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3-61 Ch. 3—Problems
Problem 3-14, Concluded
Eliminations and Adjustments:
PROBLEM 3-15
(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%)
Fair value of subsidiary ………….. $800,000 $800,000 N/A
Less book value of interest acquired:
Common stock ($1 par) ……… $100,000
Paid-in capital in excess of par 200,000
Problem 3-15, Continued
Adjustment of identifiable accounts:
Worksheet Amortization
Adjustment Key Life per Year
Inventory ($65,000 fair –
$60,000 book value) ………….. $ 5,000 debit D1
Land ($100,000 fair –
$50,000 book value) ………….. 50,000 debit D2
Mortgage payable ($205,000
fair – $200,000 book value) … (5,000) credit D3 5 $(1,000)
(2) Annual Current Prior
Account Adjustments Life Amount Year Years Total Key
Inventory ……………………. 1 $ 5,000 $ — $ 5,000 $ 5,000 (D1)
Subject to amortization:
Mortgage payable ……….. 5 $ (1,000) $ (1,000) $(1,000) $ (2,000) (A3)
Subsidiary Fast Air Company Income Distribution
Current-year amortizations ………… $9,500 Internally generated net
income …………………………… $67,500
Parent Fast Cool Company Income Distribution
Internally generated net
3-63 Ch. 3—Problems
Problem 3-15, Continued
Fast Cool Company and Subsidiary Fast Air Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2016
Eliminations Consolidated Controlling Consolidated
Trial Balance
and Adjustments Income Retained Balance
Fast Cool Fast Air Dr. Cr. Statement NCI Earnings Sheet
Cash ………………………………………………………….. 396,000 99,000 ………… ………… ….…….. ………… ………… 495,000
Buildings …………………………………………………….. 1,200,000 400,000 (D4) 150,000 ………… ………… ………… ………… 1,750,000
Accumulated Depreciation …………………………….. (200,000) (85,000) ………… (A4 15,000 ………… ………… ………… (300,000)
Equipment ………………………………………………….. 140,000 150,000 ………… (D5) 20,000 ………… ………… ………… 270,000
Accumulated Depreciation …………………………….. (80,000) (78,000) (A5) 8,000 ………… ………… ………… ………… (150,000)
Patent ………………………………………………………… ………… 24,000 (D6) 10,000 (A6) 4,000 …….….. ………… ………… 30,000
………… ………… ………… ………… ………… ………… ………… …………
………… ………… ………… ………… ………… ………… ………… …………
………… ………… ………… ………… ………… ………… ………… …………
Common Stock ($1 par)—Fast Cool ………………. (100,000) ………… ………… ………… ………… .……….. ………… (100,000)
Paid-In Capital in Excess of Par—Fast Cool ……. (1,500,000) ………… ………… ………… ………… ………… ………… (1,500,000)
Retained Earnings—Fast Cool ………………………. (680,500) ………… ………… ………… ………... ………… ………… …………
………… ………… ………… ………… ………… ………… ………… …………
………… ………… ………… ………… ………… ………… ………… …………
Subsidiary (Dividend) Income ………………………… (67,500) ………… (CY1) 67,500 ………… ………… ………… ………… …………
Dividends Declared—Fast Air ……………………….. ………… 10,000 ………… (CY2) 10,000 ………… ..………. ………… …………
Problem 3-15, Concluded
Eliminations and Adjustments:
(CY1) Current-year subsidiary income.
