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28.
(Consolidated totals for an acquisition. Worksheet is produced as a
separate requirement.)
a. OBrien acquisition-date fair value .....................
OBrien book value ...............................................
Fair value in excess of book value .....................
Excess assigned to specific
accounts based on fair value
$550,000
(350,000)
$200,000
Annual
Remaining excess
life amortizations
-0$15,000
(3,000)
-0-
$12,000
If the partial equity method were in use, the Income of OBrien account would
have had a balance of $222,000 (100% of OBrien's reported income for the
period). If the initial value method were in use, the Income of OBrien account
would have had a balance of $80,000 (100% of the dividends declared by
OBrien). The Income of OBrien balance is an equity accrual of $222,000
(100% of OBriens reported income) less excess amortizations of $12,000 (as
computed above). Thus, the equity method must be in use.
b.
Depreciation expense = $142,000 (the accounts for both companies and the
acquisition-related depreciation adjustment of $3,000)
Retained earnings, 12/31 = $1,493,000 (the beginning balance for the parent
plus consolidated net income less consolidated [parent] dividends)
28. (Continued)
c.
Accounts
Revenues
Cost of goods sold
Depreciation expense
Amortization expense
Income from OBrien
Net income
Retained earnings, 1/1
Net income (above)
Dividends declared
Retained earnings, 12/31
Cash
Receivables
Inventory
Investment in OBrien
Trademarks
Customer relationships
Equipment (net)
Goodwill
Total assets
Liabilities
Common stock
Retained earnings (above)
Total liabilities and equity
888,000
(250,000)
(222,000)
80,000
(392,000)
(S)250,000
(D) 80,000
105,000
56,000
135,000
60,000
-0272,000
-0628,000
(771,000)
(400,000)
(1,493,000)
(136,000)
(100,000)
(392,000)
(700,000)
(935,000)
142,000
(1,493,000)
290,000
281,000
310,000
(D) 80,000
474,000
-0925,000
-02,664,000
Consolidated
Totals
(1,645,000)
528,000
142,000
40,000
-0(935,000)
(A) 100,000
(A) 75,000
(E) 3,000
(A) 55,000
(S)100,000
(S) 350,000
(A) 200,000
(I) 210,000
(E) 15,000
(A) 30,000
-0634,000
60,000
1,170,000
55,000
2,800,000
(907,000)
(400,000)
(1,493,000)
(2,664,000)
888,000
36.
(Consolidated balances three years after acquisition. Parent has applied
the equity method.)
a. Schedule 1Acquisition-Date Fair Value Allocation and Amortization
Jasmines acquisition-date fair value $206,000
Book value of Jasmine ...................
(140,000)
Fair value in excess of book value
66,000
Excess fair value assigned to specific
accounts based on individual fair values
Equipment ................................
Buildings (overvalued) ...........
Goodwill ...................................
Total .............................................
Remaining
life
$54,400
8 yrs.
(10,000)
20 yrs.
$21,600 indefinite
Annual excess
amortization
$6,800
(500)
-0$6,300
$206,000
40,000
(6,300)
20,000
(6,300)
10,000
(6,300)
$257,100
$30,000
(6,300)
$23,700
$414,000
(272,000)
(6,300)
$135,700
d. Consolidated equipment:
Book values added together ...........................................
Acquisition-date fair value allocation ............................
Excess depreciation ($6,800 3) ...................................
Consolidated equipment ...........................................
$370,000
54,400
(20,400)
$404,000
e. Consolidated buildings:
Book values added together ...........................................
Acquisition-date fair value allocation.............................
Excess depreciation ($500 3) ......................................
Consolidated buildings...............................................
$288,000
(10,000)
1,500
$279,500
$21,600
$290,000
$410,000