# Accounting Chapter 3 Homework Determination and Distribution of Excess Schedule

Type Homework Help
Pages 14
Words 2987
Authors Paul M. Fischer, Rita H. Cheng, William J. Tayler

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3-21 Ch. 3—Problems
Problem 3-1, Continued
Simple Equity Method Sophisticated Equity Method Cost Method
Eliminations
2015
(CY1) Subsidiary Income ..... 48,000 Subsidiary Income ........ 44,000 No conversion
Eliminated current- Investment in Investment in needed first year
year entries. Solvo Company ...... 48,000 Solvo Company ......... 44,000
(CY2) Investment in Investment in Dividend Income ........... 8,000
Solvo Company ......... 8,000 Solvo Company…… 8,000 Dividends Declared .... 8,000
Dividends Declared 8,000 Dividends Declared .... 8,000
Ch. 3—Problems 3–22
Problem 3-1, Concluded
Simple Equity Method Sophisticated Equity Method Cost Method
Eliminations
2016
(CV) Investment in
Solvo Company
(80% × \$50,000) ........... 40,000
Equity conversion. RE—Port .................... 40,000
(EL) Common Stock .......... 80,000 Common Stock.............. 80,000 Common Stock.............. 80,000
Eliminate Paid-In Capital in Paid-In Capital in Paid-In Capital in
investment as Excess of Par ............ 160,000 Excess of Par ................ 160,000 Excess of Par ................ 160,000
of January 1. Retained Earnings ..... 240,000 Retained Earnings ........ 240,000 Retained Earnings ........ 240,000
Investment in Investment in Investment in
Solvo Company ...... 480,000 Solvo Company ......... 480,000 Solvo Company ......... 480,000
PROBLEM 3-2
(1) Company Parent NCI
Implied Price Value
Value Analysis Schedule Fair Value (80%) (20%)
Company fair value ........................................... \$400,000 \$320,000 \$80,000
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (80%) (20%)
Fair value of subsidiary .............. \$400,000 \$320,000 \$ 80,000
Less book value of interest acquired:
Common stock ...................... \$ 50,000
Worksheet Amortization
Inventory .................................... \$ 10,000 debit D1
Problem 3-2, Continued
(2) Paro Company and Solar Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2016
Consolidated Controlling Consolidated
Trial Balance
Eliminations Net Retained Balance
Paro Solar Dr. Cr. Income NCI Earnings Sheet
Inventory ......................................................... 100,000 50,000 ........... ........... ........... ........... ........... 150,000
Other Current Assets ...................................... 136,000 180,000 ........... ........... ........... ........... ........... 316,000
Goodwill .......................................................... ........... ............ (D3) 60,000 ........... ........... ........... ........... 60,000
Other Intangible Assets ................................... 20,000 ............ ........... ........... ........... ........... ........... 20,000
Current Liabilities ............................................ (120,000) (40,000) ........... ........... ........... ........... ........... (160,000)
........... ............ (A2) 600 ........... ........... ........... ........... ...........
Common Stock—Paro .................................... (200,000) ............ ........... ........... ........... ........... ........... (200,000)
Other Paid-In Capital in
Excess of Par—Paro ................................... (100,000) ............ ........... ........... ........... ........... ........... (100,000)
Retained Earnings—Paro ............................... (214,000) ............ ........... ........... ........... ........... ........... ...........
........... ............ (D1) 8,000 ........... ........... ........... ........... ...........
........... ............ (A2) 2,400 ........... ........... ........... ........... ...........
........... ............ ........... ........... ........... ........... (203,600) ...........
3–25 Ch. 3—Problems
Problem 3-2, Concluded
(CY1) Current-year subsidiary income.
(D1) Inventory (retained earnings).
(D2) Buildings and equipment.
(A2) Amortize excess.