PROBLEM 3-16
(1) Company Parent NCI
Implied Price Value
Value Analysis Schedule Fair Value (100%) (0%)
Company fair value ……………………………………. $500,000 $500,000 N/A
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (100%) (0%)
Price paid for investment ……….. $500,000 $500,000 N/A
Less book value of interest acquired:
Common stock ($1 par) ………. $100,000
3-65 Ch. 3—Problems
Problem 3-16, Continued
Adjustment of identifiable accounts:
Worksheet Amortization
Adjustment Key Life per Year
Inventory ($65,000 fair –
$60,000 book value) ………….. $ 5,000 debit D1
Land ($100,000 fair – $50,000
book value) ………………………. 50,000 debit D2
Mortgage payable ($205,000
fair – $200,000 book value) … (5,000) credit D3 5 $(1,000)
(2)
Annual Current Prior
Account Adjustments Life Amount Year Years Total Key
Inventory …………………… 1 $ 5,000 $ — $ 5,000 $ 5,000 (D1)
Subject to amortization:
Mortgage payable ………. 5 $ (1,000) $ (1,000) $(1,000) $ (2,000) (A3)
Buildings …………………… 20 7,500 7,500 7,500 15,000 (A4)
Problem 3-16, Continued
Subsidiary Fast Air Company Income Distribution
Current-year amortizations ………… $9,500 Internally generated net
income …………………………… $67,500
Adjusted income …………………… $58,000
Parent Fast Cool Company Income Distribution
Internally generated net
income …………………………… $253,000
Problem 3-16, Continued
Fast Cool Company and Subsidiary Fast Air Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2016
Eliminations Consolidated Controlling Consolidated
Trial Balance
and Adjustments Income Retained Balance
Fast Cool Fast Air Dr. Cr. Statement NCI Earnings Sheet
Cash ………………………………………………………….. 396,000 99,000 ………… ………… ….…….. ………… ………… 495,000
Accounts Receivable ……………………………………. 200,000 120,000 ………… ………… ………… ………… ………… 320,000
Buildings …………………………………………………….. 1,200,000 400,000 (D4) 150,000 ………… ………… ………… ………… 1,750,000
Accumulated Depreciation …………………………….. (200,000) (85,000) ………… (A4) 15,000 ………… ………… ………… (300,000)
Equipment ………………………………………………….. 140,000 150,000 ………… (D5) 20,000 ………… ………… ………… 270,000
Accumulated Depreciation …………………………….. (80,000) (78,000) (A5) 8,000 ………… ………… ………… ………… (150,000)
…………. ………… ………… ………… ………… ………… ………… …………
…………. ………… ………… ………… ………… ………… ………… …………
Common Stock ($1 par)—Fast Cool ………………. (85,000) ………… ………… ………… ………… ..………. ………… (85,000)
Paid-In Capital in Excess of Par—Fast Cool ……. (1,215,000) ………… ………… ………… ………… ………… ………… (1,215,000)
Retained Earnings—Fast Cool ………………………. (680,500) ………… ………… (D9) 130,000 ………… ………… ………… …………
Interest Expense …………………………………………. …………. 16,000 ………… (A3) 1,000 15,000 ………… ………… …………
…………. ………… ………… ………… ………… ………… ………… …………
Subsidiary (dividend) Income ………………………… (67,500) ………… (CY1) 67,500 ………… ………… ………… ………… …………
Dividends Declared—Fast Air ……………………….. ………… 10,000 ………… (CY2) 10,000 ………… ..………. ………… …………
Dividends Declared—Fast Cool …………………….. 20,000 ………… ………… ………… ………… ………… 20,000 …………
Problem 3-16, Concluded
Eliminations and Adjustments:
(CY1) Current-year subsidiary income.
(CY2) Current-year dividend.
