4–21 Ch. 4—Problems
Problem 4-3, Concluded
Eliminations and Adjustments:
(CY1) Current-year subsidiary income.
(CY2) Current-year dividend.
PROBLEM 4-4
Company Parent NCI
(1) Implied Price Value
Value Analysis Schedule Fair Value (70%) (30%)
Company fair value ……………………………………. $550,000 $400,000 $150,000*
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (70%) (30%)
Price paid for investment ……….. $550,000 $400,000 $150,000
Less book value of interest acquired:
Common stock ………………….. $ 10,000
Paid-in capital in excess of par 90,000
Adjustment of identifiable accounts:
Worksheet Amorti-
Adjustment Key Periods zation
Buildings ……………………………… $150,000 debit D1 20 $ 7,500
4–23 Ch. 4—Problems
Problem 4-4, Continued
Amortization Schedule
Account adjustments Annual Current Prior
to be amortized Life Amount Year Years Total Key
Buildings 20 $ 7,500 $ 7,500 $ 7,500 $15,000 A1
Equipment 5 12,000 12,000 12,000 24,000 A2
Total amortizations $19,500 $19,500 $19,500 $39,000
Intercompany Inventory Profit Deferral
Parent Parent Parent Sub Sub Sub
Subsidiary Stude Corporation Income Distribution
Unrealized profit in ending Internally generated net
inventory ………………………… $ 1,800 income …………………………… $20,000
Amortizations ……………………….. 19,500 Realized profit in beginning
inventory ………………………… 2,500
Parent Packard Corporation Income Distribution
Unrealized profit in ending Internally generated net
inventory ………………………… $10,500 income …………………………… $165,000
70% of Stude adjusted income
of $1,200 ……………………….. 840
Problem 4-4, Continued
(2) Packard Corporation and Subsidiary Stude Corporation
Consolidated Income Statement
For Year Ended December 31, 2016
Eliminations Consolidated Controlling Consolidated
Trial Balance
and Adjustments Income Retained Balance
Packard Stude Dr. Cr. Statement NCI Earnings Sheet
Cash ………………………………………………………. 66,000 132,000 ……….. ……….. ……….. ……….. ……….. 198,000
Accounts Receivable ……………………………….. 90,000 45,000 ……….. (IA) 34,000 ……….. ……….. ……….. 101,000
Buildings ………………………………………………… 800,000 200,000 (D1) 150,000 ……….. ……….. ……….. ……….. 1,150,000
Accumulated Depreciation ………………………… (220,000) (65,000) ……….. (A1) 15,000 ……….. ……….. ……….. (300,000)
Equipment ………………………………………………. 150,000 72,000 (D2) 60,000 ……….. ……….. ……….. ……….. 282,000
Accumulated Depreciation ………………………… (90,000) (46,000) ……….. (A2) 24,000 ……….. ……….. ……….. (160,000)
Goodwill …………………………………………………. ……….. ………… (D3) 128,000 ……….. .………. ……….. ……….. 128,000
……….. ………… (BI) 9,750 ……….. ……….. ……….. ……….. ………..
……….. ………… ……….. ……….. ……….. ……….. (301,600) ………..
Sales ……………………………………………………… (800,000) (350,000) (IS) 100,000 ……….. (1,050,000) ……….. ……….. ………..
Cost of Goods Sold ………………………………….. 450,000 208,500 ……….. (IS) 100,000 ……….. ……….. ……….. ………..
……….. ………… (EI) 12,300 (BI) 10,500 560,300 ……….. ……….. ………..
Depreciation Expense—Buildings ………………. 30,000 7,500 (A1) 7,500 ……….. 45,000 ……….. ……….. ………..
Depreciation Expense—Equipment ……………. 15,000 8,000 (A2) 12,000 ……….. 35,000 ……….. ……….. ..………
0
4–25 Ch. 4—Problems
Problem 4-4, Concluded
Eliminations and Adjustments:
(CY1) Current-year subsidiary income.
(CY2) Current-year dividend.
PROBLEM 4-5
Price paid for investment in Jenko Company stock:
Jenko Company stock outstanding ($450,000 ÷ $5 par) ……….. 90,000 shares
Ownership interest …………………………………………………………… × 80%
Company Parent NCI
Implied Price Value
Value Analysis Schedule Fair Value (80%) (20%)
Company fair value ………………………………………….. $1,200,000* $960,000 $240,000
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (80%) (20%)
Fair value of subsidiary ………………… $1,200,000 $ 960,000 $ 240,000
Less book value of interest acquired:
Adjustment of identifiable accounts:
Worksheet
Adjustment Key
Land ………………………………………….. $ 75,000 debit D1
Problem 4-5, Continued
Silvio Corporation and Subsidiary Jenko Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2017
Eliminations Consolidated Controlling Consolidated
Trial Balance
and Adjustments Income Retained Balance
Silvio Jenko Dr. Cr. Statement NCI Earnings Sheet
Cash ……………………………………………………… 140,000 205,200 …………. ………….. …………. …………. ………….. 345,200
Accounts Receivable ……………………………….. 285,000 110,000 …………. ………….. …………. …………. ………….. 395,000
Interest Receivable …………………………………. 1,500 ………….. …………. (LN2) 200 …………. …………. ………….. 1,300
Investment in Jenko Company ………………….. 1,128,000 ………….. …………. (CY1) 88,000 …………. ..……….. ………….. ………….
