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5–41 Ch. 5—Problems
PROBLEM 5-12
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (80%) (20%)
Fair value of subsidiary ..................... $562,500 $450,000 $112,500
Less book value of interest acquired:
Common stock ($1 par) ............... $ 10,000
Adjustment of identifiable accounts:
Worksheet Amortization
Adjustment Key Life per Year
Account Adjustments Annual Current Prior
to Be Amortized Life Amount Year Years Total Key
Buildings ............................... 20 $5,000 $5,000 $10,000 $15,000 (A1)
Problem 5-12, Continued
Subsidiary Simon Company Income Distribution
Ending inventory profit ................ $2,000 Internally generated net
Amortization ................................ 5,000 income ..................................... $22,504
Beginning inventory profit.............. 3,000
Problem 5-12, Continued
Press Company and Subsidiary Simon Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2017
Eliminations Consolidated Controlling Consolidated
Trial Balance
and Adjustments Income Retained Balance
Press Simon Dr. Cr. Statement NCI Earnings Sheet
Cash ................................................. 140,000 78,274 ............. ............ ............ ............ ............. 218,274
Accounts Receivable ........................ 87,000 55,000 ............. (IA) 7,000 ............ ............ ............. 135,000
Minimum Lease Payments
Receivable .................................... 80,089 ............ ............. (CL2) 80,089 ............ ............ ............. ............
Unearned Interest—Minimum Lease
Payment ........................................ (10,123) ............ (CL2) 10,123 ............ ............ ............ ............. ............
Buildings .......................................... 800,000 400,000 (D1) 100,000 ............ ............ ............ ............. 1,300,000
Accumulated Depreciation—
Capital Lease ................................ ............ (36,000) (CL3) 36,000 ............ ............ ............ ............. ............
Goodwill ............................................ ............ ............ (D2) 72,500 ............ ............ ............ ............. 72,500
Accounts Payable ............................ (60,000) (30,000) (IA) 7,000 ............ ............ ............ ............. (83,000)
Bonds Payable ................................. ............ ............ ............. ............ ............ ............ ............. ............
Discount (Premium) ......................... ............ ............ ............. ............ ............ ............ ............. ............
Problem 5-12, Continued
Press Company and Subsidiary Simon Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2017
(Concluded)
Eliminations Consolidated Controlling Consolidated
Trial Balance
and Adjustments Income Retained Balance
Press Simon Dr. Cr. Statement NCI Earnings Sheet
Common Stock ($1 par)—Simon ..... ............ (10,000) (EL) 8,000 ............ ............ (2,000) ............. ............
Paid-In Capital in Excess of
Common Stock ($1 par)—Press ...... (100,000) ............ ............. ............ ............ ............ ............. (100,000)
Paid-In Capital in Excess of Par
—Press ......................................... (800,000) ............ ............. ............ ............ ............ ............. (800,000)
Retained Earnings—Press ............... (636,839) ............ (A1) 8,000 ............ ............ ............ ............. ............
............ ............ (BI) 2,400 ............ ............ ............ ............. ............
Subsidiary Income ............................ (18,003) ............ (CY1) 18,003 ............ ............ ............ ............. ............
Dividends Declared—Simon ............ ............ 10,000 ............. (CY2) 8,000 ............ 2,000 ............. ............
Dividends Declared—Press ............. 20,000 ............ ............. ............ ............ ............ 20,000 ............
Totals ............................................ 0 0 852,731 852,731 ............ ............ ............. ............
Consolidated Net Income ................................................................................................................ (171,000) ............ ............. ............
5–45 Ch. 5—Problems
Problem 5-12, Concluded
Eliminations and Adjustments:
(CY1) Current-year subsidiary income.
(CY2) Current-year dividend.
(EL) Eliminate controlling interest in subsidiary equity.
(D) Distribute excess.
(A) Amortize excess.
