Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
5-11
Investment in
Amber Corp.
Acquisition
Price
49,200
34,200
Basic
15,000
Excess Reclass.
0
E5-4 Computation of Consolidated Balances
a.
$140,000
b.
$ 60,000
c.
$550,000
d.
Fair value of consideration given by Ford
$470,000
Fair value of noncontrolling interest
117,500
Total fair value
$587,500
Book value of Slim’s net assets
$450,000
Fair value increment for:
Inventory
20,000
Land
(10,000)
Buildings and equipment (net)
70,000
Fair value of identifiable net assets
(530,000)
Goodwill
$ 57,500
e.
Investment in Slim Corporation: None would be reported;
the balance in the investment account is eliminated.
f.
Noncontrolling Interest = FV of the NCI
$117,500
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
E5-5 Balance Sheet Worksheet
Cash and Receivables
900
Retained Earnings
900
Accrued interest earned by Power Co.
Equity Method Entries on Power Co.’s Books:
Investment in Pleasantdale Dairy
270,000
Cash
270,000
Record the initial investment in Pleasantdale Dairy
Book Value Calculations:
NCI
10%
+
Power Co.
90%
=
Common
Stock
+
Retained
Earnings
Book value at
acquisition
28,000
252,000
60,000
220,000
Goodwill = 0
Identifiable
Excess = 18,000
$270,000
Initial
investment in
Pleasantdale
Dairy
90%
Book value =
252,000
Basic consolidation entry
Common Stock
60,000
Retained Earnings
220,000
Investment in Pleasantdale Dairy
252,000
NCI in NA of Pleasantdale Dairy
28,000
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
E5-5 (continued)
Excess Value (Differential) Calculations:
NCI
10%
+
Power Co.
90%
=
Land
Beginning balances
2,000
18,000
20,000
Excess Value (Differential) Reclassification Entry:
Land
20,000
Investment in Pleasantdale Dairy
18,000
NCI in NA of Pleasantdale Dairy
2,000
Eliminate Intercompany Accounts:
Current Payables
8,900
Cash and Receivables
8,900
Investment in
Pleasantdale Dairy
Acquisition
Price
270,000
252,000
Basic
18,000
Excess Reclass.
0
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
E5-6 Majority-Owned Subsidiary Acquired at Greater than Book Value
a.
Equity Method Entries on Zenith Corp.’s Books:
Investment in Down Corp.
102,200
Cash
102,200
Record the initial investment in Down Corp.
Book Value Calculations:
NCI
30%
+
Zenith
Corp.
70%
=
Common
Stock
+
Retained
Earnings
Book value at
acquisition
37,500
87,500
40,000
85,000
Basic Consolidation Entry
Common Stock
40,000
Retained Earnings
85,000
Investment in Down Corp.
NCI in NA of Down Corp.
Excess Value (Differential) Calculations:
+
=
Inventory
+
Beginning balances
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
5-15
E5-6 (continued)
Excess Value (Differential) Reclassification Entry:
Inventory
6,000
Buildings & Equipment
15,000
Investment in Down Corp.
14,700
NCI in NA of Down Corp.
6,300
Eliminate Intercompany Accounts:
Accounts Payable
12,500
Accounts Receivable
12,500
Optional Accumulated Depreciation Consolidation Entry
Accumulated Depreciation
80,000
Building & Equipment
80,000
Investment in
Down Corp.
Acquisition
Price
102,200
87,500
Basic
14,700
Excess Reclass.
0
b.
Zenith
Corp.
Down
Corp.
Consolidation
Entries
DR
CR
Consolidated
Balance Sheet
Cash
50,300
21,000
71,300
Accounts Receivable
90,000
44,000
12,500
121,500
Inventory
130,000
75,000
6,000
211,000
Land
60,000
30,000
90,000
Buildings & Equipment
410,000
250,000
15,000
80,000
595,000
Less: Accumulated Depreciation
(150,000)
(80,000)
80,000
(150,000)
Investment in Down Corp.
102,200
87,500
0
14,700
Total Assets
692,500
340,000
101,000
194,700
938,800
Accounts Payable
152,500
35,000
12,500
175,000
Mortgage Payable
250,000
180,000
430,000
Common Stock
80,000
40,000
40,000
80,000
Retained Earnings
210,000
85,000
85,000
210,000
NCI in NA of Down Corp.
37,500
43,800
6,300
Total Liabilities & Equity
692,500
340,000
137,500
43,800
938,800
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
5-16
E5-6 (continued)
c.