…………. ………….. …………. (EL) 880,000 …………. …………. ………….. ………….
…………. ………….. …………. (D) 160,000 …………. …………. ………….. ………….
Goodwill ………………………………………………… …………. ………….. (D2) 125,000 ………….. …………. …………. ………….. 125,000
Accounts Payable ………………………………….. (611,500) (165,000) (LN1) 10,000 ………….. …………. …………. ………….. (776,500)
Retained Earnings, January 1, 2017—Jenko …………. (470,000) (EL) 376,000 (NCI) 40,000 …………. (134,000) …..……… ………….
Treasury Stock (at cost) …………………………… 315,000 ………….. …………. ………….. …………. …………. ………….. 315,000
Sales …………………………………………………….. (1,020,000) (500,000) (IS) 140,000 ………….. (1,380,000) …………. ………….. ………….
Interest Income ………………………………………. (1,500) ………….. (LN2) 200 ………….. (1,300) …………. ………….. ………….
Subsidiary Income ………………………………….. (88,000) ………….. (CY1) 88,000 ………….. …………. …………. ………….. ………….
Problem 4-5, Concluded
Eliminations and Adjustments:
(CY1) Eliminate the entry recording the parent’s share of the subsidiary’s net income.
(EL) Eliminate the parent’s (80%) share of Jenko Company equity against the investment.
(D)/(NCI) Distribute excess and NCI adjustment according to the determination and distribution
of excess schedule.
(BI) Eliminate the intercompany profit of $7,500 (30% × $25,000) from beginning invento-
ry.
(12% × 4/12 × 1/2 × $10,000).
Subsidiary Jenko Company Income Distribution
Internally generated net
income ………………………………. $110,000
Parent Silvio Corporation Income Distribution
Unrealized profit in ending Internally generated net
inventory……………………………. $3,500 income ………………………………. $116,500
80% × Jenko adjusted
4–29 Ch. 4—Problems
PROBLEM 4-6
Parcel Corporation and Subsidiary Sack Corporation
Worksheet for Consolidated Financial Statements
For Year Ended August 31, 2017
Eliminations Consolidated Controlling Consolidated
Trial Balance
and Adjustments Income Retained Balance
Parcel Sack Dr. Cr. Statement NCI Earnings Sheet
Cash ……………………………………………………… 120,000 50,000 …………. …………. ………….. …………. …………. 170,000
…………. ………….. (F2S) 3,000 …………. ………….. …………. …………. (242,700)
…………. ………….. (F2P) 6,300 …………. ………….. …………. …………. ………….
Other Assets ………………………………………….. 28,000 ………….. …………. …………. …..……… …………. …………. 28,000
Accounts Payable ………………………………….. (80,000) (50,200) …………. …………. ………….. …………. …………. (130,200)
Sales …………………………………………………….. (920,000) (240,000) …………. …………. (1,160,000) …………. …………. ………….
Cost of Goods Sold …………………………………. 598,000 132,000 …………. …………. 730,000 ……..….. …………. ………….
Selling and General Expenses ………………….. 108,000 80,000 …………. (F2S) 3,000 178,700 …………. …..…….. ………….
…………. ………….. …………. (F2P) 6,300 ………….. …………. …………. ………….
Subsidiary Income …………………………………… (23,040) ………….. (CY1) 23,040 …………. ………….. …………. …………. ………….
Interest Income ………………………………………. …………. (800) …………. …………. (800) .………… …………. ………….
Problem 4-6, Concluded
Subsidiary Sack Corporation Income Distribution
Internally generated net
income …………………………… $28,800
2017 amortization of
Parent Parcel Corporation Income Distribution
2017 deferred gain on Internally generated net
sale of equipment ………… (F1P) $63,000 income …………………………… $239,250
Eliminations and Adjustments:
(CY1) Eliminate the entry recording the parent’s share of the subsidiary net income.
(CY2) Eliminate the parent’s share of Sack’s dividends declared.
(EL) Eliminate the investment in Sack and the parent’s share (80%) of the subsidiary equity
balances.
