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4–41 Ch. 4—Problems
Problem 4-9, Concluded
Eliminations and Adjustments:
(CV) Adjust investment for change in Sunco retained earnings, 90% × $50,000 = $45,000.
(CY2) Eliminate the entry recording the parent’s share of the subsidiary’s cash dividend.
(CY3) Eliminate the intercompany dividend payable and receivable.
(EL) Eliminate the parent’s (90%) share of Sunco Corporation equity against the invest-
ment.
Subsidiary Sunco Corporation Income Distribution
Internally generated net
income ................................. $200,000
Adjusted income ........................ $200,000
NCI share ................................... × 10%
NCI ............................................. $ 20,000
Parent Pettie Corporation Income Distribution
Unrealized profit in ending Internally generated net
inventory ........................ (EI) $7,500 income .................................... $165,000
PROBLEM 4-10
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%)
Price paid for investment .................. $250,000 $200,000 $ 50,000
Less book value of interest acquired:
Adjustment of identifiable accounts:
Worksheet Amorti-
Adjustment Key Periods zation
Inventory ........................................... $12,500 debit D1 1 $12,500
Equipment ......................................... 25,000 debit D2 4 6,250
Goodwill ............................................ 12,500 debit D3
Total adjustments ...................... $50,000
Amortization Schedule
Account adjustments Annual Current Prior
to be amortized Life Amount Year Years Total Key
Intercompany Inventory Profit Deferral
Parent Parent Parent Sub Sub Sub
Amount % Profit Amount % Profit
Problem 4-10, Continued
Intercompany Fixed Asset Profit Deferral
Parent Sub
Original profit ....................................................... $15,000 —
Year of sale ......................................................... 1 —
Subsidiary Salt Company Income Distribution
Unrealized profit in ending Internally generated net
inventory.............................. (EI) $5,000 income ............................. $105,000
Amortizations ............................ (A2) 6,250 Realized profit in beginning
Parent Peanut Company Income Distribution
Internally generated net
income ............................... $100,000
Problem 4-10, Continued
Peanut Company and Subsidiary Salt Company
Consolidated Income Statement
For Year Ended December 31, 2016
Eliminations Consolidated Controlling Consolidated
Trial Balance
and Adjustments Income Retained Balance
Peanut Salt Dr. Cr. Statement NCI Earnings Sheet
Inventory, December 31 .................................. 130,000 50,000 ............... (EI) 5,000 ............... ............... ............... 175,000
Other Current Assets ...................................... 241,000 235,000 ............... ............... ............... ............... ............... 476,000
Accumulated Depreciation .............................. (120,000) (30,000) ............... (A2) 12,500 ............... ............... ............... ...............
............... ................ (F1) 3,000 ............... ............... ............... ............... ...............
............... ................ (F2) 3,000 ............... ............... ............... ............... (156,500)
............... ................ (A2) 1,250 ............... ............... (34,250) ............... ...............
Common Stock—Peanut ................................ (200,000) ................ ............... ............... ............... ............... ............... (200,000)
Paid-In Capital in Excess of Par—Peanut ...... (100,000) ................ ............... ............... ............... ............... ............... (100,000)
Retained Earnings—Peanut ........................... (320,000) ................ (A2) 5,000 ............... ............... ............... ............... ...............
0 0 435,500 435,500 ............... ............... ............... ...............
Consolidated Net Income ..................................................................................................................................................... (206,750) ............... ............... ...............
To NCI (see distribution schedule) ....................................................................................................................................... 20,750 (20,750) ............... ...............
To Controlling Interest (see distribution schedule) ............................................................................................................... 186,000 ............... (186,000) ...............
4–45 Ch. 4—Problems
Problem 4-10, Concluded
Eliminations and Adjustments:
(CY1) Current-year subsidiary income.
(CY2) Current-year dividend.
(EL) Eliminate controlling interest in subsidiary equity.
(D)/(NCI) Distribute excess and NCI adjustment.
Ch. 4—Problems 4–46
PROBLEM 4-11
Company Parent NCI
Implied Price Value
Value Analysis Schedule Fair Value (80%) (20%)
Company fair value .................................................. $250,000* $200,000 $50,000
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (80%) (20%)
Price paid for investment .................. $250,000 $200,000 $ 50,000
Adjustment of identifiable accounts:
Worksheet Amorti-
Adjustment Key Periods zation
Inventory ........................................... $ 12,500 debit D1 1 $12,500
Equipment ......................................... 25,000 debit D2 4 6,250
Problem 4-11, Continued
Amortization Schedule
Account adjustments Annual Current Prior
to be amortized Life Amount Year Years Total Key
Inventory 1 $12,500 $ — $12,500 $12,500 A1
Intercompany Inventory Profit Deferral
Parent Parent Parent Sub Sub Sub
Amount % Profit Amount % Profit
Beginning — 0% — $20,000 50% $10,000
Ending — 0% — 10,000 50% 5,000
Intercompany Fixed Asset Profit Deferral
Parent Sub
Original profit ....................................................... $15,000 —
Year of sale ......................................................... 1 —
Subsidiary Salt Company Income Distribution
Unrealized profit in ending Internally generated net
inventory............................ (EI) $5,000 income ............................ $105,000
Amortizations .......................... (A2) 6,250 Realized profit in beginning
Parent Peanut Company Income Distribution
Internally generated net
income .............................. $100,000
Problem 4-11, Continued
Peanut Company and Subsidiary Salt Company
Consolidated Income Statement
For Year Ended December 31, 2016
Eliminations Consolidated Controlling Consolidated
Trial Balance
and Adjustments Income Retained Balance
Peanut Salt Dr. Cr. Statement NCI Earnings Sheet
Inventory, December 31 .................................. 130,000 50,000 ............... (EI) 5,000 ............... ............... ............... 175,000
Other Current Assets ...................................... 241,000 235,000 ............... ............... ............... ............... ............... 476,000
Investment in Salt Company ........................... 200,000 ................ (CV) 40,000 ............... ............... ............... ............... ...............
