Académique Documents
Professionnel Documents
Culture Documents
405,000
45,000
(45,000)
-0-
45,000
5,000
(5,000)
-0-
450,000
50,000
(50,000)
-0-
*$450,000/.90
Problem 5-1
Calculations:
Computation and Allocation of Difference Schedule
Parent
Share
Purchase price and implied value
Less: Book value of equity acquired
Difference between implied and book value
Equipment (net) ($1,500,000 - $600,000)
Balance
Goodwill
Balance
$2,800,000
1,200,000
1,600,000
(720,000)
880,000
(880,000)
-0-
NonEntire
Controlling Value
Share
700,000 3,500,000 *
300,000 1,500,000
400,000 2,000,000
(180,000) (900,000)
220,000 1,100,000
(220,000) (1,100,000)
-0-0-
*$2,800,000/.80
Depreciation of difference allocated to Palmero ($720,000/10)
Depreciation of difference allocated to Santos ($180,000/10)
$72,000
$18,000
Part A 2011
(1) Beginning Retained Earnings-Santos Co.
1,000,000
Capital Stock- Santos Co.
500,000
Difference between Implied and Book Value
2,000,000
Investment in Santos Co.
2,800,000
Noncontrolling Interest
700,000
To eliminate investment account and create noncontrolling interest account
(2) Depreciation Expense
90,000
Property and Equipment (net) ($900,000 - $90,000)
810,000
Goodwill
1,100,000
Difference between Implied and Book Value
2,000,000
To allocate and depreciate the difference between implied and book value
Alternative to entry (2)
(2a)
Property and Equipment (net)
Goodwill
Difference between Implied and Book Value
(2b) Depreciation Expense
41212
900,000
1,100,000
2,000,000
90,000
0.20]
90,000
240,000
240,000
900,000
1,100,000
2,000,000
72,000
18,000
90,000
2011
Part B Controlling Interest in Consolidated Net Income
Palmero Company's Net Income from Independent Operations
$400,000
Palmero Company's Share of Reported Income of Santos Company 240,000
Less: Depreciation of Difference between
Implied and Book Value
Allocated to:
Property and Equipment
(72,000)
Controlling Interest in Consolidated Net Income
$568,000
180,000
2012
$425,000
320,000
(72,000)
$673,000
41313
Problem 5-2
Computation and Allocation of Difference Schedule
Parent
Share
Purchase price and implied value
41414
$1,300,000
NonEntire
Controlling Value
Share
557,143 1,857,143 *
1,050,000
250,000
(106,143)
143,857
(143,857)
-0-
450,000 1,500,000
107,143
357,143
(45,490) (151,633)
61,653
205,510
(61,653) (205,510)
-0-0-
*$1,300,000/.70
Present Value on 1/1/2011 of 6% Bonds Payable
Discounted at 10%, 5 periods
Principal ($1,000,000 0.62092)
Interest ($60,000 3.79079)
Fair value of bonds
Face value of bonds
Total Discount
$620,920
227,447
$848,367
1,000,000
$151,633
(2)
Carrying
Value (1/1)
$848,367
$873,204
(3)
Interest at 10%
of Carrying Value
$84,837
$87,320
(4)
Interest at 6%
of Par Value
$60,000
$60,000
(5)
Difference
[(3)-(4)]
$24,837
$27,320
Part A 2011
(1) Equity in Subsidiary Income (.70)($100,000)
Investment in Sagon Co.
To eliminate subsidiary income
70,000
70,000
41515
24,837
126,796
205,510
357,143
151,633
205,510
357,143
24,837
24,837
2012
(1) Equity in Subsidiary Income (.70)($120,000)
Investment in Sagon Co.
To eliminate subsidiary income
84,000
84,000
17,386 *
7,451
27,320
99,476
205,510
357,143
*$24,837 x
70% = $17,386
Alternative to entry (3)
(3a) Unamortized Discount on Bonds Payable
Goodwill
Difference between Implied and Book Value
151,633
205,510
357,143
17,386
7,451
27,320
52,157
25,510
25,510
$1,409,000
205,510
1,614,510
Excess of carrying value over fair value
114,510
The excess of carrying value over fair value means that step 2 is required.
