Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
P5-34 Consolidation Worksheet at End of Second Year of Ownership
a.
Equity Method Entries on Power Corp.’s Books:
Investment in Best Co.
27,000
Income from Best Co.
27,000
Cash
15,000
Investment in Best Co.
15,000
Income from Best Co.
1,500
Investment in Best Co.
1,500
Record amortization of excess acquisition price
Book Value Calculations:
NCI
25%
+
Power
Corp.
75%
=
Common
Stock
+
Retained
Earnings
Beginning book
value
27,000
81,000
60,000
48,000
+ Net Income
9,000
27,000
36,000
– Dividends
(5,000)
(15,000)
(20,000)
Ending book value
31,000
93,000
60,000
64,000
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
5-62
P5-34 (continued)
Basic Consolidation Entry
Common Stock
60,000
Retained Earnings
48,000
Income from Best Co.
27,000
NCI in NI of Best Co.
9,000
Dividends Declared
20,000
Investment in Best Co.
93,000
NCI in NA of Best Co.
31,000
Excess Value (Differential) Calculations:
NCI
25%
+
Power
Corp. 75%
=
Buildings
and
Equipment
+
Acc.
Depr.
+
Goodwill
Beginning balance
5,125
15,375
20,000
(2,000)
2,500
Changes
(500)
(1,500)
(2,000)
0
Ending balance
4,625
13,875
20,000
(4,000)
2,500
Amortized Excess Value Reclassification Entry:
Depreciation Expense
2,000
Income from Best Co.
1,500
NCI in NI of Best Co.
500
Excess Value (Differential) Reclassification Entry:
Buildings and Equipment
20,000
Goodwill
2,500
Acc. Depr.
4,000
Investment in Best Co.
13,875
NCI in NA of Best Co.
4,625
Optional Accumulated Depreciation Consolidation Entry
Accumulated depreciation
30,000
Building & Equipment
30,000
Investment in
Income from
Best Co.
Best Co.
Beginning Balance
96,375
75% Net Income
27,000
27,000
75% Net Income
15,000
75% Dividends
1,500
Excess Val. Amort.
1,500
Ending Balance
106,875
25,500
Ending Balance
93,000
Basic
27,000
13,875
Excess Reclass.
1,500
Amort. Reclass.
0
0
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
5-63
P5-34 (continued)
b.
Power
Corp.
Best Co.
Consolidation
Entries
DR
CR
Consolidated
Income Statement
Sales
290,000
200,000
490,000
Less: COGS
(145,000)
(114,000)
(259,000)
Less: Wage Expense
(35,000)
(20,000)
(55,000)
Less: Depreciation Expense
(25,000)
(10,000)
2,000
(37,000)
Less: Interest Expense
(12,000)
(4,000)
(16,000)
Less: Other Expenses
(23,000)
(16,000)
(39,000)
Income from Best Co.
25,500
27,000
1,500
0
Consolidated Net Income
75,500
36,000
29,000
1,500
84,000
NCI in Net Income
9,000
500
(8,500)
Controlling Interest in Net Income
75,500
36,000
38,000
2,000
75,500
Statement of Retained Earnings
Beginning Balance
126,875
48,000
48,000
126,875
Net Income
75,500
36,000
38,000
2,000
75,500
Less: Dividends Declared
(30,000)
(20,000)
20,000
(30,000)
Ending Balance
172,375
64,000
86,000
22,000
172,375
Balance Sheet
Cash
68,500
32,000
100,500
Accounts Receivable
85,000
14,000
99,000
Inventory
97,000
24,000
121,000
Land
50,000
25,000
75,000
Buildings & Equipment
350,000
150,000
20,000
30,000
490,000
Less: Accumulated Depreciation
(170,000)
(50,000)
30,000
4,000
(194,000)
Investment in Best Co.
106,875
93,000
0
13,875
Goodwill
2,500
2,500
Total Assets
587,375
195,000
52,500
140,875
694,000
Accounts Payable
51,000
15,000
66,000
Wages Payable
14,000
6,000
20,000
Notes Payable
150,000
50,000
200,000
Common Stock
200,000
60,000
60,000
200,000
Retained Earnings
172,375
64,000
86,000
22,000
172,375
NCI in NA of Best Co.
31,000
35,625
4,625
Total Liabilities & Equity
587,375
195,000
146,000
57,625
694,000
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
P5-34 (continued)
c.
