Advanced Accounting Floyd A. Beams Joseph H. Anthony Bruce Bettinghaus Kenneth Smith Eleventh edition

Transcription

1 Advanced Accounting Floyd A. Beams Joseph H. Anthony Bruce Bettinghaus Kenneth Smith Eleventh edition

2 Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE England and Associated Companies throughout the world Visit us on the World Wide Web at: Pearson Education Limited 2014 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without either the prior written permission of the publisher or a licence permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, Saffron House, 6 10 Kirby Street, London EC1N 8TS. All trademarks used herein are the property of their respective owners. The use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation with or endorsement of this book by such owners. ISBN 10: ISBN 13: British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Printed in the United States of America

3 Balance Sheet at December 31, 2012 Cash $ $ 14 Accounts receivable Dividends receivable 18 Inventories Land Buildings net Machinery net Investment in Sto $1,396.6 $400 Accounts payable $ 200 $ 50 Dividends payable Other liabilities Capital stock Retained earnings $1,396.6 $400 Pal Sto 1. Pal sold inventory to Sto for $60,000 during 2011 and $72,000 during 2012; Sto s inventories at December 31, 2011 and 2012, included unrealized profits of $10,000 and $12,000, respectively. 2. On July 1, 2011, Pal sold machinery with a book value of $28,000 to Sto for $35,000. The machinery had a useful life of 3.5 years at the time of intercompany sale, and straight-line depreciation is used. 3. During 2012, Pal sold land with a book value of $15,000 to Sto for $20, Pal s accounts receivable on December 31, 2012, includes $10,000 due from Sto. 5. Pal uses the equity method for its 90 percent interest in Sto. REQUIRED: Prepare a consolidation workpaper for Pal and Subsidiary for the year ended December 31, P 6 Workpaper (fair value/book value differential, downstream sales) Financial statements for Pil and San Corporations for 2011 are as follows (in thousands): for the Year Ended December 31, 2011 Sales $210 $130 Income from San 31.9 Gain on sale of land 10 Depreciation expense (40) (30) Other expenses (110) (60) Net income Add: Beginning retained earnings Deduct: Dividends (30) Retained earnings December 31 $202.3 $100 Balance Sheet at December 31, 2011 Current assets $200 $170 Plant assets Accumulated depreciation (120) (70) Investment in San Total assets $952.3 $450 Current liabilities $150 $ 50 Capital stock Retained earnings Total equities $952.3 $450 Pil San 221

4 1. Pil acquired an 80 percent interest in San on January 2, 2009, for $290,000, when San s stockholders equity consisted of $300,000 capital stock and no retained earnings. The excess of investment fair value over book value of the net assets acquired related 50 percent to undervalued inventories (subsequently sold in 2009) and 50 percent to a patent with a 10-year amortization period. 2. San sold equipment to Pil for $25,000 on January 1, 2010, at which time the equipment had a book value of $10,000 and a five-year remaining useful life (included in plant assets in the financial statements). 3. During 2011, San sold land to Pil at a profit of $10,000 (included in plant assets in the financial statements). 4. Pil uses the equity method to accounting for its investment in San. REQUIRED: Prepare a consolidation workpaper for Pil Corporation and Subsidiary for the year ended December 31, P 7 Workpaper (downstream and upstream sales) Pot Corporation acquired all the outstanding stock of Ski Corporation on April 1, 2011, for $15,000,000, when Ski s stockholders equity consisted of $5,000,000 capital stock and $2,000,000 retained earnings. The price reflected a $500,000 undervaluation of Ski s inventory (sold in 2011) and a $3,500,000 undervaluation of Ski s buildings (remaining useful life seven years from April 1, 2011). During 2012, Ski sold land that cost $1,000,000 to Pot for $1,500,000. Pot resold the land for $2,200,000 during Pot sells inventory items to Ski on a regular basis, as follows (in thousands): Sales to Ski Cost to Pot Percentage Unsold by Ski at Year End Percentage Unpaid by Ski at Year End 2011 $ 500 $300 0% 0% , , , , Ski sold equipment with a book value of $800,000 to Pot on January 3, 2015, for $1,600,000. This equipment had a remaining useful life of four years at the time of sale. Pot uses the equity method to account for its investment in Ski. The financial statements for Pot and Ski are summarized as follows (in thousands): for the Year Ended December 31, 2015 Sales $26,000 $11,000 Gain on land 700 Gain on equipment 800 Income from Ski 1,380 Cost of sales (15,000) (5,000) Depreciation expense (3,700) (2,000) Other expenses (4,280) (2,800) Net income 5,100 2,000 Add: Beginning retained earnings 12,375 4,000 Deduct: Dividends (3,000) (1,000) Retained earnings December 31 $14,475 $ 5,000 Balance Sheet at December 31, 2015 Cash $ 1,170 $ 500 Accounts receivable net 2,000 1,500 Inventories 5,000 2,000 Land 4,000 1,000 Buildings net 15,000 4,000 Pot Ski 222

