Student Name:
Class:
controlling
Paloma San Marco Debit Credit Interest Consolidated
(1,843,000) (675,000) (2,518,000) Correct!
1,100,000 322,000 1,422,000 Correct!
125,000 120,000 245,000 Correct!
275,000 11,000 [E] 80,000 366,000 Correct!
27,500 7,000 34,500 Correct!
(121,500) – [ I ] 121,500 – Correct!
(437,000) (215,000)
(450,500) Correct!
(13,500) (13,500) Try again!
(437,000) Correct!
Net income
Dividends declared
Retained earnings, 12/31
Current assets
Investment in San Marco
[ I ] 121,500 – Correct!
– – [A] 720,000 [E] 80,000 640,000 Correct!
931,000 863,000 1,794,000 Correct!
950,000 107,000 1,057,000 Correct!
– – [A] 375,000 375,000 Correct!
4,939,000 1,400,000 5,500,000 Correct!
(485,000) (200,000) (685,000) Correct!
Retained earnings, 12/31
Total liabilities and stockholders’ equity
Notes payable
NCI in San Marco
Common stock
Instructor
McGraw-Hill
Problem 04-37
Amortization expense
Interest expense
December 31, 2018
Separate company net income
Consolidated net income
Acquisition Method
Consolidated Balances
Revenues
Cost of goods sold
Depreciation expense
Part a.
Adjustments & Eliminations
Equity in San Marco income
To noncontrolling interest
To Paloma Company
Customer base
Buildings and equipment
Goodwill
Total assets
Copyrights
Accounts payable
Correct! Correct! Correct!
Controlling
Noncontrolling
Interest Interest
1,710,000$ 190,000$
1,372,500 152,500
337,500$ 37,500$
Correct! Correct!
Goodwill
Fair value at acquisition date
Relative fair values of identifiable net assets
Parentheses indicate a credit balance.
1,877,500$
725,000
1,152,500
800,000
352,500$
Correct!
(172,500)$
(13,500)
2,500
(183,500)$
Correct!
*
400,000$
60,000
395,000
855,000$
10%
85,500
72,000
Noncontrolling share of goodwill (below)
Noncontrolling interest 1/1
Controlling
Noncontrolling
Interest Interest
1,710,000$ 167,500$
1,372,500 152,500
337,500$ 15,000$
Correct! Correct!
Fair value at acquisition date
Relative fair values of identifiable net assets
Goodwill
Retained earnings-subsidiary 1/1
Total
Noncontrolling interest percentage
Noncontrolling share of subsidiary book value
Noncontrolling share of 1/1 customer base excess
NCI at beginning of year
Common stock-subsidiary
APIC-subsidiary
Noncontrolling interest balance beginning of year*
Net income attributable to noncontrolling interest
Dividends declared to noncontrolling interest
Noncontrolling interest end of year
Fair value of San Marco Company
Carrying amount acquired
Excess fair value
to customer base
to goodwill
Part b.
If the acquisition-date fair value of the noncontrolling interest was $167,500 both goodwill (NCI
portion) and the noncontrolling interest balance would be reduced equally by $22,500 as follows:
90%
1,710,000$
400,000$
60,000
265,000
800,000$
Book value of San Marco Company
Fair value of San Marco Company
to customer base (10-year remaining life)
Excess fair value
to goodwill
Paloma San Marco
(1,843,000)$ (675,000)$
1,100,000 322,000
125,000 120,000
275,000 11,000
27,500 7,000
(121,500) –
(437,000)$ (215,000)$
(2,625,000)$ (395,000)$
(437,000) (215,000)
350,000 25,000
(2,712,000)$ (585,000)$
1,204,000$ 430,000$
(4,939,000)$ (1,400,000)$
Total liabilities and equity
Investment in San Marco
Buildings and equipment
Total assets
Accounts payable
Notes payable
Copyrights
Common stock
Additional paid-in capital
Retained earnings, 12/31
Given Data P04-37
Revenues
Cost of goods sold
San Marco company outstanding common stock
acquired by Paloma Corporation
Cash paid by Paloma Corporation. for
San Marco Company shares
Assessed fair value of San Marco’s customer base
December 31, 2018
Account Balances
San Marco owners equity amounts on 1/1/17:
Dividends declared
Retained earnings, 12/31
Current assets
Equity in income of San Marco
Net income
Retained earnings, 1/1
Net income
Common stock
Additional paid-in capital
Retained earnings
Interest expense
Depreciation expense
Amortization expense
Fair-value allocation schedule:
Student Name:
Class:
1,003,400$
(690,000)
313,400
Correct!
225,000$
(24,000)
94,000
18,400 313,400
–$
Correct!
Life Excess
(years) Amortizations
(24,000)$ 10
94,000$ 20
18,400$ 8
Balance Explanation
2,079,880$
Correct!
