Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
5-51
P5-29 (continued)
Excess Value (Differential) Reclassification Entry:
Inventory
6,000
Buildings & Equipment
15,000
Investment in Darla Corp.
14,700
NCI in NA of Darla 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
Darla Corp.
Acquisition Price
102,200
87,500
Basic
14,700
Excess Reclass.
0
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
5-52
P5–29 (continued)
Porter
Corp.
Darla
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 Darla 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 Darla Corp.
37,500
43,800
6,300
Total Liabilities & Equity
692,500
340,000
137,500
43,800
938,800
c.
Porter 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
P5-30 Balance Sheet Consolidation of Majority-Owned Subsidiary
a.
Equity Method Entries on Total Corp.’s Books:
Investment in Ticken Tie Co.
510,000
Bonds Payable
500,000
Bond Premium
10,000
Record the initial investment in Ticken Tie Co.
Book Value Calculations:
NCI
25%
+
Total
Corp.
75%
=
Common
Stock
+
Add. Paid-
in Capital
+
Retained
Earnings
Book value at
acquisition
119,500
358,500
200,000
130,000
148,000
Basic Consolidation Entry
200,000
130,000
148,000
Investment in Ticken Tie Co.
NCI in NA of Ticken Tie Co.
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
5-54
P5–30 (continued)
Excess Value (Differential) Calculations:
NCI
25%
+
Total
Corp.
75%
=
Inven-
tory
+
Land
+
Building &
Equipment
+
Patent
+
Goodwill
Beg.
balances
50,500
151,500
4,000
20,000
50,000
40,000
88,000
Excess Value (Differential) Reclassification Entry:
Inventory
4,000
Land
20,000
Building & Equipment
50,000
Patent
40,000
Goodwill
88,000
Investment in Ticken Tie Co.
151,500
NCI in NA of Ticken Tie Co.
50,500
Eliminate Intercompany Accounts:
Current Payables
6,500
Receivables
6,500
Optional Accumulated Depreciation Consolidation Entry
Accumulated Depreciation
220,000
Building & Equipment
220,000
Investment in
Ticken Tie Co.
Acquisition Price
510,000
358,500
Basic
151,500
Excess Reclass.
0
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
P5-30 (continued)
c.
Total
Corp.
Ticken
Tie Co.
Consolidation
Entries
DR
CR
Consolidated
Balance Sheet
Cash
12,000
9,000
21,000
Receivables
39,000
30,000
6,500
62,500
Inventory
86,000
68,000
4,000
158,000
Land
55,000
50,000
20,000
125,000
Buildings & Equipment
960,000
670,000
50,000
220,000
1,460,000
Less: Accumulated Depreciation
(411,000)
(220,000)
220,000
(411,000)
Investment in Ticken Tie Co.
510,000
358,500
0
151,500
Patent
40,000
40,000
Goodwill
88,000
88,000
Total Assets
1,251,000
607,000
422,000
736,500
1,543,500
Current Payables
38,000
29,000
6,500
60,500
Bonds Payable
700,000
100,000
800,000
Bond Premium
10,000
10,000
Common Stock
300,000
200,000
200,000
300,000
Additional Paid-in Capital
100,000
130,000
130,000
100,000
Retained Earnings
103,000
148,000
148,000
103,000
NCI in NA of Ticken Tie Co.
119,500
170,000
50,500
Total Liabilities & Equity
1,251,000
607,000
484,500
170,000
1,543,500
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
5-56
P5-31 Incomplete Data
a.
$15,000
=
($115,000 + $46,000) – $146,000
b.
$65,000
=
($148,000 – $98,000) + $15,000
c.
Skyler: $24,000
=
$380,000 – ($46,000 + $110,000
+ $75,000 + $125,000)
Blue: $70,000
=
$94,000 – $24,000
d.
Fair value of Skyler
as a whole:
$200,000
Book value of Skyler shares
10,000
Differential assigned to inventory
($195,000 – $105,000 – $80,000)
40,000
Differential assigned to buildings and equipment
($780,000 – $400,000 – $340,000)
9,000
Differential assigned to goodwill
$259,000
Fair value of Skyler
e.
65 percent = 1.00 – ($90,650 / $259,000)
f.
Capital Stock = $120,000
Retained Earnings = $115,000
.
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
5-57
P5-32 Income and Retained Earnings
a.
Net income for 20X9:
Quill
North
Operating income
$ 90,000
$35,000
Income from subsidiary
24,500
Net income
$114,500
$35,000
Quill
North
Retained earnings, January 1, 20X9
$290,000
$40,000
Net income for 20X9
114,500
35,000
Dividends paid in 20X9
(30,000)
(10,000)
Retained earnings, December 31, 20X9
$374,500
$65,000
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
P5–33 Consolidation Worksheet at End of First Year of Ownership
a.
