3-41 Ch. 3—Problems
Problem 3-8, Continued
(2) Detner International and Subsidiary Hardy Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2017
Eliminations Consolidated Controlling Consolidated
Trial Balance
and Adjustments Income Retained Balance
Detner Hardy Dr. Cr. Statement NCI Earnings Sheet
Current Assets ………………………………… 632,000 505,000 ………….. …………. …………. …..……… …………. 1,137,000
Detner …………………………………………. (1,200,000) ………….. ………….. …………. ….……… ………….. …………. (1,200,000)
Retained Earnings—Detner,
January 1, 2017 ……………………………. (1,255,000) ………….. (D1) 8,000 (CV) 144,000 …………. …..……… …………. ………….
…………. ………….. (A2) 10,000 …………. …………. ………….. …………. ………….
…………. ………….. (A3) 16,000 …………. …………. ………….. …………. ………….
…………. ………….. ………….. …………. …………. ………….. (1,365,000) ………….
Common Stock ($10 par)—Hardy ………. …………. (1,000,000) (EL) 800,000 …………. …………. (200,000) .………… ………….
Sales ……………………………………………… (905,000) (425,000) ………….. …………. (1,330,000) ………….. …………. ………….
Cost of Goods Sold ………………………….. 470,000 170,000 ………….. …………. 640,000 ………….. …………. ………….
Other Expenses ………………………………. 250,000 100,000 (A2) 6,250 …………. …………. ………….. …………. ………….
…………. ………….. (A3) 10,000 …………. …………. ………….. …………. ………….
Problem 3-8, Concluded
Eliminations and Adjustments:
(CV) Convert from cost to the equity method as of January 1, 2017. ($580,000
January 1, 2017 – $400,000 January 1, 2015 = $180,000 × 80% = $144,000.)
(D)/(NCI) Distribute the excess cost and adjust NCI as given by the determination and dis-
tribution of excess schedule:
(D1) Distribute inventory adjustment for units sold in prior years to retained earnings,
80% controlling.
(D3) Increase patents by $100,000.
(A1) No amortizations necessary.
(A3) Record $10,000 annual increase in patents depreciation for the current and past
two years.
Subsidiary Hardy Company Income Distribution
Equipment depreciation ……. (A2) $ 6,250 Internally generated net
Patent depreciation ………….. (A3) 10,000 income ………………………… $155,000
Adjusted income ………………… $138,750
Parent Detner International Income Distribution
Internally generated net
income ………………………… $185,000
3-43 Ch. 3—Problems
PROBLEM 3-9
(1) Company Parent NCI
Implied Price Value
Value Analysis Schedule Fair Value (100%) (0%)
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (100%) (0%)
Price paid for investment …………. $420,000 $420,000 N/A
Less book value of interest acquired:
Common stock …………………. $ 10,000
Paid-in capital in excess of par 90,000
Adjustment of identifiable accounts:
Worksheet Amortization
Adjustment Key Life per Year
Inventory ($38,000 fair – $40,000
book value) ………………………. $ (2,000) credit D1
Land ($150,000 fair – $60,000
book value) ………………………. 90,000 debit D2
Bonds payable ($96,000 fair –
Ch. 3—Problems 3–44
Problem 3-9, Continued
(2)
Annual Current Prior
Account Adjustments Life Amount Year Years Total Key
Inventory …………………… 1 $ (2,000) $ — $ (2,000) $ (2,000) (D1)
Subject to amortization:
Bonds payable …………… 5 $ 800 $ 800 $ 1,600 $ 2,400 (A3)
Subsidiary Switzer Corporation Income Distribution
Current-year amortizations ………… $13,300 Internally generated net
income …………………………… $35,000
Adjusted income …………………… $21,700
Problem 3-9, Continued
Paulcraft Corporation and Subsidiary Switzer Corporation
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2017
Eliminations Consolidated Controlling Consolidated
Trial Balance
and Adjustments Income Retained Balance
Paulcraft Switzer Dr. Cr. Statement NCI Earnings Sheet
Cash ………………………………………………………. 160,000 110,000 ……….. ……….. ……….. ……….. ……….. 270,000
Accounts Receivable ……………………………….. 90,000 55,000 ……….. ……….. ……….. ……..… ……….. 145,000
Buildings ………………………………………………… 800,000 250,000 (D4) 130,000 ……….. ……….. ……….. ……….. 1,180,000
Accumulated Depreciation ………………………… (220,000) (80,000) ……….. (A4) 19,500 ……….. ……….. ……….. (319,500)
Equipment ………………………………………………. 150,000 100,000 (D5) 30,000 ……….. ……….. ..……… ……….. 280,000
Accumulated Depreciation ………………………… (90,000) (72,000) ……….. (A5) 18,000 ……….. ……….. ……….. (180,000)
……….. ………… (A3–A5) 26,600 ……….. ……….. ……….. (404,400) ……………
Sales ……………………………………………………… (800,000) (350,000) ……….. ……….. (1,150,000) ……….. ……….. ……………
Cost of Goods Sold ………………………………….. 450,000 210,000 ……….. ……….. 660,000 ……….. ……….. ……………
Depreciation Expense—Building ……………….. 30,000 15,000 (A4) 6,500 ……….. 51,500 ……….. ……….. ……………
Depreciation Expense—Equipment ……………. 15,000 14,000 (A5) 6,000 ……….. 35,000 ……….. ……….. ..………….