Power Corporation and Subsidiary
Consolidated Balance Sheet
December 31, 20X9
Cash
$100,500
Accounts Receivable
99,000
Inventory
121,000
Land
75,000
Buildings and Equipment
$490,000
Less: Accumulated Depreciation
(194,000)
296,000
Goodwill
2,500
Total Assets
$694,000
Accounts Payable
$ 66,000
Wages Payable
20,000
Notes Payable
200,000
Stockholders’ Equity:
Controlling Interest:
Common Stock
$200,000
Retained Earnings
172,375
Total Controlling Interest
$372,375
Noncontrolling Interest
35,625
Total Stockholders’ Equity
408,000
Total Liabilities and Stockholders’ Equity
$694,000
Power Corporation and Subsidiary
Consolidated Income Statement
Year Ended December 31, 20X9
Sales
$490,000
Cost of Goods Sold
$259,000
Wage Expense
55,000
Depreciation Expense
37,000
Interest Expense
16,000
Other Expenses
39,000
Total Expenses
(406,000)
Consolidated Net Income
$ 84,000
Income to Noncontrolling Interest
(8,500)
Income to Controlling Interest
$
75,500
Power Corporation and Subsidiary
Consolidated Retained Earnings Statement
Year Ended December 31, 20X9
Retained Earnings, January 1, 20X9
$126,875
Income to Controlling Interest, 20X9
75,500
$202,375
Dividends Declared, 20X9
(30,000)
Retained Earnings, December 31, 20X9
$172,375
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
P5-35 Comprehensive Problem: Differential Apportionment
a.
Equity Method Entries on Mortar Corp.’s Books:
Investment in Granite Co.
173,000
Cash
173,000
Record the initial investment in Granite Co.
Investment in Granite Co.
48,000
Income from Granite Co.
48,000
Record Mortar Corp.’s 80% share of Granite Co.’s 20X7 income
Cash
16,000
Investment in Granite Co.
16,000
Record Mortar Corp.’s 80% share of Granite Co.’s 20X7 dividend
Income from Granite Co.
3,000
Investment in Granite Co.
3,000
Record amortization of excess acquisition price
Book Value Calculations:
NCI
20%
+
Mortar
Corp.
80%
=
Common
Stock
+
Retained
Earnings
Beginning book
value
30,000
120,000
50,000
100,000
+ Net Income
12,000
48,000
60,000
– Dividends
(4,000)
(16,000)
(20,000)
Ending book value
38,000
152,000
50,000
140,000
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
5-66
P5-35 (continued)
Basic Consolidation Entry
Common Stock
50,000
Retained Earnings
100,000
Income from Granite Co.
48,000
NCI in NI of Granite Co.
12,000
Dividends Declared
20,000
Investment in Granite Co.
152,000
NCI in NA of Granite Co.
38,000
Excess Value (Differential) Calculations:
NCI
20%
+
Mortar
Corp. 80%
=
Buildings &
Equipment
+
Acc.
Depr.
+
Goodwil
l
Beginning balance
13,250
53,000
41,250
0
25,000
Changes
(750)
(3,000)
(3,750)
0
Ending balance
12,500
50,000
41,250
(3,750)
25,000
Amortized Excess Value Reclassification Entry:
Depreciation Expense
3,750
Income from Granite Co.
3,000
NCI in NI of Granite Co.
750
Excess Value (Differential) Reclassification Entry:
Buildings & Equipment
41,250
Goodwill
25,000
Acc. Depr.
3,750
Investment in Granite Co.
50,000
NCI in NA of Granite Co.
12,500
Eliminate Intercompany Accounts:
Accounts Payable
16,000
Accounts Receivable
16,000
Optional Accumulated Depreciation Consolidation Entry
Accumulated Depreciation
60,000
Building & Equipment
60,000
Investment in
Income from
Granite Co.
Granite Co.
Acquisition Price
173,000
80% Net Income
48,000
48,000
80% Net Income
16,000
80% Dividends
3,000
Excess Val. Amort.
3,000
Ending Balance
202,000
45,000
Ending Balance
152,000
Basic
48,000
50,000
Excess Reclass.
3,000
Amort. Reclass.
0
0
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
5-67
P5-35 (continued)
c.
Mortar
Corp.
Granite
Co.
Consolidation
Entries
DR
CR
Consolidated
Income Statement
Sales
700,000
400,000
1,100,000
Less: COGS
(500,000)
(250,000)
(750,000)
Less: Depreciation Expense
(25,000)
(15,000)
3,750
(43,750)
Less: Other Expenses
(75,000)
(75,000)
(150,000)
Income from Granite Co.
45,000
48,000
3,000
0
Consolidated Net Income
145,000
60,000
51,750
3,000
156,250
NCI in Net Income
12,000
750
(11,250)
Controlling Interest in Net
Income
145,000
60,000
63,750
3,750
145,000
Statement of Retained Earnings
Beginning Balance
290,000
100,000
100,000
290,000
Net Income
145,000
60,000
63,750
3,750
145,000
Less: Dividends Declared
(50,000)
(20,000)
20,000
(50,000)
Ending Balance
385,000
140,000
163,750
23,750
385,000
Balance Sheet
Cash
38,000
25,000
63,000
Accounts Receivable
50,000
55,000
16,000
89,000
Inventory
240,000
100,000
340,000
Land
80,000
20,000
100,000
Buildings & Equipment
500,000
150,000
41,250
60,000
631,250
Less: Accumulated Depreciation
(155,000)
(75,000)
60,000
3,750
(173,750)
Investment in Granite Co.