PROBLEM 3-17
(1) Company Parent NCI
Implied Price Value
Value Analysis Schedule Fair Value (80%) (20%)
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (80%) (20%)
Fair value of subsidiary ………….. $875,000 $700,000 $175,000
Less book value of interest acquired:
Common stock ($1 par) ……… $100,000
Paid-in capital in excess of par 200,000
Problem 3-17, Continued
Adjustment of identifiable accounts:
Worksheet Amortization
Adjustment Key Life per Year
Inventory ($65,000 fair –
$60,000 book value) ………….. $ 5,000 debit D1 1
Land ($100,000 fair – $50,000
book value) ………………………. 50,000 debit D2
Mortgage payable ($205,000
fair – $200,000 book value) … (5,000) credit D3 5 $(1,000)
(2)
Annual Current Prior
Account Adjustments Life Amount Year Years Total Key
Inventory …………………… 1 $ 5,000 $ 5,000 $ — $ 5,000 (D1)
Subject to amortization:
Mortgage payable ………. 5 $ (1,000) $ (1,000) $ — $ (1,000) (A3)
Problem 3-17, Continued
Subsidiary Fast Air Company Income Distribution
Inventory adjustment ………………… $5,000 Internally generated net
Current-year amortizations ………… 9,500 income …………………………… $47,500
Parent Fast Cool Company Income Distribution
Internally generated net
income …………………………… $253,000
3-71 Ch. 3—Problems
Problem 3-17, Continued
Fast Cool Company and Subsidiary Fast Air Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2015
Eliminations Consolidated Controlling Consolidated
Trial Balance
and Adjustments Income Retained Balance
Fast Cool Fast Air Dr. Cr. Statement NCI Earnings Sheet
Cash ………………………………………………………….. 145,000 37,000 ………… ………… ….…….. ………… ………… 182,000
Accounts Receivable ……………………………………. 70,000 100,000 ………… ………… ………… ………… ………… 170,000
Buildings …………………………………………………….. 1,200,000 400,000 (D4) 150,000 ………… ………… ………… ………… 1,750,000
Accumulated Depreciation …………………………….. (176,000) (67,500) ………… (A4) 7,500 ………… ………… ………… (251,000)
Equipment ………………………………………………….. 140,000 150,000 ………… (D5) 20,000 ………… ………… ………… 270,000
Accumulated Depreciation …………………………….. (68,000) (54,000) (A5) 4,000 ………… ………… ………… ………… (118,000)
………… ………… ………… ………… ………… ………… ………… …………
………… ………… ………… ………… ………… ………… ………… …………
Common Stock ($1 par)—Fast Cool ………………. (95,000) ………… ………… ………… ………… ..………. ………… (95,000)
Paid-In Capital in Excess of Par—Fast Cool ……. (1,405,000) ………… ………… ………… ………… ………… ………… (1,405,000)
………… ………… ………… ………… ………… ………… ………… …………
Subsidiary (Dividend) Income ……………………….. (38,000) ………… (CY1) 38,000 ………… ………… ………… ………… …………
Dividends Declared—Fast Air ……………………….. ………… 10,000 ………… (CY2) 8,000 ………… 2,000 ………… …………
Dividends Declared—Fast Cool …………………….. 20,000 ………… ………… ………… ………… ………… 20,000 …………
Problem 3-17, Concluded
Eliminations and Adjustments:
PROBLEM 3-18
(1) Company Parent NCI
Implied Price Value
Value Analysis Schedule Fair Value (80%) (20%)
Company fair value ……………………………………. $875,000 $700,000 $175,000
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (80%) (20%)
Fair value of subsidiary ………….. $875,000 $700,000 $175,000
Less book value of interest acquired:
Common stock ($1 par) ………. $100,000
3-73 Ch. 3—Problems
Problem 3-18, Continued
Adjustment of identifiable accounts:
Worksheet Amortization
Adjustment Key Life per Year
Inventory ($65,000 fair –
$60,000 book value) ………….. $ 5,000 debit D1 1
Mortgage payable ($205,000
fair – $200,000 book value) … (5,000) credit D3 5 $(1,000)
Land ($100,000 fair –
$50,000 book value) ………….. 50,000 debit D2
(2)
Annual Current Prior
Account Adjustments Life Amount Year Years Total Key
Inventory …………………… 1 $ 5,000 $ — $ 5,000 $ 5,000 (D1)