Problem 3-9, Concluded
Eliminations and Adjustments:
(CY1) Current-year subsidiary income.
PROBLEM 3-10
(1) Company Parent NCI
Implied Price Value
Value Analysis Schedule Fair Value (100%) (0%)
Company fair value ……………………………………. $480,000 $480,000 N/A
Determination and Distribution of Excess Schedule
Company Parent
Implied Price NCI
Fair Value (100%)(0%) Value
Fair value of subsidiary …………………. $480,000 $480,000 N/A
Less book value of interest acquired:
Common stock ($1 par) ………. $ 10,000
Paid-in capital in excess of par 90,000
Problem 3-10, Continued
Adjustment of identifiable accounts:
Worksheet Amortization
Adjustment Key Life per Year
Inventory ($38,000 fair – $40,000
book value) ………………………. $ (2,000) credit D1
Land ($150,000 fair – $60,000
book value) ………………………. 90,000 debit D2
(2) Annual Current Prior
Account Adjustments Life Amount Year Years Total Key
Inventory …………………… 1 $ (2,000) $ — $ (2,000) $ (2,000) (D1)
Subject to amortization:
Bonds payable …………… 5 $ 800 $ 800 $ 1,600 $ 2,400 (A3)
Buildings …………………… 20 6,500 6,500 13,000 19,500 (A4)
Equipment…………………. 5 6,000 6,000 12,000 18,000 (A5)
Total amortizations …. $13,300 $13,300 $26,600 $39,900
Cost-to-Equity Conversion:
Subsidiary Switzer Corporation Income Distribution
Current-year amortizations ………… $13,300 Internally generated net
income …………………………… $35,000
Adjusted income …………………… $21,700
NCI share …………………………….. 0%
Problem 3-10, Continued
Paulcraft Corporation and Subsidiary Switzer Corporation
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2017
Eliminations Consolidated Controlling Consolidated
Trial Balance
and Adjustments Income Retained Balance
Paulcraft Switzer Dr. Cr. Statement NCI Earnings Sheet
Cash ………………………………………………………. 100,000 110,000 ……….. ……….. ……….. ……….. ……….. 210,000
Accounts Receivable ……………………………….. 90,000 55,000 ……….. ……….. ……….. ……..… ……….. 145,000
Inventory ………………………………………………… 120,000 86,000 ……….. ……….. ……….. ……….. ……….. 206,000
Land ………………………………………………………. 100,000 60,000 (D2) 90,000 ……….. ……….. ……….. ……….. 250,000
Investment in Switzer ……………………………….. 480,000 ………… (CV) 70,000 (CY1) 10,000 ……….. ……….. ……….. ……………
……….. ………… (CY2) 10,000 ……….. ……….. ……….. ……….. ……………
……….. ………… ……….. (EL) 282,000 ……….. ……….. ……….. ……………
……….. ………… ……….. (D) 268,000 ……….. ……….. ……….. ……………
Buildings ………………………………………………… 800,000 250,000 (D4) 130,000 ……….. ……….. ……….. ……….. 1,180,000
……….. ………… (A3–A5) 26,600 ……….. ……….. ……….. ……….. ………..
……….. ………… ……….. ……….. ……….. ……….. (360,400) ………..
Sales …………………………………………………….. (800,000) (350,000) ……….. ……….. (1,150,000) ……….. ……….. ………..
Cost of Goods Sold ………………………………….. 450,000 210,000 ……….. ……….. 660,000 ……….. ……….. ………..
Depreciation Expense—Buildings ………………. 30,000 15,000 (A4) 6,500 ……….. 51,500 ……….. ……….. ………..
Depreciation Expense—Equipment ……………. 15,000 14,000 (A5) 6,000 ……….. 35,000 ……….. ……….. ..………
Other Expenses ………………………………………. 140,000 68,000 ……….. ……….. 208,000 ……….. ……….. ………..
3-49 Ch. 3—Problems
Problem 3-10, Concluded
Eliminations and Adjustments:
(CV) Conversion to equity.
(CY1) Current-year subsidiary income.
(CY2) Current-year dividend.
PROBLEM 3-11
(1) Company Parent NCI
Implied Price Value
Value Analysis Schedule Fair Value (80%) (20%)
Company fair value ……………………………………. $550,000 $440,000 $110,000
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (80%) (20%)
Fair value of subsidiary ………….. $550,000 $440,000 $110,000
Less book value of interest acquired:
Common stock ($1 par) ………. $ 10,000
Problem 3-11, Continued
Adjustment of identifiable accounts:
Worksheet Amortization
Adjustment Key Life per Year
Inventory ($38,000 fair –
$40,000 book value) ………….. $ (2,000) credit D1 1
Land ($150,000 fair – $ 60,000
book value) ………………………. 90,000 debit D2
(2)
Annual Current Prior
Account Adjustments Life Amount Year Years Total Key
Inventory …………………… 1 $ (2,000) $ — $ (2,000) $ (2,000) (D1)
Subject to amortization:
Bonds payable …………… 5 $ 800 $ 800 $ 1,600 $ 2,400 (A3)
Subsidiary Switzer Corporation Income Distribution
Current-year amortizations ………… $13,300 Internally generated net
income …………………………… $35,000
3-51 Ch. 3—Problems
Problem 3-11, Continued
Paulcraft Corporation and Subsidiary Switzer Corporation
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2017
Eliminations Consolidated Controlling Consolidated
Trial Balance
and Adjustments Income Retained Balance
Paulcraft Switzer Dr. Cr. Statement NCI Earnings Sheet
Cash ………………………………………………………. 138,000 110,000 ……….. ……….. ……….. ……….. ……….. 248,000
Accounts Receivable ……………………………….. 90,000 55,000 ……….. ……….. ……….. ……..… ……….. 145,000
……….. ………… ……….. (D) 270,400 ……….. ……….. ……….. ………..
Buildings ………………………………………………… 800,000 250,000 (D4) 130,000 ……….. ……….. ……….. ……….. 1,180,000
Accumulated Depreciation ………………………… (220,000) (80,000) ……….. (A4) 19,500 ……….. ……….. ……….. (319,500)
Equipment ………………………………………………. 150,000 100,000 (D5) 30,000 ……….. ……….. ..……… ……….. 280,000
Accumulated Depreciation ………………………… (90,000) (72,000) ……….. (A5) 18,000 ……….. ……….. ……….. (180,000)
……….. ………… ……….. (D1) 400 ……….. ……….. ……….. ………..
Common Stock ($1 par)—Paulcraft ……………. (100,000) ………… ……….. ……….. ……….. ……..… ……….. (100,000)
Paid-In Capital in Excess of Par—Paulcraft …. (900,000) ………… ……….. ……….. ……….. ……….. ……….. (900,000)
Retained Earnings—Paulcraft ……………………. (371,000) ………… ……….. ……….. ……….. ……….. ……….. ………..
……….. ………… ……….. (D1) 1,600 ……….. ……….. ……….. ………..
……….. ………… ……….. ……….. ……….. ……….. ……….. ………..
……….. ………… ……….. ……….. ……….. ……….. ……….. ………..
Subsidiary (Dividend) Income ……………………. (28,000) ………… (CY1) 28,000 ……….. ……….. …..…… ……….. ………..
Dividends Declared—Switzer ……………………. ……….. 10,000 ……….. (CY2) 8,000 ……….. 2,000 ….……. ………..
Dividends Declared—Paulcraft ………………….. 20,000 ………… ……….. ……….. ……….. ……….. 20,000 ………..
Total ………………………………………………………. 0 0 641,500 641,500 ……….. ……….. ……….. ………..
Consolidated Net Income ………………………………………………………………………………………….………………………………………. (186,700) ……….. ……….. ………..
Problem 3-11, Concluded
Eliminations and Adjustments:
(CY1) Current-year subsidiary income.