Income Distribution Schedules
Solar Company
Amortizations ................................. \$3,000 Internally generated net
income .................................... \$90,000
PROBLEM 3-3
(2) Entries under the sophisticated equity method: 2015 2016
Debit Credit Debit Credit
Investment in Solar ...................................... 37,600a 69,600b
Subsidiary Income ................................. 37,600 69,600
Cash ............................................................ 16,000 24,000
(3) Balance in Investment in Solar Company:
Problem 3-3, Continued
(4) Paro Company and Solar Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2016
Eliminations Consolidated Controlling Consolidated
Trial Balance
Paro Solar Dr. Cr. Statement NCI Earnings Sheet
Inventory, December 31 ......................... 100,000 50,000 .......... .......... ......... .......... .......... 150,000
Other Current Assets ............................. 136,000 180,000 .......... .......... ......... .......... .......... 316,000
Goodwill ................................................. .......... .......... (D3) 60,000 .......... ......... .......... .......... 60,000
Other Intangibles .................................... 20,000 .......... .......... .......... ......... .......... .......... 20,000
Current Liabilities ................................... (120,000) (40,000) .......... .......... ......... .......... .......... (160,000)
Bonds Payable ....................................... .......... (100,000) .......... .......... ......... .......... .......... (100,000)
Other Long-Term Liabilities .................... (200,000) .......... .......... .......... ......... .......... .......... (200,000)
Common Stock—Paro ........................... (200,000) .......... .......... .......... ......... .......... .......... (200,000)
Other Paid-In Capital in Excess of
Subsidiary Income .................................. (69,600) .......... (CY1) 69,600 .......... ......... .......... .......... ..........
Dividends Declared—Paro ..................... 50,000 .......... .......... .......... ......... .......... 50,000 ..........
Dividends Declared—Solar .................... .......... 30,000 .......... (CY2) 24,000 ......... 6,000 .......... ..........
Problem 3-3, Concluded
(CY) Eliminate the current-year entries made in the investment account and in the
ating Expenses for extra depreciation). Adjust NCI, \$17,400 (\$20,000 on acquisi-
tion date – 20% × \$13,000 amortizations for 2015).
(D2) Buildings for \$30,000 for 2015 and accumulated depreciation for \$3,000 for 2015.
(A2) For 2016 only, depreciate the write-up to Buildings and Equipment for \$3,000
and increase depreciation expense.
Use income distribution schedules from Problem 3-2.
PROBLEM 3-4
(1) Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (100%) (0%)
Fair value of subsidiary .............. \$400,000 \$400,000 N/A
Less book value of interest acquired:
Common stock (\$5 par) ......... \$ 50,000
Paid-in capital in excess of par 15,000
Worksheet Amortization
Fixed assets............................... \$ 50,000 debit D1 10 \$5,000
Problem 3-4, Concluded
(2) Charles Company and Subsidiary Lehto, Inc.
Consolidated Income Statement
For Year Ended December 31, 2017
Revenue ............................................................................................... \$670,000
Charles Company and Subsidiary Lehto, Inc.
Retained Earnings Statement
For Year Ended December 31, 2017
Retained earnings, Charles Company, January 1, 2017
(\$230,000 Charles + \$35,000 equity conversion) ........................... \$265,000
Add consolidated net income ................................................................ 45,000
Charles Company and Subsidiary Lehto Inc.
Consolidated Balance Sheet
December 31, 2017
Assets
Current assets .......................................................................... \$ 720,000
Depreciable fixed assets (\$1,805,000 + \$440,000 + \$50,000) . \$2,295,000
Accumulated depreciation ((\$405,000 + \$70,000 + \$5,000) (480,000) 1,815,000
Liabilities and Stockholders’ Equity
Liabilities ................................................................................... \$1,125,000
Stockholders’ equity:
Common stock (\$1 par) ...................................................... \$ 220,000
3-29 Ch. 3—Problems
PROBLEM 3-5
(1) Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (100%) (0%)
Fair value of subsidiary .............. \$220,000 \$220,000 N/A
Less book value of interest acquired:
Common stock (\$10 par) ....... \$100,000
Worksheet Amortization
Problem 3-5, Continued
(2) Bell Corporation and Subsidiary Stockdon Corporation
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2017
Eliminations Consolidated Controlling Consolidated
Trial Balance
Bell Stockdon Dr. Cr. Statement NCI Earnings Sheet
Cash ....................................................... 180,000 143,000 .......... .......... ......... .......... .......... 323,000
Inventory ................................................ 60,000 30,000 .......... .......... ......... .......... .......... 90,000
Retained Earnings—Bell ........................ (255,000) .......... .......... .......... ......... .......... (255,000) ..........
Common Stock (\$10 par)—Stockdon ..... .......... (100,000) (EL) 100,000 .......... ......... .......... .......... ..........
Paid-In Capital in Excess of Par—
Stockdon ............................................ .......... (50,000) (EL) 50,000 .......... ......... .......... .......... ..........
Retained Earnings—Stockdon ............... .......... (100,000) (EL) 100,000 .......... ......... .......... .......... ..........
Sales ...................................................... (210,000) (40,000) .......... .......... (250,000) .......... .......... ..........