PROBLEM 4-7
Company Parent NCI
Implied Price Value
Value Analysis Schedule Fair Value (80%) (20%)
Company fair value ……………………………………. $590,000 $480,000 $110,000
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (80%) (20%)
Price paid for investment …………. $590,000 $480,000 $110,000
Less book value of interest acquired:
Common stock …………………. $ 10,000
Adjustment of identifiable accounts:
Worksheet Amorti-
Adjustment Key Periods zation
Buildings ……………………………… $120,000 debit D1 20 $6,000
Equipment……………………………. 40,000 debit D2 5 8,000
Problem 4-7, Continued
Amortization Schedule
Account adjustments Annual Current Prior
to be amortized Life Amount Year Years Total Key
Buildings 20 $ 6,000 $ 6,000 $ 6,000 $12,000 A10
Intercompany Inventory Profit Deferral
Parent Parent Parent Sub Sub Sub
Amount % Profit Amount % Profit
Intercompany Fixed Asset Profit Deferral
Parent Sub
Original profit ……………………………………….. $15,000 —
Year of sale………………………………………….. 2 —
Realized in prior years …………………………… — —
Balance, start of year …………………………….. 15,000 —
Realized in current year …………………………. 3,000 —
Subsidiary Sandin Company Income Distribution
Ending inventory profit …………… $ 5,400 Internally generated net
Amortizations ……………………….. 14,000 income ………………………….. $20,000
Beginning inventory profit ……… 3,000
Parent Panther Company Income Distribution
Equipment gain …………………….. $15,000 Internally generated net
income …………………………… $165,000
4–33 Ch. 4—Problems
(2) Panther Company and Subsidiary Sandin Company
Consolidated Income Statement
For Year Ended December 31, 2016
Eliminations Consolidated Controlling Consolidated
Trial Balance
and Adjustments Income Retained Balance
Panther Sandin Dr. Cr. Statement NCI Earnings Sheet
Cash ………………………………………………………. 24,000 132,000 …………… …………… …………… …………… …………… 156,000
Accounts Receivable ……………………………….. 90,000 45,000 …………… (IA) 20,000 …………… …………… …………… 115,000
Accumulated Depreciation ………………………… (220,000) (65,000) …………… (A1) 12,000 …………… .………….. …………… (297,000)
Equipment ………………………………………………. 150,000 72,000 (D2) 40,000 (F1) 15,000 …………… .………….. …………… 247,000
Accumulated Depreciation ………………………… (90,000) (46,000) …………… (A2) 16,000 …………… ..…………. …………… ……………
…………… ……………. (F2) 3,000 …………… …………… …………… …………… (149,000)
Goodwill …………………………………………………. …………… ……………. (D3) 218,000 …….…….. …………… …………… …………… 218,000
Common Stock—Panther …………………………. (100,000) ……………. …………… …………… …………… …………… …………… (100,000)
Paid-In Capital in Excess of Par—Panther ….. (800,000) ……………. …………… …………… …………… …………… …………… (800,000)
Retained Earnings—Panther …………………….. (365,000) ……………. (A1-2) 11,200 …………… ………..…. …………… …………… ……………
…………… ……………. (BI) 2,400 …………… …………… …………… …………… …..……….
…………… ……………. …………… …………… …………… …………… (351,400) …..……….
Dividends Declared—Panther ……………………. 20,000 ……………. …………… …………… …………… …………… 20,000 ……………
Total ………………………………………………………. 0 0 745,000 745,000 …………… …………… …………… ……………
Consolidated Net Income ………………………………………………………………………………………….………………………………………. (156,600) …………… …………… ……………
NCI Share (see distribution schedule) ……………………………………………………………………………..…………………………………. 720 (720) …………… ……………
Problem 4-7, Concluded
Eliminations and Adjustments:
(CY1) Current-year subsidiary income.
(CY2) Current-year dividend.
(BI) Defer beginning inventory profit.
(EI) Defer ending inventory profit.
(F1) Fixed asset profit at beginning of year.