PROBLEM 3-12
(1) Company Parent NCI
Implied Price Value
Value Analysis Schedule Fair Value (80%) (20%)
Company fair value ……………………………………. $500,000 $400,000 $100,000
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (80%) (20%)
Fair value of subsidiary ………….. $500,000 $400,000 $100,000
Less book value of interest acquired:
Common stock ($1 par) ………. $ 10,000
Paid-in capital in excess of par 90,000
3-53 Ch. 3—Problems
Problem 3-12, Continued
Adjustment of identifiable accounts:
Worksheet Amortization
Adjustment Key Life per Year
Inventory ($38,000 fair –
$40,000 book value) ………….. $ (2,000) credit D1 1
Land ($150,000 fair – $60,000
book value) ………………………. 90,000 debit D2
(2)
Annual Current Prior
Account Adjustments Life Amount Year Years Total Key
Inventory …………………… 1 $ (2,000) $ (2,000) $ — $(2,000) (D1)
Subject to amortization:
Bonds payable …………… 5 $ 800 $ 800 $ — $ 800 (A3)
Subsidiary Switzer Corporation Income Distribution
Current-year amortizations ………… $13,300 Internally generated net
income …………………………… $34,000
Inventory adjustment …………….. 2,000
Parent Paulcraft Corporation Income Distribution
Internally generated net
income …………………………… $185,000
Problem 3-12, Continued
Paulcraft Corporation and Subsidiary Switzer Corporation
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2015
Eliminations Consolidated Controlling Consolidated
Trial Balance
and Adjustments Income Retained Balance
Paulcraft Switzer Dr. Cr. Statement NCI Earnings Sheet
Cash ………………………………………………………. 178,000 81,000 ……….. ……….. ……….. ……….. ……….. 259,000
Accounts Receivable ……………………………….. 80,000 35,000 ……….. ……….. ……….. ……..… ……….. 115,000
Buildings ………………………………………………… 800,000 200,000 (D4) 130,000 ……….. ……….. ……….. ……….. 1,130,000
Accumulated Depreciation ………………………… (200,000) (60,000) ……….. (A4) 6,500 ……….. ……….. ……….. (266,500)
Equipment ………………………………………………. 150,000 100,000 (D5) 30,000 ……….. ……….. ..……… ……….. 280,000
Accumulated Depreciation ………………………… (75,000) (44,000) ……….. (A5) 6,000 ……….. ……….. ……….. (125,000)
Goodwill …………………………………………………. ……….. ………… (D6) 36,000 ……….. ..……… ……….. ……….. 36,000
……….. ………… ……….. ……….. ……….. ……….. ……….. ………..
……….. ………… ……….. ……….. ……….. ……….. ……….. ………..
Common Stock ($1 par)—Paulcraft ……………. (100,000) ………… ……….. ……….. ……….. ……..… ……….. (100,000)
Paid-In Capital in Excess of Par—Paulcraft …. (900,000) ………… ……….. ……….. ……….. ……….. ……….. (900,000)
Retained Earnings—Paulcraft ……………………. (300,000) ………… ……….. ……….. ……….. ..……… ………..
……….. ………… ……….. ……….. ……….. ……….. ……….. ………..
Dividends Declared—Paulcraft ………………….. 20,000 ………… ……….. ……… ……….. ……….. 20,000 ………..
Total ………………………………………………………. 0 0 488,900 488,900 ……….. ……….. ……….. ………..
Consolidated Net Income ………………………………………………………………………………………….………………………………………. (207,700) ……….. ……….. ………..
To Noncontrolling Interest (see distribution schedule) ……………………………………………………………..………………………… 4,540 (4,540) ……….. ………..
Problem 3-12, Concluded
Eliminations and Adjustments:
(CV) Conversion to equity
(CY1) Current-year subsidiary income.
