Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
2–35 Ch. 2—Problems
Problem 2-10, Concluded
(2) Palto Company and Subsidiary Saleen Company
Worksheet for Consolidated Balance Sheet
January 1, 2015
Eliminations Consolidated
Balance Sheet
and Adjustments Balance
Palto Saleen Dr. Cr. NCI Sheet
Cash ………………………………… 161,000 ………… …………. ………… ………… 161,000
Accounts Receivable ………….. 65,000 20,000 …………. ………… ………… 85,000
Inventory …………………………… 80,000 50,000 (D1) 10,000 ………… ………… 140,000
Investment in Saleen ………….. 400,000 ………… …………. (EL) 128,000 ………… …………
………… ………… …………. (D) 272,000 ………… …………
Land …………………………………. 100,000 40,000 (D2) 40,000 ………… ………… 180,000
Buildings …………………………… 250,000 200,000 (D3) 170,000 ………… ………… 620,000
Saleen …………………………… ………… (10,000) (EL) 8,000 ………… (2,000) …………
Paid-In Capital in Excess of
Par—Saleen …………………… ………… (90,000) (EL) 72,000 ………… (18,000) …………
Retained Earnings—Saleen … ………… (60,000) (EL) 48,000 (NCI) 60,000 (72,000) …………
Common Stock—Palto ……….. (20,000) ………… …………. ………… ………… (20,000)
Eliminations and Adjustments:
(EL) Eliminate the investment in the subsidiary against the subsidiary equity accounts.
(D)/(NCI) Distribute $272,000 excess and adjust NCI $60,000 (total $332,000 excess) as follows:
(D1) Inventory, $10,000.
(D3) Buildings, $170,000.
PROBLEM 2-11
(1) Company Parent NCI
Implied Price Value
Value Analysis Schedule Fair Value (80%) (20%)
Company fair value ……………………………………. $390,000 $300,000 $90,000*
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (80%) (20%)
Price paid for investment ……….. $390,000 $300,000 $ 90,000
Less book value of interest acquired:
Common stock ($1 par) ………. $ 10,000
Paid-in capital in excess of par 90,000
Adjustment of identifiable accounts:
Worksheet
Adjustment Key
Inventory ($60,000 fair –
$50,000 book value) …………… $ 10,000 debit D1
Land ($80,000 fair – $40,000
book value) ……………………….. 40,000 debit D2
Buildings ($320,000 fair –
Problem 2-11, Concluded
(2) Palto Company and Subsidiary Saleen Company
Worksheet for Consolidated Balance Sheet
January 1, 2015
Eliminations Consolidated
Balance Sheet
and Adjustments Balance
Palto Saleen Dr. Cr. NCI Sheet
Cash ………………………………… 261,000 ………… …………. ………… ………… 261,000
Accounts Receivable ………….. 65,000 20,000 …………. ………… ………… 85,000
Inventory …………………………… 80,000 50,000 (D1) 10,000 ………… ………… 140,000
Investment in Saleen ………….. 300,000 ………… …………. (EL) 128,000 ………… …………
Common Stock ($1 par)—
Saleen …………………………… ………… (10,000) (EL) 8,000 ………… (2,000) …………
Paid-In Capital in Excess of
Par—Saleen …………………… ………… (90,000) (EL) 72,000 ………… (18,000) …………
Totals……………………………………………………………………………………………………………………………….. 0
Eliminations and Adjustments:
(EL) Eliminate the investment in the subsidiary against the subsidiary equity accounts.
(D)/(NCI) Distribute $172,000 excess and adjust NCI $58,000 (total $230,000 excess) as follows:
(D2) Land, $40,000.
(D4) Equipment, $20,000.
(D6) Gain on acquisition (close to Palto’s Retained Earnings), $60,000.
Ch. 2—Problems 2–38
PROBLEM 2-12
(1) Company Parent NCI
Implied Price Value
Value Analysis Schedule Fair Value (100%) (0%)
Company fair value ……………………………………. $1,100,000 $1,100,000 N/A
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (100%) (0%)
Fair value of subsidiary ………….. $1,100,000 $1,100,000 N/A
Less book value interest acquired:
Common stock ($1 par) ………. $ 10,000
Adjustment of identifiable accounts:
Worksheet
Adjustment Key
Inventory ($100,000 fair –
$120,000 book value) …………. $(20,000) credit D1
Patent ($150,000 fair –
$10,000 book value) …………… 140,000 debit D5
Computer software ($50,000
fair – $0 book value) …………… 50,000 debit D6
2–39 Ch. 2—Problems
Problem 2-12, Concluded
(2) Purnell Corporation and Subsidiary Sentinel Corporation
Worksheet for Consolidated Balance Sheet
December 31, 2015
Eliminations Consolidated
Balance Sheet
and Adjustments Balance
Purnell Sentinel Dr. Cr. Sheet
Patent ……………………………. ………… 10,000 (D5) 140,000 ………… 150,000
Computer Software …………. ………… ………… (D6) 50,000 ………… 50,000
Goodwill …………………………. ………… 60,000 (D8) 190,000 ………… 250,000
Current Liabilities …………….. (150,000) (90,000) …………. ………… (240,000)
Bonds Payable ……………….. (300,000) (200,000) …………. ………… (500,000)
Premium on Bonds Payable ………… ………… …………. (D7) 10,000 (10,000)
NCI ……………………………………………………………………………………………………………………. …………
Totals………………………………………………………………………………………………………………. 0
Eliminations and Adjustments:
(EL) Eliminate parent ownership interest.
Distribute adjustments:
(D1) Inventory.
(D3) Buildings.
(D5) Patent.
(D7) Premium on bonds payable.
Ch. 2—Problems 2–40
PROBLEM 2-13
(1) Company Parent NCI
Implied Price Value
Value Analysis Schedule Fair Value (100%) (0%)
Company fair value ……………………………………. $800,000 $800,000 N/A
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (100%) (0%)
Price paid for investment ……….. $800,000 $800,000 N/A
Less book value interest acquired:
Common stock ($1 par) ………. $ 10,000
Paid-in capital in excess of par 190,000
Adjustment of identifiable accounts:
Worksheet
Adjustment Key
Inventory ($100,000 fair –
$120,000 book value) …………. $ (20,000) credit D1
book value) ……………………….. 140,000 debit D5
Computer software ($50,000
fair – $0 book value) …………… 50,000 debit D6
Premium on bonds payable
Problem 2-13, Concluded
(2) Purnell Corporation and Subsidiary Sentinel Corporation
Worksheet for Consolidated Balance Sheet
December 31, 2015
Eliminations Consolidated
Balance Sheet
and Adjustments Balance
Purnell Sentinel Dr. Cr. Sheet
Land ………………………………. 800,000 100,000 (D2) 100,000 ………… 1,000,000
Buildings ………………………… 2,800,000 300,000 (D3) 200,000 ………… 3,300,000
Accumulated Depreciation .. (500,000) (100,000) …………. ………… (600,000)
Equipment ……………………… 600,000 140,000 (D4) 110,000 ………… 850,000
Accumulated Depreciation .. (230,000) (50,000) …………. ………… (280,000)
Patent ……………………………. ………… 10,000 (D5) 140,000 ………… 150,000
Computer Software …………. ………… ………… (D6) 50,000 ………… 50,000
Goodwill …………………………. ………… 60,000 …………. (D8) 60,000 …………
NCI ……………………………………………………………………………………………………………………. …………
Totals………………………………………………………………………………………………………………. 0
Eliminations and Adjustments:
(EL) Eliminate parent ownership interest.
(D) Distribute excess.
Distribute adjustments:
(D2) Land.
(D4) Equipment.
(D6) Computer software.
PROBLEM 2-14
(1) Company Parent NCI
Implied Price Value
Value Analysis Schedule Fair Value (80%) (20%)
Company fair value ……………………………………. $1,187,500 $950,000 $237,500
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (80%) (20%)
Fair value of subsidiary ………….. $1,187,500 $950,000 $237,500
Less book value interest acquired:
Common stock ($1 par) ………. $ 10,000
Paid-in capital in excess of par 190,000
Adjustment of identifiable accounts:
Worksheet
Adjustment Key
Inventory ($100,000 fair –
$120,000 book value) …………. $(20,000) credit D1
Land ($200,000 fair –
Patent ($150,000 fair –
$10,000 book value) …………… 140,000 debit D5
Computer software ($50,000
fair – $0 book value) …………… 50,000 debit D6
Problem 2-14, Concluded
(2) Purnell Corporation and Subsidiary Sentinel Corporation
Worksheet for Consolidated Balance Sheet
December 31, 2015
Eliminations Consolidated
Balance Sheet
and Adjustments Balance
Purnell Sentinel Dr. Cr. NCI Sheet
Cash ……………………………… 20,000 ………… …………. ………… ………… 20,000
Buildings ………………………… 2,800,000 300,000 (D3) 200,000 ………… ………… 3,300,000
Accumulated Depreciation .. (500,000) (100,000) …………. ………… ………… (600,000)
Equipment ……………………… 600,000 140,000 (D4) 110,000 ………… ………… 850,000
Accumulated Depreciation .. (230,000) (50,000) …………. ………… ………… (280,000)
Patent ……………………………. ………… 10,000 (D5) 140,000 ………… ………… 150,000
Computer Software …………. ………… ………… (D6) 50,000 ………… ………… 50,000
Goodwill …………………………. ………… 60,000 (D8) 277,500 ………… ………… 337,500
Current Liabilities …………….. (150,000) (90,000) …………. ………… ………… (240,000)
Bonds Payable ……………….. (300,000) (200,000) …………. ………… ………… (500,000)
Eliminations:
(EL) Eliminate parent ownership interest.
(D) Distribute excess.
(NCI) Adjust NCI to fair value (credit subsidiary Retained Earnings).
Distribute adjustments:
(D2) Land.
(D4) Equipment.
(D6) Computer software.
(D8) Goodwill.
Ch. 2—Problems 2–44
PROBLEM 2-15
(1) Company Parent NCI
Implied Price Value
Value Analysis Schedule Fair Value (80%) (20%)
Company fair value ……………………………………. $ 670,000 $ 500,000 $170,000*
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (80%) (20%)
Price paid for investment ……….. $670,000 $500,000 $170,000
Less book value interest acquired:
Common stock ($1 par) ………. $ 10,000
Paid-in capital in excess of par 190,000
Adjustment of identifiable accounts:
Worksheet
Adjustment Key
Inventory ($100,000 fair –
$120,000 book value) …………. $ (20,000) credit D1
Land ($200,000 fair –
$100,000 book value) …………. 100,000 debit D2
Buildings ($400,000 fair –
$200,000 net book value) ……. 200,000 debit D3
2–45 Ch. 2—Problems
Problem 2-15, Concluded
(2) Purnell Corporation and Subsidiary Sentinel Corporation
Worksheet for Consolidated Balance Sheet
December 31, 2015
Eliminations Consolidated
Balance Sheet
and Adjustments Balance
Purnell Sentinel Dr. Cr. NCI Sheet
Cash ……………………………… 20,000 ………… …………. ………… ………… 20,000
Accounts Receivable ……….. 300,000 50,000 …………. ………… ………… 350,000
Patent ……………………………. ………… 10,000 (D5) 140,000 ………… ………… 150,000
Computer Software …………. ………… ………… (D6) 50,000 ………… ………… 50,000
Goodwill …………………………. ………… 60,000 …………. (D8) 60,000 ………… …………
Current Liabilities …………….. (150,000) (90,000) …………. ………… ………… (240,000)
Bonds Payable ……………….. (300,000) (200,000) …………. ………… ………… (500,000)
Totals……………………………………………………………………………………………………………………………….. 0
Eliminations:
(EL) Eliminate parent ownership interest.
(D) Distribute excess.
(NCI) Adjust NCI to fair value (credit subsidiary retained earnings).
Distribute adjustments:
(D1) Inventory.
(D3) Buildings.
(D5) Patent.
(D7) Premium on bonds payable.
(D9) Gain on acquisition (close to parent Retained Earnings).
Ch. 2—Problems 2–46
APPENDIX PROBLEM
PROBLEM 2A-1
(1) Famous
Company Parent NCI
Implied Price Value
Value Analysis Schedule Fair Value (100%)b
Company fair value ……………………………………. $240,000a $240,000
Fair value of net assets excluding goodwill …… 235,000 235,000
Determination and Distribution of Excess Schedule
Famous
Company Parent NCI
Implied Price Value
Fair Value (100%)
Fair value of subsidiary ………….. $240,000 $240,000
Less book value of interest acquired:
Common stock ($1 par) ………. $ 4,000
Paid-in capital in excess of par 96,000
Retained earnings ……………… 15,000
Adjustment of identifiable accounts:
Worksheet
Adjustment Key
Building ($200,000 fair –
$100,000 book value) …………. $100,000 debit D1
Equipment ($40,000 fair –
2–47 Ch. 2—Problems
PROBLEM 2A-1
(2) Reverse Acquisition
Famous Company and Subsidiary Unknown Company
Worksheet for Consolidated Balance Sheet
December 31, 2015
Eliminations Consolidated
Balance Sheet
and Adjustments Balance
(Credits are in parentheses) Unknown Famous Dr. Cr. NCI Sheet
Current Assets ………………… 10,000 5,000 …………. ………… ………… 15,000
Paid-In Capital in Excess
of Par—Unknown …………. (115,000) ………… (TR) 115,000 ………… ………… ……..
Retained Earnings—
Unknown …………………….. (135,000) ………… …………. ………… ………… (135,000)
Common Stock—Famous … ………… (10,000) (EL) 6,000 (TR) 6,000 (10,000)
Eliminations and Adjustments:
(EL) Eliminate investment account and the equity recorded at the time of acquisition.
(D) Distribute the excess applicable to the investment and the adjustment to fair value for the NCI
as follows:
(D1) Increase building, $100,000.
(D3) Record goodwill, $5,000.
(TR) Transfer paid-in equity of Unknown Company and retained earnings of Famous Company to
Ch. 2—Case 2–48
CASE
CASE 2-1
(1) Evaluation of price—Fair value of Al’s Hardware:
Cash ………………………………………………………………. $ 180,000
Accounts receivable …………………………………………. 350,000
Inventory ………………………………………………………… 600,000
Land ………………………………………………………………. 100,000
(2) Accounting methods:
(a) GAAP would require that many of the adjustments to recognize fair values must be
made directly on Al’s books before consolidation:
Adjust accounts receivable to net realizable value.
Decrease inventory to fair value.
Record estimated liability from lawsuit.
(b) There are no major differences between fair and book values of the long-lived assets.
Normally, they would not be adjusted to fair value, but this could be done under quasi-