41616
2012
$250,000
84,000
(19,124)*
$314,876
41717
41818
Problem 5-3
Computation and Allocation of Difference Schedule
Parent
Share
Purchase price and implied value
Less: Book value of equity acquired
Difference between implied and book value
Inventory ($725,000 - $600,000)
Equipment ($1,075,000 - $900,000)
Balance
Goodwill
Balance
$1,970,000
1,440,000
530,000
(100,000)
(140,000)
290,000
(290,000)
-0-
NonControlling
Share
492,500
360,000
132,500
(25,000)
(35,000)
72,500
(72,500)
-0-
Entire
Value
2,462,500 *
1,800,000
662,500
(125,000)
(175,000)
362,500
(362,500)
-0-
*$1,970,000/.80
2012 Amortization Schedule
Inventory (60% in 2012)
Equipment ($175,000/7)
Total
60,000
20,000
80,000
15,000
5,000
20,000
75,000
25,000
100,000
40,000
20,000
60,000
10,000
5,000
15,000
50,000
25,000
75,000
Part A 2012
Investment in Superstition Company
Cash
1,970,000
120,000
600,000
41919
1,970,000
120,000
600,000
80,000
80,000
180,000
180,000
720,000
720,000
60,000
60,000
Part B 2012
(1) Equity in Subsidiary Income ((.80)($750,000) - $80,000)
Dividends Declared (0.80 $150,000)
Investment in Superstition Company
To eliminate intercompany income and dividends
(2) Beginning Retained Earnings - Superstition Company
Common Stock- Superstition Company
Difference between Implied and Book Value
Investment in Superstition Company
Noncontrolling Interest
To eliminate the investment account and create noncontrolling interest
account
520,000
120,000
400,000
600,000
1,200,000
662,500
1,970,000
492,500
2013
(1) Equity in Subsidiary Income ((.80)($900,000) - $60,000)
Dividends Declared (0.80 $225,000)
Investment in Superstition Company
To eliminate intercompany income and dividends
.20)
(3)
42020
50,000
75,000
175,000
362,500
662,500
25,000
25,000
660,000
180,000
480,000
($60,000 + $20,000)
80,000
Noncontrolling Interest ($15,000 + $5,000)
20,000
Cost of Good Sold
50,000
Depreciation Expense
25,000
Equipment (net) ($175,000 $25,000 $25,000)
125,000
Goodwill
362,500
Difference between Implied and Book Value
662,500
To allocate and depreciate the difference between implied and book value
Alternative to entry (3)
(3a) Investment in Superstition Company
Noncontrolling Interest
Cost of Good Sold
Equipment (net)
Goodwill
Difference between Implied and Book Value
60,000
15,000
50,000
175,000
362,500
662,500
20,000
5,000
25,000
50,000
$880,000
(60,000)
(20,000)
Problem 5-7
Computation and Allocation of Difference Schedule
Parent
Share
Purchase price and implied value
Less: Book value of equity acquired
Difference between implied and book value
Equipment (net)
Balance
Goodwill
Balance
*$900,000/.75
42121
$900,000
506,250
393,750
(135,000)
258,750
(258,750)
-0-
NonControlling
Share
300,000
168,750
131,250
(45,000)
86,250
(86,250)
-0-
Entire
Value
1,200,000 *
675,000
525,000
(180,000)
345,000
(345,000)
-0-
Equipment
Accumulated Depreciation
Net
Fair
Value
$990,000 1
330,000 2
$660,000
Book
Value
$720,000
(240,000)
$480,000
$660,000/($480/$720) = $990,000
$990,000 ($240/$720) = $330,000
3
$180,000/($480/$720) = $270,000
4
$270,000 ($240/$720) = $90,000
2
90,000
90,000
78,750
78,750
375,000
300,000
525,000
18,000
270,000
345,000
900,000
300,000
108,000
525,000
270,000
345,000
90,000
525,000
18,000
18,000
42222
Book Value
$720,000
(240,000)
$480,000
Difference
$270,000 3
(90,000)
$180,000
Consolidated
$990,000 1
(330,000)
$660,000
8/10
Carrying Value 1/1/2013
Proceeds from Sale
(Gain) Loss on Sale
384,000
(450,000)
$(66,000)
8/10
528,000
(450,000)
$78,000
42323
36,000
66,000
78,000
180,000