202,000
152,000
0
50,000
Goodwill
25,000
25,000
Total Assets
955,000
275,000
126,250
281,750
1,074,500
Accounts Payable
70,000
35,000
16,000
89,000
Mortgage Payable
200,000
50,000
250,000
Common Stock
300,000
50,000
50,000
300,000
Retained Earnings
385,000
140,000
163,750
23,750
385,000
NCI in NA of Granite Co.
38,000
50,500
12,500
Total Liabilities & Equity
955,000
275,000
229,750
74,250
1,074,500
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
P5–36 Comprehensive Problem: Differential Apportionment in Subsequent Period.
a.
Equity Method Entries on Mortar Corp.’s Books:
Investment in Granite Co.
36,000
Income from Granite Co.
36,000
Cash
20,000
Investment in Granite Co.
20,000
Income from Granite Co.
11,800
Investment in Granite Co.
11,800
Record amortization of excess acquisition price
Book Value Calculations:
NCI
20%
+
Mortar Corp.
80%
=
Common
Stock
+
Retained
Earnings
Beginning book
value
38,000
152,000
50,000
140,000
+ Net Income
9,000
36,000
45,000
– Dividends
(5,000)
(20,000)
(25,000)
Ending book value
42,000
168,000
50,000
160,000
1/1/X8
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
5-69
P5–36 (continued)
Basic Consolidation Entry
Common Stock
50,000
Retained Earnings
140,000
Income from Granite Co.
36,000
NCI in NI of Granite Co.
9,000
Dividends Declared
25,000
Investment in Granite Co.
168,000
NCI in NA of Granite Co.
42,000
Excess Value (Differential) Calculations:
NCI
20%
+
Mortar
Corp.
80%
=
Buildings
&
Equipment
+
Acc.
Depr.
+
Goodwill
Beginning balance
12,500
50,000
41,250
(3,750)
25,000
Changes
(2,950)
(11,800)
(3,750)
(11,000)
Ending balance
9,550
38,200
41,250
(7,500)
14,000
Amortized Excess Value Reclassification Entry:
Depreciation Expense
3,750
Goodwill Impairment Loss
11,000
Income from Granite Co.
11,800
NCI in NI of Granite Co.
2,950
Excess Value (Differential) Reclassification Entry:
Buildings & Equipment
41,250
Goodwill
14,000
Accumulated Dep.
7,500
Investment in Granite Co.
38,200
NCI in NA of Granite Co.
9,550
Eliminate Intercompany Accounts:
Accounts Payable
9,000
Accounts Receivable
9,000
Optional Accumulated Depreciation Consolidation Entry
Accumulated Depreciation
60,000
Building & Equipment
60,000
Investment in
Income from
Granite Co.
Granite Co.
Beginning
Balance
202,000
80% Net Income
36,000
36,000
80% Net Income
20,000
80% Dividends
11,800
Excess Val.
Amort.
11,800
Ending Balance
206,200
24,200
Ending Balance
168,000
Basic
36,000
38,200
Excess Reclass.
11,800
Amort. Reclass.
0
0
Chapter 05 – Consolidation of Less-Than-Wholly Owned Subsidiaries Acquired at More than Book Value
5-70
P5–36 (continued)
c.
Mortar
Corp.
Granite
Co.
Consolidation
Entries
DR
CR
Consolidated
Income Statement
Sales
650,000
470,000
1,120,000
Less: COGS
(490,000)
(310,000)
(800,000)
Less: Depreciation Expense
(25,000)
(15,000)
3,750
(43,750)
Less: Other Expenses
(62,000)
(100,000)
(162,000)
Less: Goodwill Impairment
11,000
(11,000)
Income from Granite Co.
24,200
36,000
11,800
0
Consolidated Net Income
97,200
45,000
50,750
11,800
103,250
NCI in Net Income
9,000
2,950
(6,050)
Controlling Interest in Net
Income
97,200
45,000
59,750
14,750
97,200
Statement of Retained
Earnings
Beginning Balance
385,000
140,000
140,000
385,000
Net Income
97,200
45,000
59,750
14,750
97,200
Less: Dividends Declared
(45,000)
(25,000)
25,000
(45,000)
Ending Balance
437,200
160,000
199,750
39,750
437,200
Balance Sheet
Cash
59,000
31,000
90,000
Accounts Receivable
83,000
71,000
9,000
145,000
Inventory
275,000
118,000
393,000
Land
80,000
30,000
110,000
Buildings & Equipment
500,000
150,000
41,250
60,000
631,250
Less: Accumulated Depreciation
(180,000)
(90,000)
60,000
7,500
(217,500)
Investment in Granite Co.
206,200
168,000
0
38,200
Goodwill
14,000
14,000
Total Assets
1,023,200
310,000
115,250
282,700
1,165,750
Accounts Payable
86,000
30,000
9,000
107,000
Mortgage Payable
200,000
70,000
270,000
Common Stock
300,000
50,000
50,000
300,000
Retained Earnings
437,200
160,000
199,750
39,750
437,200
NCI in NA of Granite Co.
42,000
51,550
9,550
Total Liabilities & Equity
1,023,200
310,000
258,750
91,300
1,165,750