0
(EL) Eliminate 100% of the subsidiary’s January 2017 equity balances against the balance of the investment account.
Problem 3-5, Concluded
(3) Bell Corporation and Subsidiary Stockdon Corporation
Consolidated Income Statement
For Year Ended December 31, 2017
Revenues ................................................................................................... \$ 250,000
Cost of goods sold ...................................................................................... (155,000)
Gross profit ................................................................................................. \$ 95,000
Bell Corporation and Subsidiary Stockdon Corporation
Retained Earnings Statement
For Year Ended December 31, 2017
Retained earnings, January 1, 2017 ........................................................... \$255,000
Add consolidated net income ...................................................................... 43,000
Bell Corporation and Subsidiary Stockdon Corporation
Consolidated Balance Sheet
December 31, 2017
Assets
Current assets:
Cash ............................................................................. \$323,000
Inventory ....................................................................... 90,000 \$ 413,000
Property, plant, and equipment:
Liabilities and Stockholders’ Equity
Current liabilities ................................................................. \$ 615,000
Stockholders’ equity:
Common stock (\$3 par) ................................................ \$300,000
PROBLEM 3-6
(1) Company Parent NCI
Implied Price Value
Value Analysis Schedule Fair Value (80%) (20%)
Company fair value ........................................... \$337,500* \$270,000 \$67,500
Fair value of net assets excluding goodwill ...... 235,000** 188,000 47,000
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (80%) (20%)
Fair value of subsidiary .............. \$337,500 \$270,000 \$ 67,500
Less book value of interest acquired:
Common stock (\$10 par) ....... \$100,000
Paid-in capital in excess of par 120,000
Worksheet Amortization
Buildings .................................... \$ 40,000 debit D1 10 \$4,000
3-33 Ch. 3—Problems
Problem 3-6, Continued
(2) Prescott Company and Subsidiary Sandin Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2016
Eliminations Consolidated Controlling Consolidated
Trial Balance
Prescott Sandin Dr. Cr. Statement NCI Earnings Sheet
Current Assets ....................................... 180,000 115,000 .......... .......... ......... .......... .......... 295,000
Land ....................................................... 150,000 75,000 .......... .......... ......... .......... .......... 225,000
Goodwill ................................................. .......... .......... (D2) 102,500 .......... ......... .......... .......... 102,500
Liabilities ................................................ (175,000) (133,000) .......... .......... ......... .......... .......... (308,000)
Common Stock (\$10 par)—Prescott ...... (200,000) .......... .......... .......... ......... .......... .......... (200,000)
Retained Earnings, January 1, 2016—
Prescott ........................................... (503,000) .......... (A) 3,200 .......... ......... .......... .......... ..........
.......... .......... .......... .......... ......... .......... (499,800) ..........
Dividends Declared ................................ 10,000 5,000 .......... (CY2) 4,000 ......... 1,000 10,000 ..........
Total ................................................ 0 0 350,500 350,500 ......... .......... .......... ..........
Consolidated Net Income ............................................................................................................................... (82,000) .......... .......... ..........
To Noncontrolling Interest (see distribution schedule) ............................................................................ 4,200 (4,200) .......... ..........
Problem 3-6, Continued
(CY1) Eliminate the subsidiary income against the investment account.
(CY2) Eliminate the 80% ownership portion of the subsidiary dividends, including
\$15,000 negative retained earnings.
(EL) Eliminate the 80% ownership portion of the subsidiary equity accounts against
the investment.
(D)/(NCI) Distribute the excess cost and NCI adjustment as follows, in accordance with the
determination and distribution of excess schedule:
(D1) Increase buildings by \$40,000.
(D2) Increase goodwill \$102,500.
(A) Record \$4,000 annual increase in building depreciation for current and prior
years.