1,206,000$
Correct!
283,200$
Correct!
10,800$
Correct!
63,600$
Correct!
–$
Correct!
516,280$
Correct!
44,280$
472,000$
1,275,000$
260,000$
1,487,000$
Retained earnings, 12/31
Dividends declared
Parent company balance only
Net income attributable to NCI
Net income to Padre Company
Consolidated net income less noncontrolling interest share
parent company balance; subsidiary’s declarations to parent are intra-entity,
Consolidated balance on 1/1 plus net income to Padre Co. less Padre‘s dividends
Retained earnings, 1/1
Consolidated net income
McGraw-Hill
PADRE, INC. AND SIERRA CORPORATION
Totals for the business combination for the year ending December 31, 2018
Add the two book values plus $4,700 excess adjustment
Add the two book values less $2,400 excess adjustment
Add the two book values
Depreciation expense
Cost of goods sold
Revenues
Amortization expense
– Purchase price allocation and annual amortization
Total
Add the two book values plus $2,300 excess adjustment
Equity in income of Sierra
Interest expense
Instructor
Total
Notes payable
Copyright
Buildings and equipment
Annual excess amortizations:
Notes payable
Copyright
Problem 04-39
Allocations to specific accounts based on difference
Fair value in excess of book value
Book value of subsidiary
Land
between fair value and book value:
Acquisition-date subsidiary fair value
PADRE, INC. AND SIERRA CORPORATION
Buildings and equipment
(2,400)$
4,700
2,300
4,600$
Correct!
Add the two book values
Account Name
Eliminated so that the individual revenues and expenses of the subsidiary can be
included in the consolidated figures
Revenues less expenses
Student Name:
Class:
McGraw-Hill
Instructor
Problem 04-39
1,620,860$
Correct!
–$
Correct!
650,000$
Correct!
1,162,800$
Correct!
205,200$
Correct!
3,638,860$
Correct!
469,000$
Correct!
700,900$
Correct!
231,960$
Correct!
300,000$
Correct!
450,000$
Correct!
1,487,000$
Correct!
3,638,860$
Correct!
Accounts payable
Current assets
Total assets
Copyright
Buildings and equipment (net)
Land
Investment in Sierra
Total liabilities & equities
Add the two book values plus the $225,000 excess allocation
Add book values
Retained earnings, 12/31
Additional paid-in capital
Common stock
Add the two book values
Add the book values less $18,400 excess allocation plus amortization
20% of fair value as of 1/1 [$200,680] plus net income attributable to noncontrolling
interest [$44,280] less dividends declared to outside owners [$13,000]
Eliminated so that the individual assets and liabilities of the subsidiary can be included
in the consolidated figures
Add the book values less the $24,000 allocation [asset was overvalued] plus the
excess amortization
Book value plus $94,000 excess allocation less amortization for the year
Noncontrolling interest in Sierra
Notes payable
Computed above
Parent company balance
Parent company balance
Student Name:
Class:
McGraw-Hill
Instructor
Problem 04-39
Non-
Consolidation Entries controlling Consolidated
Accounts Padre Sierra Debit Credit Interest Totals
(1,394,980) (684,900) (2,079,880) Correct!
774,000 432,000 1,206,000 Correct!
274,000 11,600 [E] 2,400 283,200 Correct!
– 6,100 [E] 4,700 10,800 Correct!
52,100 9,200 [E] 2,300 63,600 Correct!
(177,120) –
[ I ]
177,120 – Correct!
(472,000) (226,000)
(516,280) Correct!
(44,280) 44,280 Correct!
(472,000) Correct!
(1,275,000) (530,000) [S] 530,000 (1,275,000) Correct!
(472,000) (226,000) (472,000) Correct!
260,000 65,000
[D]
52,000 13,000 260,000 Correct!
(1,487,000) (691,000) (1,487,000) Correct!
856,160 764,700 1,620,860 Correct!
927,840
[D]
52,000 [S] 552,000
[ I ]
177,120
[A] 250,720 – Correct!
360,000 65,000 [A] 225,000 650,000 Correct!
909,000 275,400 [E] 2,400 [A] 24,000 1,162,800 Correct!
– 115,900 [A] 94,000 [E] 4,700 205,200 Correct!
3,053,000 1,221,000 3,638,860 Correct!
(275,000) (194,000) (469,000) Correct!
(541,000) (176,000) [A] 18,400 [E] 2,300 (700,900) Correct!
[S] 138,000
[A] 62,680 (200,680)
(231,960) (231,960)
(300,000) (100,000) [S] 100,000 (300,000) Correct!
(450,000) (60,000) [S] 60,000 (450,000) Correct!
(1,487,000) (691,000) (1,487,000) Correct!
(3,053,000) (1,221,000)
1,265,920 1,265,920 (3,638,860)
Correct! Correct! Correct!
