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Problem 6-9, Concluded
Parson Company and Subsidiary Solar Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2016
(Concluded)
Eliminations Consolidated Controlling Consolidated
Trial Balance and Adjustments Income Retained Balance
Parson Solar Dr. Cr. Statement NCI Earnings Sheet
Sales ...................................................... (950,000) (400,000) (IS) 100,000 .......... (1,250,000) .......... .......... ..........
Interest Expense .................................... .......... 8,000 .......... .......... 8,000 .......... .......... ..........
Gain on Sale of Fixed Asset ................... .......... (25,000) (F1) 25,000 .......... ......... .......... .......... ..........
Subsidiary Income .................................. (57,600) .......... (CY1) 57,600 .......... ......... .......... .......... ..........
Dividends Declared—Solar .................... .......... 10,000 .......... (CY2) 8,000 ......... 2,000 .......... ..........
Eliminations and Adjustments:
(CY1) Current-year subsidiary income.
(CY2) Current-year dividend.
(EL) Eliminate controlling interest in subsidiary equity.
(D)/(NCI) Distribute excess and adjust NCI per D&D schedule.
(BI) Defer beginning inventory profit.
(EI) Defer ending inventory profit.
(F1) Fixed asset profit at beginning of year.
(F2) Fixed asset profit realized.
6–37 Ch. 6—Problems
PROBLEM 6-10
Determination and Distribution of Excess Schedule
Company Parent NCI
Implied Price Value
Fair Value (70%) (30%)
Fair value of subsidiary ..................... $550,000 $385,000 $165,000
Less book value of interest acquired:
Adjustment of identifiable accounts:
Worksheet Amortization
Adjustment Key Life per Year
Goodwill ............................................ $128,000 debit D
Intercompany Inventory Profit Deferral
Parent Parent Parent Sub Sub Sub
Amount Percent Profit Amount Percent Profit
Beginning .............................. — 0% — $10,000 30% $3,000
Subsidiary Solan Company Income Distribution
Ending inventory profit .................. $6,000 Internally generated income ........ $ 80,000
Beginning inventory profit ........... 3,000
Adjusted income ......................... $ 77,000
Tax provision (30%) .................... (23,100)
Problem 6-10, Continued
Parent Perko Company Income Distribution
Internally generated income ........ $100,000
Realized gain .............................. 7,000
Adjusted income ......................... $107,000
Tax provision (30%) .................... (32,100)
Net income .................................. $ 74,900
DTA/DTL adjustments:
To beginning retained earnings: Parent Sub
Subsidiary transactions:
Beginning inventory ............................................ $ 3,000
Remaining fixed asset profit ............................... —
Total ................................................................... $ 3,000
First tax .............................................................. $ 900 $ 630 $ 270
Second tax ......................................................... $ 88 88
To current year:
Subsidiary transactions:
Beginning inventory ............................................ $ (3,000)
Ending inventory ................................................ 6,000
Fixed asset sale ................................................. —
Realized fixed asset ........................................... —
Total ................................................................... $ 3,000
First tax .............................................................. $ 900 $ 630 $ 270
Second tax ......................................................... $ 88 $ 88
Problem 6-10, Continued
Perko Company and Subsidiary Solan Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2016
Eliminations Consolidated Controlling Consolidated
Trial Balance and Adjustments Income Retained Balance
Perko Solan Dr. Cr. Statement NCI Earnings Sheet
Accounts Receivable .............................. 282,576 295,000 .......... .......... ......... .......... .......... 577,576
Inventory ................................................ 110,000 85,000 .......... (EI) 6,000 ......... .......... .......... 189,000
Accumulated Depreciation ..................... (35,000) (20,000) .......... .......... ......... .......... .......... ..........
.......... .......... .......... .......... ......... .......... .......... ..........
Retained Earnings—Solan ..................... .......... (250,000) (EL) 175,000 (NCI) 38,400 ......... .......... .......... ..........
.......... .......... (BI) 900 (T1) 270 ......... .......... .......... ..........
.......... .......... .......... .......... ......... (112,770) .......... ..........
Common Stock—Perko .......................... (100,000) .......... .......... .......... ......... .......... .......... (100,000)
Problem 6-10, Concluded
Perko Company and Subsidiary Solan Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2016
(Concluded)
Eliminations Consolidated Controlling Consolidated
Trial Balance and Adjustments Income Retained Balance
Perko Solan Dr. Cr. Statement NCI Earnings Sheet
Sales ...................................................... (590,000) (370,000) (IS) 60,000 .......... (900,000) .......... .......... ..........
Cost of Goods Sold ................................ 340,000 220,000 .......... (IS) 60,000 ......... .......... .......... ..........
.......... .......... .......... .......... ......... .......... .......... ..........