............... ................ (F1) 3,000 ............... ............... ............... ............... ...............
............... ................ (F2) 3,000 ............... ............... ............... ............... (156,500)
Other Intangible Assets ................................... ............... 20,000 ............... ............... ............... ............... ............... 20,000
Goodwill .......................................................... ............... ................ (D3) 12,500 ............... ............... ............... ............... 12,500
Current Liabilities ............................................ (150,000) (70,000) ............... ............... ............... ............... ............... (220,000)
Bonds Payable ................................................ ............... (100,000) ............... ............... ............... ............... ............... (100,000)
Other Long-Term Liabilities ............................. (200,000) (50,000) ............... ............... ............... ............... ............... (250,000)
Common Stock—Peanut ................................ (200,000) ................ ............... ............... ............... ............... ............... (200,000)
Paid-In Capital in Excess of Par—Peanut ...... (100,000) ................ ............... ............... ............... ............... ............... (100,000)
Retained Earnings—Peanut ........................... (280,000) ................ (A2) 5,000 (CV) 40,000 ............... ............... ............... ...............
............... ................ (D1) 10,000 ............... ............... ............... ............... ...............
............... ................ (BI) 8,000 ............... ............... ............... ............... ...............
............... ................ (F1) 12,000 ............... ............... ............... (285,000) ...............
Sales ............................................................... (600,000) (315,000) (IS) 40,000 ............... (875,000) ............... ............... ...............
4–49 Ch. 4—Problems
Problem 4-11, Concluded
Eliminations and Adjustments:
(D)/(NCI) Distribute excess and NCI adjustment.
(A) Amortize excess, (A1) includes $12,500 inventory adjustment.
(IS) Eliminate intercompany sales during current period.
(BI) Eliminate beginning inventory profit.
(EI) Defer ending inventory profit.
(F2) Fixed asset profit realized.
Ch. 4—Problems 4–50
PROBLEM 4-12
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%)
Price paid for investment .................. $250,000 $200,000 $ 50,000
Less book value of interest acquired:
Adjustment of identifiable accounts:
Worksheet Amorti-
Adjustment Key Periods zation
Inventory ........................................... $ 12,500 debit D1 1 $12,500
Problem 4-12, Continued
Amortization Schedule
Account adjustments Annual Current Prior
to be amortized Life Amount Year Years Total Key
Intercompany Inventory Profit Deferral
Parent Parent Parent Sub Sub Sub
Amount % Profit Amount % Profit
Beginning — 0% — $20,000 50% $10,000
Ending — 0% — 10,000 50% 5,000
Intercompany Fixed Asset Profit Deferral
Parent Sub
Original profit ....................................................... $15,000 —
Year of sale ......................................................... 1 —
Subsidiary Salt Company Income Distribution
Unrealized profit in ending Internally generated net
inventory.............................. (EI) $5,000 income ............................. $105,000
Parent Peanut Company Income Distribution
Internally generated net
income ................................ $100,000
Problem 4-12, Continued
Peanut Company and Subsidiary Salt Company
Consolidated Income Statement
For Year Ended December 31, 2016
Eliminations Consolidated Controlling Consolidated
Trial Balance
and Adjustments Income Retained Balance
Peanut Salt Dr. Cr. Statement NCI Earnings Sheet
Inventory, December 31 .................................. 130,000 50,000 ............... (EI) 5,000 ............... ............... ............... 175,000
Other Long-Term Investments ........................ 20,000 ................ ............... ............... ............... ............... ............... 20,000
Land ................................................................ 140,000 80,000 ............... ............... ............... ............... ............... 220,000
Buildings and Equipment ................................ 375,000 200,000 (D2) 18,750 (F1) 15,000 ............... ............... ............... 578,750
Accumulated Depreciation .............................. (120,000) (30,000) ............... (A2) 6,250 ............... ............... ............... ...............
............... ................ (F1) 3,000 ............... ............... ............... ............... ...............
............... ................ (F2) 3,000 ............... ............... ............... ............... (150,250)
............... ................ (EL) 112,000 ............... ............... (34,250) ............... ...............
Common Stock—Peanut ................................ (200,000) ................ ............... ............... ............... ............... ............... (200,000)
Paid-In Capital in Excess of Par—Peanut ...... (100,000) ................ ............... ............... ............... ............... ............... (100,000)
Retained Earnings—Peanut ........................... (297,000) ................ (F1) 12,000 ............... ............... ............... (285,000) ...............
Sales ............................................................... (600,000) (315,000) (IS) 40,000 ............... (875,000) ............... ............... ...............
Cost of Goods Sold ......................................... 350,000 150,000 ............... (IS) 40,000 ............... ............... ............... ...............
............... ................ (EI) 5,000 (Adj) 10,000 455,000 ............... ............... ...............
4–53 Ch. 4—Problems
Problem 4-12, Concluded
Eliminations and Adjustments:
(Adj) Adjust subsidiary for $10,000 beginning inventory profit.
(CY1) Current-year subsidiary income.
(CY2) Current-year dividend.
Ch. 4—Problems 4–54
PROBLEM 4-13
(1) Company Parent NCI
Implied Price Value
Value Analysis Schedule Fair Value (80%) (20%)
Company fair value ........................................... $375,000* $300,000 $75,000
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (80%) (20%)
Price paid for investment ............. $375,000 $300,000 $ 75,000
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 .................................... $100,000 debit D1 20 $ 5,000