Net income
Retained earnings, 1/1
NI to Padre Company
Amortization expense
Depreciation expense
Cost of goods sold
Revenues
NI to noncontrolling interest
Consolidated net income
Separate company net income
Equity in income of Sierra
Interest expense
Parentheses indicate a credit balance.
Total liabilities and stockholders‘ equity
Retained earnings, 12/31
Additional paid-in capital
Common stock
NCI in Sierra 12/31
NCI in Sierra 1/1
Notes payable
Accounts payable
Total assets
Copyright
Buildings and equipment (net)
Land
Investment in Sierra
Current assets
Retained earnings, 12/31
Dividends declared
Consolidation Worksheet
PADRE, INC. AND SIERRA CORPORATION
80%
802,720$
1,003,400$
690,000$
Book Fair
Value Value
65,000$ 290,000$
287,000 263,000
122,000 216,000
(176,000) (157,600)
Padre Sierra
12/31/2018 12/31/2018
(1,394,980)$ (684,900)$
774,000 432,000
274,000 11,600
– 6,100
52,100 9,200
(177,120) –
(472,000)$ (226,000)$
(1,275,000)$ (530,000)$
(472,000) (226,000)
260,000 65,000
(1,487,000)$ (691,000)$
856,160$ 764,700$
927,840 –
360,000 65,000
909,000 275,400
– 115,900
3,053,000$ 1,221,000$
(275,000)$ (194,000)$
(541,000) (176,000)
(300,000) (100,000)
(450,000) (60,000)
(1,487,000) (691,000)
(3,053,000)$ (1,221,000)$
acquired by Padre, Inc.
Sierra Corporation outstanding common stock
Sierra accounts values on 1/1/18
Book value of Sierra Corporation
Sierra’s assessed fair value
Sierra Corporation shares
Cash paid by Padre, Inc. for
Revenues
Notes payable (due in 8 years)
Depreciation expense
Cost of goods sold
Copyright (20-year remaining life)
Buildings and equipment (10-year remaining life)
Land
Net income
Equity in income of Sierra
Interest expense
Amortization expense
Retained earnings, 12/31/18
Dividends declared
Net income
Retained earnings, 1/1/18
Given Data P04-39
Note: Credits are indicated by parentheses.
Total liabilities and equity
Retained earnings
Additional paid-in capital
Common stock
Notes payable
Accounts payable
Total assets
Copyright
Buildings and equipment (net)
Land
Investment in Sierra
Current assets
Student Name:
Class:
67,000
670,000$
(460,000)
210,000$
Annual
Remaining Excess
Life Amortizations
30,000$ –
(20,000) 10
40,000 5
50,000 10
20,000 5
Total
Goodwill
Non-
Adams Barstow controlling Consolidated
Corp. Inc. Debit Credit Interest Totals
(940,000) (280,000) (1,220,000) Correct!
480,000 90,000 570,000 Correct!
100,000 55,000 [E] 6,000 161,000 Correct!
– [E] 5,000 5,000 Correct!
40,000 15,000 [E] 4,000 59,000 Correct!
(108,000)
Consideration transferred by Adams
[ I ]
108,000 – Correct!
(428,000) (120,000)
(425,000) Correct!
(10,500) 10,500 Correct!
(414,500) Correct!
Net income
Dividends declared
Retained earnings, 12/31
610,000 250,000 860,000 Correct!
702,000 [D] 63,000
[*C]
13,500 – Correct!
[S] 468,000
[A] 175,500
[ I ]
108,000
Total assets
Patents
Equipment
Buildings
Instructor
Correct!
Correct!
Part a.
Part d.
Problem 04-40
McGraw-Hill
Book value of Barstow
Acquisition-date total fair value
Noncontrolling interest fair value
ADAMS CORPORATION AND BARSTOW, INC.
4,000
– Purchase price allocation and excess amortizations
–
(2,000)
Cost of goods sold
NI to Adams Corporation
NI to noncontrolling interest
Consolidated net income
Separate company net income
Investment income
Interest expense
Amortization expense
Depreciation expense
Investment in Barstow
Equipment
Land
Current assets
Revenues
Accounts
For Year Ending December 31, 2018
Consolidation Worksheet – Acquisition Method
ADAMS CORPORATION AND BARSTOW, INC.
Buildings
Excess fair value over book value
5,000
8,000
Notes payable
Patents
Student Name:
Class:
Instructor
Problem 04-40
McGraw-Hill
(860,000) (230,000) [A] 16,000 [E] 4,000 (1,078,000) Correct!
(510,000) (180,000) [S] 180,000 (510,000) Correct!
(1,685,000) (390,000) (1,658,000) Correct!
[S] 52,000
[A] 19,500 (71,500) (75,000) Correct!