5 Equipment net 10,000 4,000 Investment in Ski 14,405 Total assets $51,575 $13,000 Accounts payable $ 4,100 $ 1,000 Other liabilities 7,000 2,000 Capital stock 26,000 5,000 Retained earnings 14,475 5,000 Total equities $51,575 $13,000 Pot Ski REQUIRED: Prepare a consolidation workpaper for Pot Corporation and Subsidiary for the year ended December 31, P 8 Workpaper (incomplete equity method, upstream sale) Pic Corporation acquired an 80 percent interest in Sic Company on January 1, 2011, for $136,000, when Sic s capital stock and retained earnings were $100,000 and $70,000, respectively. At the beginning of 2011, Sic sold a machine to Pic for $10,000. The machine had cost Sic $7,000, had depreciated $2,000 while being used by Sic, and had a remaining useful life of five years from the date of sale. Trial balances of the two companies on December 31, 2011 and 2012, are as follows (in thousands): Pic Sic Pic Sic Debits Cash and equivalents $ 50 $ 30 $ 63 $ 30 Other current assets Plant and equipment Investment in Sic Cost of sales Depreciation expense Other expenses $1,100 $475 $1,200 $550 Credits Accumulated depreciation $ 150 $ 50 $ 200 $ 75 Liabilities Capital stock Retained earnings Sales Gain on plant asset 5 Income from Sic $1,100 $475 $1,200 $550 REQUIRED: Prepare consolidation workpapers for Pic Corporation and Subsidiary for the year ended December 31, 2011, and the year ended December 31, P 9 Workpaper (upstream sales current and previous years) Par Corporation acquired an 80 percent interest in Sin Corporation on January 1, 2011, for $108,000 cash, when Sin s capital stock was $100,000 and retained earnings were $10,000. The difference between investment fair value and book value acquired is due to a patent being amortized over a 10- year period. 223

6 Separate financial statements for Par and Sin on December 31, 2014, are summarized as follows (in thousands): for the Year Ended December 31, 2014 Sales $650 $120 Income from Sin 42 Cost of sales (390) (40) Other expenses (170) (30) Net income Add: Beginning retained earnings Deduct: Dividends (70) (20) Retained earnings December 31 $157.6 $ 50 Balance Sheet at December 31, 2014 Cash $ 58 $ 20 Accounts receivable Inventories Plant assets Accumulated depreciation (70) (100) Investment in Sin Total assets $499.6 $180 Accounts payable $ 42 $ 30 Capital stock Retained earnings Total equities $499.6 $180 Par Sin 1. Sin s sales include intercompany sales of $8,000, and Par s December 31, 2014, inventory includes $1,000 profit on goods acquired from Sin. Par s December 31, 2013, inventory contained $2,000 profit on goods acquired from Sin. 2. Par owes Sin $4,000 on account. 3. On January 1, 2013, Sin sold plant assets to Par for $60,000. These assets had a book value of $40,000 on that date and are being depreciated by Par over five years. 4. Park uses the equity method to account for its investment in Sin. REQUIRED: Prepare a consolidation workpaper for Par Corporation and Subsidiary for P 10 Consolidation workpaper (upstream sales) Financial statements for Pal and Sun Corporations for 2011 are as follows (in thousands): for the Year Ended December 31, 2011 Sales $210 $130 Income from Sun 34.4 Gain on sale of land 10 Depreciation expense (40) (30) Other expenses (110) (60) Net income Add: Beginning retained earnings Deduct: Dividends (30) Retained earnings December 31 $209.8 $100 Balance Sheet at December 31, 2011 Current assets $200 $170 Plant assets Pal Sun 224

7 Accumulated depreciation (120) (70) Investment in Sun Total assets $959.8 $450 Current liabilities $150 $ 50 Capital stock Retained earnings Total equities $959.8 $450 Pal Sun 1. Pal acquired an 80 percent interest in Sun on January 2, 2009, for $290,000, when Sun s stockholders equity consisted of $300,000 capital stock and no retained earnings. The excess of investment fair value over book value of the net assets acquired related 50 percent to undervalued inventories (subsequently sold in 2009) and 50 percent to goodwill. 2. Sun sold equipment to Pal for $25,000 on January 1, 2010, when the equipment had a book value of $10,000 and a five-year remaining useful life (included in plant assets). 3. During 2011, Sun sold land to Pal at a profit of $10,000 (included in plant assets). 4. Pal uses the equity method to account for its investment in Sun. REQUIRED: Prepare a consolidation workpaper for Pal and Subsidiary for the year ended December 31, P 11 Analyze provided separate company and consolidated statements Separate company and consolidated financial statements for Pop Corporation and its only subsidiary, