current year depreciation on transferred item since its
historical cost has been fully depreciated.
Noncontrolling Interest’s Share of Consolidated Net Income
Reported net income of Young (given) ……………….…..….... $160,000
34. (35 Minutes) (Consolidation entries with upstream Inventory transfers and
downstream equipment transfers. Parent uses equity method)
Entry *G (Same as Entry *G in Problem 33.)
Entry *TA
Investment in Young ……………………..…………….... 30,000
Equipment ………….………..……….………..………..…… 14,000
Entry *C (No Entry *C is needed because equity method has been applied.)
Entry I
Investment income …………..…………..…..….…..….. 102,740
Investment in Young ………….…..….…..…..….... 102,740
To eliminate intra-entity income accrual.
Reported net income of Young (given) ……………..…..…..…..….… $160,000
Excess fair value amortization ……………..………..………..………….. (20,000)
Recognition of 2014 unrealized gross profit (Entry *G) …......... 3,600
Deferral of 2015 unrealized gross profit (Entry G) (upstream) (5 ,400)
Entry D
Investment in Young ……………………..…………….... 35,000
Dividends declared ………….………..……….…….. 35,000
To eliminate intra-entity dividend transfers.
Entry E (Same as Entry E in Problem 33.)