(75,000)
(3,055,000) (800,000) 934,500 934,500 (3,321,000)
Correct! Correct! Correct!
Retained earnings, 12/31
Common stock
Notes payable
Parentheses indicate a credit balance.
stockholders’ equity
Total liabilities and
Noncontrolling interest
90%
603,000$
67,000$
Book Fair
Value Value
160,000$ 160,000$
120,000 150,000
220,000 200,000
160,000 200,000
– 50,000
(200,000) (180,000)
(180,000)
(280,000)
Depreciation expense
Cost of goods sold
Land
Current assets
Notes payable
Dividends paid
Interest expense
Investment income
Retained earnings, 1/1/18
Common stock
Retained earnings, 12/31/16
Common stock
Notes Payable (due in 5 years)
Patents (10-year remaining life)
Equipment (5-year remaining life)
Given Data P04-40
Barstow, Inc. outstanding voting shares
acquired by Adams Corporation
Cash paid by Adams Corporation for
Barstow, Inc. shares
Fair value of 10% NCI – before & after acquisition
Buildings (10-year remaining life)
Land
Current assets
Barstow account values on 12/31/16
Student Name:
Class:
Non-
Bretz, Keane controlling Consolidated
Accounts Inc. Company Debit Credit Interest Totals
(402,000) (300,000) (702,000) Correct!
200,000 120,000 [E] 20,000 340,000 Correct!
(144,000) –
[ I ]
144,000 – Correct!
(346,000) (180,000)
(362,000) Correct!
(16,000) 16,000 Correct!
(346,000) Correct!
(797,000) (500,000) [S] 500,000 (797,000) Correct!
(346,000) (180,000) (346,000) Correct!
143,000 60,000 [D] 54,000 6,000 143,000 Correct!
(1,000,000) (620,000) (1,000,000) Correct!
224,000 190,000 414,000 Correct!
994,500 – [S] 792,000 – Correct!
[D] 54,000 [A] 112,500
[ I ]
144,000
106,000 600,000 706,000 Correct!
210,000 300,000 [A] 100,000 [E] 20,000 590,000 Correct!
380,000 110,000 490,000 Correct!
[A] 25,000 25,000 Correct!
1,914,500 1,200,000 2,225,000 Correct!
(453,000) (200,000) (653,000) Correct!
(400,000) (300,000) [S] 300,000 (400,000) Correct!
(60,000) (80,000) [S] 80,000 (60,000) Correct!
(1,500) – (1,500) Correct!
(1,000,000) (620,000) (1,000,000) Correct!
[A] 12,500
[S] 88,000 (100,500)
(110,500) (110,500) Correct!
(1,914,500) (1,200,000) 1,223,000 1,223,000 (2,225,000)
Correct! Correct! Correct!
Parentheses indicate a credit balance.
Investment in Keane Company
Trademarks
Copyrights
Goodwill
Equipment (net)
Non-controlling interest 1/1
Additional paid-in capital – step acquisition
Non-controlling interest 12/31
Total liabilities and equities
Consolidation Entries
Revenues
Operating expenses
BRETZ, INC. AND KEANE COMPANY
Retained earnings 12/31
Problem 04-44
NI attributable to noncontrolling interest
NI attributable to Bretz, Inc.
Equity in Keane earnings
Separate company net income
Retained earnings, 1/1
Net income
Total assets
Liabilities
Dividends declared
Retained earnings, 12/31
Common stock
Additional paid-in capital
Instructor
Part c. only
Consolidated net income
McGraw-Hill
Current assets
60%
573,000$
810,000$
120,000$
150,000$
80,000$
30%
300,000$
Bretz, Keane
Inc. Company
(402,000)$ (300,000)$
200,000 120,000
(144,000) –
(346,000)$ (180,000)$
(797,000)$ (500,000)$
(346,000) (180,000)
143,000 60,000
Retained earnings, 12/31
Current assets
Investment in Keane Company
106,000 600,000
210,000 300,000
380,000 110,000
1,914,500$ 1,200,000$
(453,000)$ (200,000)$
Common stock
Additional paid-in capital
Retained earnings 12/31
Total liabilities and equity
Additional paid-in capital – step acquisition
Note: Credits are indicated by parentheses.
Total assets
Liabilities
Copyrights
Equipment (net)
Trademarks
Net income
Net income
Retained earnings, 1/1
Dividends declared
Operating expenses
Keane’s net income for 2017
Financial Information for 2018
Equity in Keane earnings
Amount paid by Bretz for Keane shares
Additional Keane shares purchased by Bretz on 1/1/18
Cash dividends declared by Keane during 2017
Book value of Keane Company
Keane copyright undervalued (6-year remaining live)
Revenues
Given Data P04-44
Keane Company outstanding shares
acquired by Bretz, Inc.
Cash paid by Bretz, Inc. for
Keane Company shares