Provision for Tax .................................... 32,352 24,000 (T2) 1,112 .......... 57,464 .......... .......... ..........
Subsidiary Income .................................. (39,200) .......... (CY1) 39,200 .......... ......... .......... .......... ..........
Dividends Declared—Solan ................... .......... 30,000 .......... (CY2) 21,000 ......... 9,000 .......... ..........
Dividends Declared—Perko ................... 60,000 .......... .......... .......... ......... .......... 60,000 ..........
Totals .................................................. 0 0 608,600 608,600 ......... .......... .......... ..........
Eliminations and Adjustments:
(CY1) Current-year subsidiary income.
(CY2) Current-year dividend.
(F1) Fixed asset profit at beginning of year.
(F2) Fixed asset profit realized.
6–41 Ch. 6—Problems
PROBLEM 6-11
(1) 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 ...................... $ 10,000
Paid-in capital in excess of par 190,000
Adjustment of identifiable accounts:
Worksheet Amortization
Adjustment Key Life per Year
Buildings .................................... $100,000 debit D1 20 $ 5,000
(2) 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)
Intercompany Inventory Profit Deferral
Parent Parent Parent Sub Sub Sub
Amount Percent Profit Amount Percent Profit
Problem 6-11, Continued
Subsidiary Stock Company Income Distribution
Amortizations .............................. $15,000 Internally generated income ........ $ 42,000
Ending inventory profit ................ 4,800 Beginning inventory profit ............ 3,600
Adjusted income .......................... $ 25,800
Tax provision (see schedule) ....... (11,520)
Subsidiary tax schedule: Controlling NCI Total
(1) Total adjusted income ............................. $20,640 $5,160 $25,800
(2) NCI share of asset adjustments
($15,000 × 20%) .................................. 3,000 3,000
Parent Penske Company Income Distribution
Internally generated income ........ $205,000
Realized gain .............................. 8,000
Adjusted income ......................... $213,000
Tax provision (40%) .................... (85,200)
Net income .................................. $127,800
Controlling share of
6–43 Ch. 6—Problems
Problem 6-11, Continued
DTA/DTL adjustments:
To beginning retained earnings: Total Parent Sub
Subsidiary transactions:
Beginning inventory ............................................ $ 3,600 $ 2,880 $ 720
Remaining fixed asset profit ............................... — — —
Amortizations (80%) ........................................... 12,000 12,000
To current year:
Subsidiary transactions:
Beginning inventory ............................................ $ (3,600) $ (2,880) $(720)
Ending inventory ................................................ 4,800 3,840 960
Fixed asset sale ................................................. —
Realized fixed asset ........................................... —
Amortizations (80%) ........................................... 12,000 12,000
Total ................................................................... $13,200 $12,960 $ 240
Problem 6-11, Continued
Penske Company and Subsidiary Stock Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2016
Eliminations Consolidated Controlling Consolidated
Trial Balance and Adjustments Income Retained Balance
Penske Stock Dr. Cr. Statement NCI Earnings Sheet
Cash ....................................................... 92,400 53,200 .......... .......... ......... .......... .......... 145,600
Accounts Receivable .............................. 150,600 90,000 .......... (IA) 6,000 ......... .......... .......... 234,600
Inventory ................................................ 105,000 90,000 .......... (EI) 4,800 ......... .......... .......... 190,200
Accumulated Depreciation ..................... (250,000) (70,000) .......... (A1) 10,000 ......... .......... .......... (330,000)
Equipment .............................................. 210,000 120,000 (D2) 50,000 (F1) 40,000 ......... .......... .......... 340,000
Accumulated Depreciation ..................... (115,000) (90,000) .......... (A2) 20,000 ......... .......... .......... ...........
.......... .......... (F1) 8,000 .......... ......... .......... .......... ...........
.......... .......... (F2) 8,000 .......... ......... .......... .......... (209,000)
Goodwill ................................................. .......... 30,000 (D3) 42,500 .......... ......... .......... .......... 72,500
.......... .......... .......... .......... ......... (79,308) .......... ...........
Common Stock—Penske ....................... (100,000) .......... .......... .......... ......... .......... .......... (100,000)
Problem 6-11, Concluded
Penske Company and Subsidiary Stock Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2016
(Concluded)
Eliminations Consolidated Controlling Consolidated
Trial Balance and Adjustments Income Retained Balance
Penske Stock Dr. Cr. Statement NCI Earnings Sheet
Sales ...................................................... (890,000) (350,000) (IS) 30,000 .......... (1,210,000) .......... .......... ...........
Cost of Goods Sold ................................ 480,000 220,000 .......... (IS) 30,000 ......... .......... .......... ...........