Subsidiary Sandin Company Income Distribution
Building depreciation .............. (A) \$4,000 Internally generated net
income .................................... \$25,000
Parent Prescott Company Income Distribution
Internally generated net
(3) Prescott Company and Subsidiary Sandin Company
Consolidated Income Statement
For Year Ended December 31, 2016
Sales ................................................................................................................ \$480,000
Cost of goods sold ........................................................................................... 229,000
Gross profit ...................................................................................................... \$251,000
Problem 3-6, Concluded
Prescott Company and Subsidiary Sandin Company
Retained Earnings Statement
For Year Ended December 31, 2016
Controlling
NCI
Interest
Retained earnings, January 1, 2016 ......................................... \$(3,000)* \$499,800
Prescott Company and Subsidiary Sandin Company
Consolidated Balance Sheet
December 31, 2016
Assets
Current assets .................................................. \$ 295,000
Property, plant, and equipment:
Land ............................................................. \$225,000
Liabilities and Stockholders’ Equity
Liabilities ........................................................... \$ 308,000
Stockholders’ equity:
Controlling interest:
PROBLEM 3-7
(1) Company Parent NCI
Implied Price Value
Value Analysis Schedule Fair Value (80%) (20%)
Company fair value ........................................... \$343,750* \$275,000 \$68,750
Fair value of net assets excluding goodwill ...... 260,000** 208,000 52,000
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (80%) (20%)
Fair value of subsidiary .............. \$343,750 \$275,000 \$ 68,750
Less book value of interest acquired:
Common stock (\$5 par) .......... \$150,000
Worksheet Amortization
Equipment.................................. \$ 10,000 debit D1 5 \$2,000
Problem 3-7, Continued
(2) Jeter Corporation and Subsidiary Super Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2015
Eliminations Consolidated Controlling Consolidated
Trial Balance
Jeter Super Dr. Cr. Statement NCI Earnings Sheet
Cash ....................................................... 296,600 91,000 .......... .......... ......... .......... .......... 387,600
Land ....................................................... 160,000 90,000 .......... .......... ......... .......... .......... 250,000
Goodwill ................................................. .......... .......... (D3) 83,750 .......... ......... .......... .......... 83,750
Liabilities ................................................ (480,000) (150,000) .......... .......... ......... .......... .......... (630,000)
Common Stock (\$100 par)—Jeter .......... (400,000) .......... .......... .......... ......... .......... .......... (400,000)
Paid-In Capital in Excess of Par—Jeter . (40,000) .......... .......... .......... ......... .......... .......... (40,000)
Retained Earnings—Jeter ...................... (251,600) .......... .......... .......... ......... .......... (251,600) ..........
Common Stock (\$5 par)—Super ............ .......... (150,000) (EL) 120,000 .......... ......... (30,000) .......... ..........
Retained Earnings, July 1, 2015—Super .......... (50,000) (EL) 40,000 (NCI) 28,750 ......... (38,750) .......... ..........
Sales ...................................................... (460,000) (60,000) .......... .......... (520,000) .......... .......... ..........
Problem 3-7, Continued
Subsidiary Super Company Income Distribution
Equipment depreciation ....... (A1) \$1,000 Internally generated net
Building depreciation ........... (A2) 1,250 income .................................. \$6,000
Parent Jeter Corporation Income Distribution
Internally generated net
income ................................. \$30,000
(CY1) Eliminate parent’s current-year entry for subsidiary income.
(EL) Eliminate the pro rata share of Super Company equity balances and purchased
income.
(D)/(NCI) Distribute the excess and adjust NCI as determined by the determination and dis-
tribution of excess schedule:
(D2) Increase building by \$50,000.
(A1) Amortize equipment for \$2,000 (\$10,000 ÷ 5 years) for the half-year (\$1,000)
(3) Jeter Corporation and Subsidiary Super Company
Consolidated Income Statement
For Year Ended December 31, 2015
Revenues ........................................................................................................ \$520,000
Cost of goods sold ........................................................................................... 250,000
3-39 Ch. 3—Problems
Problem 3-7, Concluded
Jeter Corporation and Subsidiary Super Company
Consolidated Retained Earnings Statement
For Year Ended December 31, 2015
Controlling
Current assets:
Cash ................................................................................... \$ 387,600
Property, plant, and equipment:
Land .................................................................................... \$ 250,000
Liabilities and Stockholders’ Equity
Current liabilities ....................................................................... \$ 630,000
Stockholders’ equity:
Controlling interest:
Common stock (\$100 par) .............................................. \$400,000
Paid-in capital in excess of par ....................................... 40,000
Retained earnings .......................................................... 274,600
NCI ...................................................................................... 69,500 784,100
Total liabilities and stockholders’ equity .................................... \$1,414,100
*Includes both building and equipment depreciation.
PROBLEM 3-8
(1) Company Parent NCI
Implied Price Value
Value Analysis Schedule Fair Value (80%) (20%)
Company fair value ........................................... \$2,000,000* \$1,600,000 \$400,000
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (80%) (20%)
Fair value of subsidiary .............. \$2,000,000 \$1,600,000 \$ 400,000
Less book value of interest acquired:
Common stock (\$10 stated
value) ................................. \$1,000,000
Paid-in capital in excess of par 300,000