4–35 Ch. 4—Problems
PROBLEM 4-8
Company Parent NCI
Implied Price Value
Value Analysis Schedule Fair Value (80%) (20%)
Company fair value ……………………………………. $590,000 $480,000 $110,000
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (80%) (20%)
Price paid for investment …………. $590,000 $480,000 $110,000
Less book value of interest acquired:
Common stock …………………. $ 10,000
Paid-in capital in excess of par 90,000
Adjustment of identifiable accounts:
Worksheet Amorti-
Adjustment Key Periods zation
Buildings ……………………………… $120,000 debit D1 20 $6,000
Problem 4-8, Continued
Amortization Schedule
Account adjustments Annual Current Prior
to be amortized Life Amount Year Years Total Key
Buildings 20 $ 6,000 $ 6,000 $ 6,000 $12,000 A10
Intercompany Inventory Profit Deferral
Parent Parent Parent Sub Sub Sub
Amount % Profit Amount % Profit
Beginning $20,000 30% $6,000 — 0% —
Ending 25,000 30% 7,500 — 0% —
Intercompany Fixed Asset Profit Deferral
Parent Sub
Original profit ……………………………………….. — $24,000
Year of sale………………………………………….. — 1
Subsidiary Sandin Company Income Distribution
Amortizations ……………………….. $14,000 Internally generated net
income …………………………….. $20,000
Realized gain on equipment …….. 4,000
Parent Panther Company Income Distribution
Ending inventory profit …………….. $7,500 Internally generated net
Problem 4-8, Continued
(2) Panther Company and Subsidiary Sandin Company
Consolidated Income Statement
For Year Ended December 31, 2016
Eliminations Consolidated Controlling Consolidated
Trial Balance
and Adjustments Income Retained Balance
Panther Sandin Dr. Cr. Statement NCI Earnings Sheet
Cash ………………………………………………………. 24,000 132,000 …………… …………… ..…………. …………… …………… 156,000
Accounts Receivable ……………………………….. 90,000 45,000 …………… (IA) 15,000 …………… …………… …………… 120,000
Buildings ………………………………………………… 800,000 200,000 (D1) 120,000 …………… …………… …………… …………… 1,120,000
Accumulated Depreciation ………………………… (220,000) (65,000) …………… (A1) 12,000 …………… .………….. …………… (297,000)
Equipment ………………………………………………. 150,000 72,000 (D2) 40,000 (F1) 24,000 …………… .………….. …………… 238,000
Accumulated Depreciation ………………………… (90,000) (46,000) …………… (A2) 16,000 …………… ..…………. …………… ……………
…………… ……………. (F1) 4,000 …………… …………… …………… …………… …..……….
Common Stock—Panther …………………………. (100,000) ……………. …………… …………… …………… …………… …………… (100,000)
Paid-In Capital in Excess of Par—Panther ….. (800,000) ……………. …………… …………… …………… …………… …………… (800,000)
Retained Earnings—Panther …………………….. (365,000) ……………. (A1-2) 11,200 …………… ………..…. …………… …………… ……………
…………… ……………. (BI) 6,000 …………… …………… …………… …………… …..……….
Dividends Declared—Sandin ……………………. …………… 10,000 …………… (CY2) 8,000 …………… 2,000 …………… ……………
Dividends Declared—Panther ……………………. 20,000 ……………. …………… …………… …………… …………… 20,000 ……………
0 0 780,100 780,100 …………… …………… …………… ……………
Consolidated Net Income ………………………………………………………………………………………….………………………………………. (173,500) …………… …………… ……………
Problem 4-8, Concluded
Eliminations and Adjustments:
(CY1) Current-year subsidiary income.
(CY2) Current-year dividend.
(BI) Defer beginning inventory profit.
(EI) Defer ending inventory profit.
(F2) Fixed asset profit realized.
PROBLEM 4-9
Company Parent NCI
Implied Price Value
Value Analysis Schedule Fair Value (90%) (10%)
Company fair value ………………………………………….. $1,400,000* $1,260,000 $140,000
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (90%) (10%)
Fair value of subsidiary ………………… $1,400,000 $1,260,000 $140,000
Less book value of interest acquired:
Adjustment of identifiable accounts:
Worksheet
Problem 4-9, Continued
Pettie Corporation and Subsidiary Sunco Corporation
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2016
Eliminations Consolidated Controlling Consolidated
Trial Balance
and Adjustments Income Retained Balance
Pettie Sunco Dr. Cr. Statement NCI Earnings Sheet
Cash ………………………………………………….. 15,000 45,500 …………. …………. ………….. .………… …………. 60,500
…………. ………….. …………. (D) 540,000 ………….. …………. …………. …………..
Goodwill …………………………………………….. …………. ………….. (D) 600,000 …………. .…………. …………. …………. 600,000
Accounts Payable and Other
Current Liabilities ……………………………… (140,000) (305,900) (CY3) 900 …………. ………….. ….……… …………. …………..
Dividend Income …………………………………. (900) ………….. (CY2) 900 …………. ………….. …………. …………. …………..
Interest Expense …………………………………. …………. 5,000 …………. (LN2) 5,000 ………….. …………. …………. …………..
Interest Income …………………………………… (5,000) ………….. (LN2) 5,000 …………. ………….. …………. …………. …………..
Cost of Goods Sold ……………………………… 1,500,000 400,000 (EI) 7,500 (IS) 300,000 1,607,500 …………. .………… …………..