Chapter 04 – Consolidation of Wholly Owned Subsidiaries Acquired at More than Book Value
4-21
E4-16 (continued)
b.
Gold
Enterprises
Premium
Builders
Consolidation Entries
CR
Consolidated
Balance Sheet
Cash and Receivables
80,000
30,000
2,000
108,000
Inventory
150,000
350,000
507,000
Buildings & Equipment (net)
430,000
80,000
522,000
Investment in Premium Builders
167,000
150,000
0
17,000
Total Assets
827,000
460,000
169,000
1,137,000
Current Liabilities
100,000
110,000
210,000
Long-Term Debt
400,000
200,000
600,000
Common Stock
200,000
140,000
200,000
Retained Earnings
127,000
10,000
127,000
Total Liabilities & Equity
827,000
460,000
0
1,137,000
c.
Gold Enterprises and Subsidiary
Consolidated Balance Sheet
January 1, 20X5
Cash and Receivables
$ 108,000
Current Liabilities
$ 210,000
Inventory
507,000
Long-Term Debt
600,000
Buildings and
Common Stock
$200,000
Equipment (net)
522,000
Retained Earnings
127,000
327,000
Total Liabilities &
Total Assets
$1,137,000
Stockholders’ Equity
$1,137,000
Investment in
Premium Builders
Acquisition Price
167,000
150,000
Basic
17,000
Excess Reclass.
0
Chapter 04 – Consolidation of Wholly Owned Subsidiaries Acquired at More than Book Value
4-22
E4-17 Computation of Consolidated Balances
a.
Inventory
$ 440,000
b.
Land
$ 145,000
c.
Buildings and Equipment
$ 1,750,000
d. Goodwill:
Fair value of consideration given
$ 576,000
Book value of net assets
at acquisition
$450,000
Fair value increment for:
Inventory
20,000
Land
(10,000)
Buildings and equipment
70,000
Fair value of net assets
at acquisition
(530,000)
Balance assigned to goodwill
$ 46,000
e.
Investment in Astor Corporation: Nothing would be reported; the balance in the
investment account is eliminated.
E4-18 Multiple-Choice Questions on Balance Sheet Consolidation
1.
d –
$215,000
=
$130,000 + $85,000
2.
b –
$23,000
=
$198,000 – ($405,000 – $265,000 + $15,000 + $20,000)
3.
c –
$1,109,000
=
Total Assets of Top Corp.
$ 844,000
Less: Investment in Sun Corp.
(198,000)
Book value of assets of Top Corp.
$ 646,000
Book value of assets of Sun Corp.
405,000
Total book value
$1,051,000
Payment in excess of book value
($198,000 – $140,000)
58,000
Total assets reported
$1,109,000
4.
c –
$701,500
=
($61,500 + $95,000 + $280,000) + ($28,000 + $37,000
+ $200,000)
5.
d –
$257,500
=
The amount reported by Top Corporation
6.
a –
$407,500
=
The amount reported by Top Corporation
Chapter 04 – Consolidation of Wholly Owned Subsidiaries Acquired at More than Book Value
E4-19 Wholly Owned Subsidiary with Differential
a.
Equity Method Entries on Winston Corp.’s Books:
Investment in Canton Corp.
178,000
Cash
178,000
Record the initial investment in Canton Corp.
Investment in Canton Corp.
30,000
Income from Canton Corp.
30,000
Record Winston Corp.’s 100% share of Canton Corp.’s 20X3 income
Cash
12,000
Investment in Canton Corp.
12,000
Record Winston Corp.’s 100% share of Canton Corp.’s 20X3 dividend
Income from Canton Corp.
4,000
Investment in Canton Corp.
4,000
Record amortization of excess acquisition price
Book Value Calculations:
Total Book
Value
=
Common
Stock
+
Retained
Earnings
Beginning book value
150,000
60,000
90,000
+ Net Income
30,000
30,000
– Dividends
(12,000)
(12,000)
Ending book value
168,000
60,000
108,000
1/1/X3
Goodwill = 0
Identifiable
Excess = 28,000
$178,000
Initial
investment
in Canton
Corp.
100%
Book value =
150,000
12/31/X3
Goodwill = 0
Identifiable
Excess = 24,000
$192,000
Net
investment in
Canton Corp.
100%
Book value =
168,000
Chapter 04 – Consolidation of Wholly Owned Subsidiaries Acquired at More than Book Value
4-24
E4–19 (continued)
Basic Consolidation Entry
Common stock
60,000
Retained earnings
90,000
Income from Canton Corp.
30,000
Dividends declared
12,000
Investment in Canton Corp.
168,000
Excess Value (Differential) Calculations:
Total
=
Equipment
+
Acc.
Depr.
Beginning Balances
28,000
28,000
Changes
(4,000)
(4,000)
Ending Balances
24,000
28,000
(4,000)
Amortized Excess Value Reclassification Entry:
Depreciation Expense
4,000
Income from Canton Corp.
4,000
Excess value (differential) reclassification entry:
Equipment
28,000
Accumulated depreciation
4,000
Investment in Canton Corp.
24,000
Investment in
Income from
Canton Corp.
Canton Corp.
Acquisition Price
178,000
100% Net Income
30,000
30,000
100% Net Income
12,000
100% Dividends
4,000
Excess Val. Amort.
4,000
Ending Balance
192,000
26,000
Ending Balance
168,000
Basic
30,000
24,000
Excess Reclass.
4,000
0
0
Chapter 04 – Consolidation of Wholly Owned Subsidiaries Acquired at More than Book Value
E4-20 Basic Consolidation Worksheet
a.
Equity Method Entries on Blake Corp.’s Books:
Investment in Shaw Corp.
150,000
Cash
150,000
Record the initial investment in Shaw Corp.