PROBLEM 5-13
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (80%) (20%)
Fair value of subsidiary ..................... $562,500 $450,000 $112,500
Less book value of interest acquired:
Common stock ($1 par) ............... $ 10,000
Problem 5-13, Continued
Adjustment of identifiable accounts:
Worksheet Amortization
Adjustment Key Life per Year
Account Adjustments Annual Current Prior
to Be Amortized Life Amount Year Years Total Key
Buildings ............................... 20 $5,000 $5,000 $5,000 $10,000 (A1)
Total amortizations .......... $5,000 $5,000 $5,000 $10,000
Intercompany Inventory Profit Deferral
Parent Parent Parent Sub Sub Sub
Amount Percent Profit Amount Percent Profit
Beginning .............................. — 0% — $10,000 25% $2,500
Subsidiary Simon Company Income Distribution
Ending inventory profit ................ $3,000 Internally generated net
Amortization ................................ 5,000 income ..................................... $40,804
Beginning inventory profit ............. 2,500
Adjusted income ........................... $35,304
Problem 5-13, Continued
Press Company and Subsidiary Simon Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2016
Eliminations Consolidated Controlling Consolidated
Trial Balance
and Adjustments Income Retained Balance
Press Simon Dr. Cr. Statement NCI Earnings Sheet
Cash ................................................. 72,363 73,637 ............. ............ ............ ............ ............. 146,000
Minimum Lease Payments
Receivable .................................... 103,452 ............ ............. (CL2) 103,452 ............ ............ ............. ............
Unearned Interest ............................ (17,619) ............ (CL2) 17,619 ............ ............ ............ ............. ............
Buildings ........................................... 800,000 400,000 (D1) 100,000 ............ ............ ............ ............. 1,300,000
Accumulated Depreciation ............... (220,000) (220,000) ............. (A1) 10,000 ............ ............ ............. (450,000)
Equipment ........................................ 150,000 100,000 ............. (F1) 15,000 ............ ............ ............. 335,000
............ ............ (CL3) 100,000 ............ ............ ............ ............. ............
Accumulated Depreciation—
Capital Lease ................................ ............ (18,000) (CL3) 18,000 ............ ............ ............ ............. ............
Goodwill ............................................ ............ ............ (D2) 72,500 ............ ............ ............ ............. 72,500
Accounts Payable ............................ (60,000) (40,000) (IA) 6,000 ............ ............ ............ ............. (94,000)
Bonds Payable ................................. ............ ............ ............. ............ ............ ............ ............. ............
Discount (Premium) ......................... ............ ............ ............. ............ ............ ............ ............. ............
............ ............ ............. ............ ............ ............ ............. ............
(continued)
Problem 5-13, Continued
Press Company and Subsidiary Simon Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2016
(Concluded)
Eliminations Consolidated Controlling Consolidated
Trial Balance
and Adjustments Income Retained Balance
Press Simon Dr. Cr. Statement NCI Earnings Sheet
Paid-In Capital in Excess of Par
—Simon ....................................... ............ (190,000) (EL) 152,000 ............ ............ (38,000) ............. ............
Retained Earnings—Simon .............. ............ (230,000) (EL) 184,000 ............ ............ ............ ............. ............
Paid-In Capital in Excess of Par
—Press ......................................... (800,000) ............ ............. ............ ............ ............ ............. (800,000)
Retained Earnings—Press ............... (450,000) ............ (A1) 4,000 ............ ............ ............ ............. ............
............ ............ (BI) 2,000 ............ ............ ............ ............. ............
............ ............ ............. ............ ............ ............ (444,000) ............
Subsidiary Income ............................ (32,643) ............ (CY1) 32,643 ............ ............ ............ ............. ............
Dividends Declared—Simon ............ 10,000 ............. (CY2) 8,000 ............ 2,000 ............. ............
Dividends Declared—Press ............. 20,000 ............ ............. ............ ............ ............ 20,000 ............
Totals ............................................ 0 0 867,291 867,291 ............ ............ ............. ............