.......... .......... (EI) 4,800 (BI) 3,600 671,200 .......... .......... ...........
.......... .......... .......... .......... ......... .......... .......... ...........
Provision for Income Tax ....................... 83,613 16,800 .......... (T2) 2,702 97,711 .......... .......... ...........
Subsidiary Income .................................. (20,160) .......... (CY1) 20,160 .......... ......... .......... .......... ...........
(CY2) Current-year dividend.
(EL) Eliminate controlling interest in subsidiary equity.
(D)/(NCI) Distribute excess and adjust NCI per D&D schedule.
(A) Amortize excess.
(IS) Eliminate intercompany sales during current period.
(EI) Defer ending inventory profit.
(F1) Fixed asset profit at beginning of year.
(F2) Fixed asset profit realized.
(T1) Deferred tax asset (liability) applicable to beginning
retained earnings.
PROBLEM 6-12
(1) 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 interest acquired:
Common stock ....................... $ 10,000
Paid-in capital in excess of par 190,000
Adjustment of identifiable accounts:
Worksheet Amortization
Adjustment Key Life per Year
Buildings .................................... $100,000 debit D1 20 $ 5,000
Equipment.................................. 50,000 debit D2 5 10,000
(2) 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)
Equipment...................... 5 10,000 10,000 20,000 30,000 (A2)
Problem 6-12, Continued
Subsidiary Stock Company Income Distribution
Amortizations .............................. $15,000 Internally generated income ........ $ 72,000
Ending inventory profit ................ 3,000 Beginning inventory profit ............ 4,800
Equipment gain ........................... 25,000 Realized gain ............................... 5,000
Subsidiary tax schedule: Controlling NCI Total
(1) Total adjusted income ............................. $31,040 $ 7,760 $38,800
(3) Taxable income ...................................... $31,040 $10,760 $41,800
(5) Net income (line 1 – line 4) ..................... $18,624 $ 3,456 $22,080
Parent Penske Company Income Distribution
Ending inventory profit .................. $6,000 Internally generated income ........ $159,000
Realized gain .............................. 8,000
Adjusted income ......................... $161,000
Tax provision (40%) .................... (64,400)
Net income .................................. $ 96,600
Controlling share of
Problem 6-12, Continued
DTA/DTL adjustments:
To beginning retained earnings: Parent Sub
Subsidiary transactions:
Beginning inventory ............................................ $ 4,800 $ 3,840 $ 960
Total RE adjustments ............................................... $22,456 $22,072 $ 384
To current year:
Subsidiary transactions:
Beginning inventory ............................................ $ (4,800) $ (3,840) $ (960)
Ending inventory ................................................ 3,000 2,400 600
6–49 Ch. 6—Problems
Problem 6-12, Continued
Penske Company and Subsidiary Stock Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2017
Buildings ................................................ 900,000 250,000 (D1) 100,000 .......... ......... .......... .......... 1,250,000
Accumulated Depreciation ..................... (290,000) (80,000) .......... (A1) 15,000 ......... .......... .......... (385,000)
Equipment .............................................. 210,000 120,000 (D2) 50,000 (F1) 65,000 ......... .......... .......... 315,000
Accumulated Depreciation ..................... (140,000) (100,000) .......... (A2) 30,000 ......... .......... .......... ..........
.......... .......... (BI) 960 (T1) 384 ......... .......... .......... ..........
.......... .......... (A1–A2) 6,000 .......... ......... .......... .......... ..........
.......... .......... .......... .......... ......... (79,204) .......... ..........
Common Stock—Penske ....................... (100,000) .......... .......... .......... ......... .......... .......... (100,000)
Problem 6-12, Concluded
Penske Company and Subsidiary Stock Company
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2017
(Concluded)
Eliminations Consolidated Controlling Consolidated
Trial Balance and Adjustments Income Retained Balance
Penske Stock Dr. Cr. Statement NCI Earnings Sheet
Sales ...................................................... (950,000) (400,000) (IS) 100,000 .......... (1,250,000) .......... .......... ..........
Gain on Sale of Fixed Asset ................... .......... (25,000) (F1) 25,000 .......... ......... .......... .......... ..........
Provision for Income Taxes .................... 66,365 28,800 .......... (T2) 12,555 82,610 .......... .......... ..........
Subsidiary Income .................................. (34,560) .......... (CY1) 34,560 .......... ......... .......... .......... ..........
(CY2) Current-year dividend.
(EL) Eliminate controlling interest in subsidiary equity.
(IS) Eliminate intercompany sales during current period.
(IA) Eliminate intercompany unpaid trade accounts.
(F1) Fixed asset profit at beginning of year.
(F2) Fixed asset profit realized.
(T2) Deferred tax asset (liability) applicable to current
year.