Equity Method Entries on Power Corp.’s Books:
Investment in Best Co.
96,000
Cash
96,000
Record the initial investment in Best Co.
Investment in Best Co.
18,000
Income from Best Co.
18,000
Record Power Corp.’s 75% share of Best Co.’s 20X8 income
Cash
12,000
Investment in Best Co.
12,000
Record Power Corp.’s 75% share of Best Co.’s 20X8 dividend
Income from Best Co.
5,625
Investment in Best Co.
5,625
Record amortization of excess acquisition price
Book Value Calculations:
NCI
25%
+
Power Corp.
75%
=
Common
Stock
+
Retained
Earnings
Beginning book
value
25,000
75,000
60,000
40,000
+ Net Income
6,000
18,000
24,000
– Dividends
(4,000)
(12,000)
(16,000)
Ending book value
27,000
81,000
60,000
48,000
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
5-59
P5-33 (continued)
Basic Consolidation Entry
Common Stock
60,000
Retained Earnings
40,000
Income from Best Co.
18,000
NCI in NI of Best Co.
6,000
Dividends Declared
16,000
Investment in Best Co.
81,000
NCI in NA of Best Co.
27,000
Excess Value (Differential) Calculations:
NCI
25%
+
Power Corp.
75%
=
Buildings &
Equipment
+
Acc.
Depr.
+
Goodwill
Beginning balance
7,000
21,000
20,000
0
8,000
Changes
(1,875)
(5,625)
(2,000)
(5,500)
Ending balance
5,125
15,375
20,000
(2,000)
2,500
Amortized Excess Value Reclassification Entry:
Depreciation Expense
2,000
Goodwill Impairment Loss
5,500
Income from Best Co.
5,625
NCI in NI of Best Co.
1,875
Excess Value (Differential) Reclassification Entry:
Buildings & Equipment
20,000
Goodwill
2,500
Acc. Depr.
2,000
Investment in Best Co.
15,375
NCI in NA of Best Co.
5,125
Optional Accumulated Depreciation Consolidation Entry
Accumulated Depreciation
30,000
Building & Equipment
30,000
Investment in
Income from
Best Co.
Best Co.
Acquisition Price
96,000
75% Net Income
18,000
18,000
75% Net Income
12,000
75% Dividends
5,625
Excess Val. Amort.
5,625
Ending Balance
96,375
12,375
Ending Balance
81,000
Basic
18,000
15,375
Excess Reclass.
5,625
Amort. Reclass
0
0
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
5-60
P5-33 (continued)
b.
Power
Corp.
Best Co.
Consolidation
Entries
DR
CR
Consolidated
Income Statement
Sales
260,000
180,000
440,000
Less: COGS
(125,000)
(110,000)
(235,000)
Less: Wage Expense
(42,000)
(27,000)
(69,000)
Less: Depreciation Expense
(25,000)
(10,000)
2,000
(37,000)
Less: Interest Expense
(12,000)
(4,000)
(16,000)
Less: Other Expenses
(13,500)
(5,000)
(18,500)
Less: Impairment Loss
5,500
(5,500)
Income from Best Co.
12,375
18,000
5,625
0
Consolidated Net Income
54,875
24,000
25,500
5,625
59,000
NCI in Net Income
6,000
1,875
(4,125)
Controlling Interest in Net
Income
54,875
24,000
31,500
7,500
54,875
Statement of Retained
Earnings
Beginning Balance
102,000
40,000
40,000
102,000
Net Income
54,875
24,000
31,500
7,500
54,875
Less: Dividends Declared
(30,000)
(16,000)
16,000
(30,000)
Ending Balance
126,875
48,000
71,500
23,500
126,875
Balance Sheet
Cash
47,500
21,000
68,500
Accounts Receivable
70,000
12,000
82,000
Inventory
90,000
25,000
115,000
Land
30,000
15,000
45,000
Buildings & Equipment
350,000
150,000
20,000
30,000
490,000
Less: Accumulated Depreciation
(145,000)
(40,000)
30,000
2,000
(157,000)
Investment in Best Co.
96,375
81,000
0
15,375
Goodwill
2,500
2,500
Total Assets
538,875
183,000
52,500
128,375
646,000
Accounts Payable
45,000
16,000
61,000
Wages Payable
17,000
9,000
26,000
Notes Payable
150,000
50,000
200,000
Common Stock
200,000
60,000
60,000
200,000
Retained Earnings
126,875
48,000
71,500
23,500
126,875
NCI in NA of Best Co.
27,000
32,125
5,125
Total Liabilities & Equity
538,875
183,000
131,500
55,625
646,000