PROBLEM 3-13
(1) Company Parent NCI
Implied Price Value
Value Analysis Schedule Fair Value (70%) (30%)
Company fair value ……………………………………. $600,000 $420,000 $180,000
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (70%) (30%)
Fair value of subsidiary ………….. $600,000 $420,000 $180,000
Less book value of interest acquired:
Adjustment of identifiable accounts:
Worksheet Amortization
Adjustment Key Life per Year
Inventory ($38,000 fair –
$40,000 book value) ………….. $ (2,000) credit D1 1
Land ($150,000 fair – $60,000
book value) ………………………. 90,000 debit D2
Problem 3-13, Continued
(2)
Annual Current Prior
Account Adjustments Life Amount Year Years Total Key
Inventory …………………… 1 $ (2,000) $ — $ (2,000) $ (2,000) (D1)
Subject to amortization:
Bonds payable …………… 5 $ 800 $ 800 $ 1,600 $ 2,400 (A3)
Cost-to-Equity Conversion:
Subsidiary retained earnings, worksheet ……………………………. $182,000
Subsidiary retained earnings, purchase date ……………………… 112,000
Subsidiary Switzer Corporation Income Distribution
Current-year amortizations ………… $13,300 Internally generated net
income …………………………… $35,000
Parent Paulcraft Corporation Income Distribution
Internally generated net
income …………………………… $165,000
3-57 Ch. 3—Problems
Problem 3-13, Continued
Paulcraft Corporation and Subsidiary Switzer Corporation
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2017
Eliminations Consolidated Controlling Consolidated
Trial Balance
and Adjustments Income Retained Balance
Paulcraft Switzer Dr. Cr. Statement NCI Earnings Sheet
Cash ………………………………………………………. 157,000 110,000 ……….. ……….. ……….. ……….. …………… 267,000
Accounts Receivable ……………………………….. 90,000 55,000 ……….. ……….. ……….. ……..… …………… 145,000
Buildings ………………………………………………… 800,000 250,000 (D4) 130,000 ……….. ……….. ……….. …………… 1,180,000
Accumulated Depreciation ………………………… (220,000) (80,000) ……….. (A4) 19,500 ……….. ……….. …………… (319,500)
Equipment ………………………………………………. 150,000 100,000 (D5) 30,000 ……….. ……….. ..……… …………… 280,000
Accumulated Depreciation ………………………… (90,000) (72,000) ……….. (A5) 18,000 ……….. ……….. …………… (180,000)
Common Stock ($1 par)—Paulcraft ……………. (100,000) ………… ……….. ……….. ……….. ……..… …………… (100,000)
Paid-In Capital in Excess of Par—Paulcraft …. (900,000) ………… ……….. ……….. ……….. ……….. …………… (900,000)
Retained Earnings—Paulcraft ……………………. (315,000) ………… ……….. (CV) 49,000 ……….. ……….. …………… ………..
……….. ………… ……….. (D1) 1,400 ……….. ……….. …………… ………..
Dividends Declared—Paulcraft ………………….. 20,000 ………… ……….. ……….. ……….. ……….. 20,000 ………..
Total ………………………………………………………. 0 0 690,300 690,300 ……….. ……….. ……….. ………..
Consolidated Net Income ………………………………………………………………………………………….………………………………………. (186,700) ……….. ……….. ………..
To Noncontrolling Interest (see distribution schedule) ……………………………………………………………..………………………… 6,510 (6,510) ……….. ………..
Problem 3-13, Concluded
Eliminations and Adjustments:
(CV) Conversion to equity.
(CY1) Current-year subsidiary income.
(CY2) Current-year dividend.
PROBLEM 3-14
(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
3-59 Ch. 3—Problems
Problem 3-14, 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
(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)
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
Problem 3-14, 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 ………………………………………………………….. 147,000 37,000 ………… ………… ….…….. ………… ………… 184,000
………… ………… ………… (D) 320,000 ………… ………… ………… …………
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)
Patent ………………………………………………………… ………… 32,000 (D6) 10,000 (A6) 2,000 …….….. ………… ………… 40,000
Purchase Contract ……………………………………….. ………… ………… (D7) 10,000 (A7) 5,000 …….….. ………… ………… 5,000
………… ………… ………… ………… ………… ………… ………… …………
………… ………… ………… ………… ………… ………… ………… …………
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 ………………………. (400,000) ………… ………… ………… ………... ………… ………… …………
………… ………… ………… ………… ………… ………… ………… …………
………… ………… ………… ………… ………… ………… ………… …………
………… ………… ………… ………… ………… ………… (400,000) …………
Sales …………………………………………………………. (700,000) (400,000) ………… ………… (1,100,000) ………… ………… …………
Cost of Goods Sold ……………………………………… 380,000 210,000 (D1) 5,000 ………… 595,000 ………… ………… …………
………… ………… ………… ………… ………… ………… ………… …………
………… ………… ………… ………… ………… ………… ………… …………
Subsidiary (Dividend) Income ………………………… (47,500) ………… (CY1) 47,500 ………… ………… ………… ………… …………
Dividends Declared—Fast Air ……………………….. ………… 10,000 ………… (CY2) 10,000 ………… ..………. ………… …………