Zenith Corporation and Subsidiary
Consolidated Balance Sheet
December 31, 20X4
Cash
$ 71,300
Accounts Receivable
121,500
Inventory
211,000
Land
90,000
Buildings and Equipment
$595,000
Less: Accumulated Depreciation
(150,000)
445,000
Total Assets
$938,800
Accounts Payable
$175,000
Mortgage Payable
430,000
Stockholders’ Equity:
Controlling Interest:
Common Stock
$ 80,000
Retained Earnings
210,000
Total Controlling Interest
$290,000
Noncontrolling Interest
43,800
Total Stockholders’ Equity
333,800
Total Liabilities and Stockholders’ Equity
$938,800
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
E5-7 Consolidation with Minority Interest
Equity Method Entries on Temple Corp.’s Books:
Investment in Dynamic Corp.
390,000
Cash
390,000
Record the initial investment in Dynamic Corp.
Book Value Calculations:
NCI
25%
+
Temple
Corp.
75%
=
Common
Stock
+
Retained
Earnings
Book value at
acquisition
90,000
270,000
120,000
240,000
Basic Consolidation Entry
Common stock
120,000
Retained earnings
240,000
Investment in Dynamic Corp.
NCI in NA of Dynamic Corp.
Excess Value (Differential) Calculations:
+
=
Buildings
+
Inventories
+
Goodwill
Beginning balances
40,000
Excess Value (Differential) Reclassification Entry:
Buildings
80,000
Inventories
36,000
Goodwill
44,000
120,000
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
5-18
E5-8 Multiple-Choice Questions on Balance Sheet Consolidation
1.
d –
$215,000
=
$130,000 + $70,000 + ($85,000 – $70,000)
2.
c –
$40,000
=
($150,500 + $64,500) – ($405,000 – $28,000 – $37,000
– $200,000) – $15,000 – $20,000
3.
b –
$1,121,000
=
Total Assets of Power Corp.
$ 791,500
Less: Investment in Silk Corp.
(150,500)
$ 641,000
Book value of assets of Silk Corp.
405,000
Book value reported by Power and
Silk
$1,046,000
Increase in inventory ($85,000 – $70,000)
15,000
Increase in land ($45,000 – $25,000)
20,000
Goodwill
40,000
Total assets reported
$1,121,000
4.
d –
$701,500
=
($61,500 + $95,000 + $280,000) + ($28,000 + $37,000
+ $200,000)
5.
d –
$64,500
6.
d –
$205,000
=
The amount reported by Power Corporation
7.
c –
$419,500
=
($150,000 + $205,000) + $64,500
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
E5-9 Majority-Owned Subsidiary with Differential
a.
Equity Method Entries on West Corp.’s Books:
Investment in Canton Corp.
133,500
Cash
133,500
Record the initial investment in Canton Corp.
Investment in Canton Corp.
22,500
Income from Canton Corp.
22,500
Record West Corp.’s 75% share of Canton Corp.’s 20X3 income
Cash
9,000
Investment in Canton Corp.
9,000
Record West Corp.’s 75% share of Canton Corp.’s 20X3 dividend
Income from Canton Corp.
3,000
Investment in Canton Corp.
3,000
Record West Corp’s 75% share of amortization of excess acquisition price
+ Net Income
– Dividends
Ending book value
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
5-20
E5-9 (continued)
Basic Consolidation Entry
Common Stock
60,000
Retained Earnings
90,000
Income from Canton Corp.
22,500
NCI in NI of Canton Corp.
7,500
Dividends Declared
12,000
Investment in Canton Corp.
126,000
NCI in NA of Canton Corp.
42,000
Excess Value (Differential) Calculations:
NCI
25%
+
West Corp.
75%
=
Equipment
+
Acc. Depr.
Beginning balance
7,000
21,000
28,000
0
Changes
(1,000)
(3,000)
(4,000)
Ending balance
6,000
18,000
28,000
(4,000)
Amortized Excess Value Reclassification Entry:
Depreciation Expense
4,000
Income from Canton Corp.
3,000
NCI in NI of Canton Corp.
1,000
Excess Value (Differential) Reclassification Entry:
Equipment
28,000
Acc. Depr.
4,000
Investment in Canton Corp.
18,000
NCI in NA of Canton Corp.
6,000
Investment in
Income from
Canton Corp.
Canton Corp.
Acquisition Price
133,500
75% Net Income
22,500
22,500
75% Net Income
9,000
75% Dividends
3,000
Excess Val. Amort.
3,000
Ending Balance
144,000
19,500
Ending Balance
126,000
Basic
22,500
18,000
Excess Reclass.
3,000
Amort. Reclass
0
0