Consolidated Net Income ................................................................................................................ (197,500) ............ ............. ............
5–49 Ch. 5—Problems
Problem 5-13, Concluded
Eliminations and Adjustments:
(CY1) Current-year subsidiary income.
(F1) Fixed asset profit at beginning of year.
(F2) Fixed asset profit realized.
(CL1) Intercompany interest on capital lease.
PROBLEM 5-14
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (80%) (20%)
Fair value of subsidiary ..................... $562,500 $450,000 $112,500
Less book value of interest acquired:
Common stock ($1 par) ............... $ 10,000
Paid-in capital in excess of par ... 190,000
Problem 5-14, Continued
Adjustment of identifiable accounts:
Worksheet Amortization
Adjustment Key Life per Year
Buildings ........................................... $100,000 debit D1 20 $5,000
Account Adjustments Annual Current Prior
to Be Amortized Life Amount Year Years Total Key
Buildings ............................... 20 $5,000 $5,000 $10,000 $15,000 (A1)
Intercompany Inventory Profit Deferral
Parent Parent Parent Sub Sub Sub
Amount Percent Profit Amount Percent Profit
Subsidiary Simon Company Income Distribution
Ending inventory profit ................ $2,000 Internally generated net
Amortization ................................ 5,000 income ..................................... $22,504
Beginning inventory profit ............. 3,000
Parent Press Company Income Distribution
Internally generated net
income ..................................... $152,496
80% × Simon adjusted income
Total .............................................. $170,299
5–51 Ch. 5—Problems
Problem 5-14, Continued
Press Company and Subsidiary Simon Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2017
Eliminations Consolidated Controlling Consolidated
Trial Balance
and Adjustments Income Retained Balance
Press Simon Dr. Cr. Statement NCI Earnings Sheet
Cash ................................................. 140,000 78,274 ............. ............ ............ ............ ............. 218,274
Accounts Receivable ........................ 87,000 55,000 ............. (IA) 7,000 ............ ............ ............. 135,000
Minimum Lease Payments
Receivable .................................... 80,089 ............ ............. (CL2) 80,089 ............ ............ ............. ............
Unearned Interest ............................ (10,123) ............ (CL2) 10,123 ............ ............ ............ ............. ............
Buildings ........................................... 800,000 400,000 (D1) 100,000 ............ ............ ............ ............. 1,300,000
Accumulated Depreciation ............... (250,000) (230,000) ............. (A1) 15,000 ............ ............ ............. (495,000)
Accumulated Depreciation—
Capital Lease ................................ ............ (36,000) (CL3) 36,000 ............ ............ ............ ............. ............
Goodwill ............................................ ............ ............ (D2) 72,500 ............ ............ ............ ............. 72,500
Accounts Payable ............................ (60,000) (30,000) (IA) 7,000 ............ ............ ............ ............. (83,000)
Bonds Payable ................................ ............ ............ ............. ............ ............ ............ ............. ............
Discount (Premium) ........................ ............ ............ ............. ............ ............ ............ ............. ............
............ ............ ............. ............ ............ ............ ............. ............
Obligation Under Capital Lease ....... ............ (62,470) (CL2) 62,470 ............ ............ ............ ............. ............
Problem 5-14, Continued
Press Company and Subsidiary Simon Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2017
(Concluded)
Eliminations Consolidated Controlling Consolidated
Trial Balance
and Adjustments Income Retained Balance
Press Simon Dr. Cr. Statement NCI Earnings Sheet
Common Stock ($1 par)—Simon ..... ............ (10,000) (EL) 8,000 ............ ............ (2,000) ............. ............
Paid-In Capital in Excess of Par
Paid-In Capital in Excess of Par
—Press ......................................... (800,000) ............ ............. ............ ............ ............ ............. (800,000)
Retained Earnings—Press ............... (636,839) ............ (A1) 8,000 ............ ............ ............ ............. ............