Investment in Shaw Corp.
30,000
Income from Shaw Corp.
30,000
Record Blake Corp.’s 100% share of Shaw Corp.’s 20X3 income
Cash
10,000
Investment in Shaw Corp.
10,000
Record Blake Corp.’s 100% share of Shaw Corp.’s 20X3 dividend
Book Value Calculations:
Total Book
Value
=
Common
Stock
+
Retained
Earnings
Beginning book
value
150,000
100,000
50,000
+ Net Income
30,000
30,000
– Dividends
(10,000)
(10,000)
Ending book value
170,000
100,000
70,000
1/1/X3
Goodwill = 0
Identifiable
Excess = 0
$150,000
Initial
investment
in Shaw
Corp.
100%
Book value =
150,000
12/31/X3
Goodwill = 0
Identifiable
Excess = 0
$170,000
Net
investment in
Shaw Corp.
100%
Book value =
170,000
Chapter 04 – Consolidation of Wholly Owned Subsidiaries Acquired at More than Book Value
4-26
E4–20 (continued)
Basic Consolidation Entry
Common Stock
100,000
Retained Earnings
50,000
Income from Shaw Corp.
30,000
Dividends Declared
10,000
Investment in Shaw Corp.
170,000
Investment in
Income from
Shaw Corp.
Shaw Corp.
Acquisition Price
150,000
100% Net Income
30,000
30,000
100% Net Income
10,000
100%
Dividends
Ending Balance
170,000
30,000
Ending Balance
170,000
Basic
30,000
0
0
Chapter 04 – Consolidation of Wholly Owned Subsidiaries Acquired at More than Book Value
4-27
E4-20 (continued)
b.
Blake
Corp.
Shaw
Corp.
Consolidation
Entries
DR
CR
Consolidated
Income Statement
Sales
200,000
120,000
320,000
Less: Depreciation Expense
(25,000)
(15,000)
(40,000)
Less: Other Expenses
(105,000)
(75,000)
(180,000)
Income from Shaw Corp.
30,000
30,000
0
Net Income
100,000
30,000
30,000
0
100,000
Statement of Retained Earnings
Beginning Balance
230,000
50,000
50,000
230,000
Net Income
100,000
30,000
30,000
0
100,000
Less: Dividends Declared
(40,000)
(10,000)
10,000
(40,000)
Ending Balance
290,000
70,000
80,000
10,000
290,000
Balance Sheet
Current Assets
145,000
105,000
250,000
Depreciable Assets (net)
325,000
225,000
550,000
Investment in Shaw Corp.
170,000
170,000
0
Total Assets
640,000
330,000
0
170,000
800,000
Current Liabilities
50,000
40,000
90,000
Long-Term Debt
100,000
120,000
220,000
Common Stock
200,000
100,000
100,000
200,000
Retained Earnings
290,000
70,000
80,000
10,000
290,000
Total Liabilities & Equity
640,000
330,000
180,000
10,000
800,000
Chapter 04 – Consolidation of Wholly Owned Subsidiaries Acquired at More than Book Value
E4-21 Basic Consolidation Worksheet for Second Year
a.
Equity Method Entries on Blake Corp.’s Books:
Investment in Shaw Corp.
35,000
Income from Shaw Corp.
35,000
Record Blake Corp.’s 100% share of Shaw Corp.’s 20X4 income
Cash
15,000
Investment in Shaw Corp.
15,000
Record Blake Corp.’s 100% share of Shaw Corp.’s 20X4 dividend
Book Value Calculations:
Total Book
Value
=
Common
Stock
+
Retained
Earnings
Beginning book
value
170,000
100,000
70,000
+ Net Income
35,000
35,000
– Dividends
(15,000)
(15,000)
Ending book value
190,000
100,000
90,000
Chapter 04 – Consolidation of Wholly Owned Subsidiaries Acquired at More than Book Value
4-29
E4-21 (continued)
Basic Consolidation Entry
Common Stock
100,000
Retained Earnings
70,000
Income from Shaw Corp.
35,000
Dividends Declared
15,000
Investment in Shaw Corp.
190,000
Investment in
Income from
Shaw Corp.
Shaw Corp.
Beginning Balance
170,000
100% Net Income
35,000
35,000
100% Net Income
15,000
100%
Dividends
Ending Balance
190,000
35,000
Ending Balance
190,000
Basic
35,000
0
0
Chapter 04 – Consolidation of Wholly Owned Subsidiaries Acquired at More than Book Value
4-30
E4-21 (continued)
b.
Blake
Corp.
Shaw
Corp.
Consolidation
Entries
DR
CR
Consolidated
Income Statement
Sales
230,000
140,000
370,000
Less: Depreciation Expense
(25,000)
(15,000)
(40,000)
Less: Other Expenses
(150,000)
(90,000)
(240,000)
Income from Shaw Corp.
35,000
35,000
0
Net Income
90,000
35,000
35,000
0
90,000
Statement of Retained
Earnings
Beginning Balance
290,000
70,000
70,000
290,000
Net Income
90,000
35,000
35,000
0
90,000
Less: Dividends Declared
(50,000)
(15,000)
15,000
(50,000)
Ending Balance
330,000
90,000
105,000
15,000
330,000
Balance Sheet
Current Assets
210,000
150,000
360,000
Depreciable Assets (net)
300,000
210,000
510,000
Investment in Shaw Corp.
190,000
190,000
0
Total Assets
700,000
360,000
0
190,000
870,000
Current Liabilities
70,000
50,000
120,000
Long-Term Debt
100,000
120,000
220,000
Common Stock
200,000
100,000
100,000
200,000
Retained Earnings
330,000
90,000
105,000
15,000
330,000
Total Liabilities & Equity
700,000
360,000
205,000
15,000
870,000