Subject to amortization:
Mortgage payable ………. 5 $ (1,000) $ (1,000) $(1,000) $ (2,000) (A3)
Buildings …………………… 20 7,500 7,500 7,500 15,000 (A4)
Equipment…………………. 5 (4,000) (4,000) (4,000) (8,000) (A5)
Problem 3-18, Continued
Subsidiary Fast Air Company Income Distribution
Current-year amortizations ………… $9,500 Internally generated net
income …………………………… $67,500
Parent Fast Cool Company Income Distribution
Internally generated net
income …………………………… $253,000
Problem 3-18, Continued
Fast Cool Company and Subsidiary Fast Air Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2016
Eliminations Consolidated Controlling Consolidated
Trial Balance
and Adjustments Income Retained Balance
Fast Cool Fast Air Dr. Cr. Statement NCI Earnings Sheet
Cash ………………………………………………………….. 392,000 99,000 ………… ………… ….…….. ………… ………… 491,000
Buildings …………………………………………………….. 1,200,000 400,000 (D4) 150,000 ………… ………… ………… ………… 1,750,000
Accumulated Depreciation …………………………….. (200,000) (85,000) ………… (A4) 15,000 ………… ………… ………… (300,000)
Equipment ………………………………………………….. 140,000 150,000 ………… (D5) 20,000 ………… ………… ………… 270,000
Accumulated Depreciation …………………………….. (80,000) (78,000) (A5) 8,000 ………… ………… ………… ………… (150,000)
………… ………… (D1) 1,000 ………… ………… ………… ………… …………
………… ………… (A3–A7) 1,900 ………… ………… ………… ………… …………
Common Stock ($1 par)—Fast Cool ………………. (95,000) ………… ………… ………… ………… ..………. ………… (95,000)
Paid-In Capital in Excess of Par—Fast Cool ……. (1,405,000) ………… ………… ………… ………… ………… ………… (1,405,000)
………… ………… ………… ………… ………… ………… ………… …………
………… ………… ………… ………… ………… ………… ………… …………
Subsidiary (Dividend) Income ………………………… (54,000) ………… (CY1) 54,000 ………… ………… ………… ………… …………
Dividends Declared—Fast Air ……………………….. ………… 10,000 ………… (CY2) 8,000 ………… 2,000 ………… …………
Ch. 3—Problems 3–76
Problem 3-18, Concluded
Eliminations and Adjustments:
(CY1) Current-year subsidiary income.
(CY2) Current-year dividend.
3-77 Ch. 3—Problems
APPENDIX PROBLEMS
(1) See part (1) of solution to Problem 3-2.
(2) Paro Company and Solar Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2016
Financial Eliminations Non-
Statements and Adjustments controlling Consoli-
Paro Solar Dr. Cr. Interest dated
Income Statement:
Net Sales ………………………………………. (520,000) (450,000) ……….. ……….. ……….. (970,000)
Cost of Goods Sold ………………………… 300,000 260,000 ……….. ……….. ……….. 560,000
Operating Expenses ……………………….. 120,000 100,000 (A) 3,000 ……….. ……….. 223,000
distribution schedule) ………………… ……….. ……….. ……….. ……….. ……….. (169,600)
Retained Earnings Statement:
Balance, January 1, 2016—Paro ……… (214,000) ……….. (D1) 8,000 ……….. ……….. ………..
………………………………………………. ……….. ……….. (A) 2,400 ……….. ……….. (203,600)
Balance, January 1, 2016—Solar …….. ……….. (190,000) (EL) 152,000 ……….. (55,400) ………..
………………………………………………. ……….. ……….. ……….. (NCI) 20,000 ……….. ………..
………………………………………………. ……….. ……….. (D1) 2,000 ……….. ……….. ………..
………………………………………………. ……….. ……….. (A) 600 ……….. ……….. ………..
Problem 3A-1, Continued
Paro Company and Solar Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2016
(Concluded)
Financial Eliminations Non-
Statements and Adjustments controlling Consoli-
Paro Solar Dr. Cr. Interest dated
Consolidated Balance Sheet:
Inventory, December 31, 2016 …………. 100,000 50,000 ……….. ……….. ……….. 150,000
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)
(carrydown) ……………………………… (336,000) (250,000) ……….. ……….. ……….. ………..
Retained Earnings—Controlling
Interest, December 31, 2016 ………. ……….. ……….. ……….. ……….. ……….. (323,200)