............ ............ (BI) 2,400 ............ ............ ............ ............. ............
............ ............ (F1) 12,000 ............ ............ ............ (614,439) ............
Dividends Declared—Simon ............ ............ 10,000 ............. (CY2) 8,000 ............ 2,000 ............. ............
Dividends Declared—Press ............. 20,000 ............ ............. ............ ............ ............ 20,000 ............
Totals ............................................ 0 0 870,731 870,731 ............ ............ ............. ............
Consolidated Net Income ................................................................................................................ (174,000) ............ ............. ............
To NCI (see distribution schedule) .............................................................................................. 3,701 (3,701) ............. ............
Problem 5-14, Concluded
Eliminations and Adjustments:
(CY1) Current-year subsidiary income.
(CY2) Current-year dividend.
(EI) Defer ending inventory profit.
(F1) Fixed asset profit at beginning of year.
(F2) Fixed asset profit realized.
(CL1) Intercompany interest on capital lease.
PROBLEM 5-15
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:
Adjustment of identifiable accounts:
Worksheet Amortization
Adjustment Key Life per Year
Goodwill ............................................ $20,000 debit D
Problem 5-15, Continued
Subsidiary Slammer Company Income Distribution
Internally generated net
income ................................. $42,937
Adjusted income ....................... $42,937
Parent Plessor Industries Income Distribution
Sales profit on leases .................. $7,298 Internally generated net
income ................................. $129,361
Profit realized through use
of machine ........................... 912
Problem 5-15, Continued
Plessor Industries and Subsidiary Slammer Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2017
Eliminations Consolidated Controlling Consolidated
Trial Balance
and Adjustments Income Retained Balance
Plessor Slammer Dr. Cr. Statement NCI Earnings Sheet
Cash ....................................................... 60,000 40,745 .......... .......... ......... .......... .......... 100,745
Accounts Receivable .............................. 97,778 76,000 .......... .......... ......... .......... .......... 173,778
Inventory ................................................ 140,000 120,000 .......... .......... ......... .......... .......... 260,000
Minimum Lease Payments Receivable .. 127,000 .......... .......... (CL2a) 80,000 ......... .......... .......... .............
Assets Under Capital Lease ................... .......... 156,068 .......... (CL3a) 103,770 ......... .......... .......... .............
.......... .......... .......... (CL3b) 52,298 ......... .......... .......... .............
Accumulated Depreciation—Assets
Under Capital Lease ........................... .......... (27,291) (CL3a) 20,754 .......... ......... .......... .......... .............
.......... .......... (CL3b) 6,537 .......... ......... .......... .......... .............
Property, Plant, and Equipment ............. 1,900,000 310,000 (CL3a) 103,770 (F1) 7,298 ......... .......... .......... .............
.......... .......... (CL3b) 52,298 .......... ......... .......... .......... 2,358,770
Problem 5-15, Continued
Plessor Industries and Subsidiary Slammer Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2017
(Concluded)
Eliminations Consolidated Controlling Consolidated
Trial Balance
and Adjustments Income Retained Balance
Plessor Slammer Dr. Cr. Statement NCI Earnings Sheet
Common Stock ($10 par)—Plessor ........ (700,000) .......... .......... .......... ......... .......... .......... (700,000)
Paid-In Capital in Excess of Par
Interest Income ...................................... (12,063) .......... (CL1a) 7,587 .......... ......... .......... .......... .............
.......... .......... (CL1b) 4,476 .......... ......... .......... .......... .............
Cost of Goods Sold ................................ 780,000 380,000 .......... .......... 1,160,000 .......... .......... .............
Totals .......................................................................................................................................................................................................................... 0
Eliminations and Adjustments:
(CV) Conversion to equity as of beginning of year, 80% × ($130,000 – $80,000) = $40,000.
(CY2) Eliminate the intercompany dividends.
(EL) Eliminate 80% of the subsidiary equity.
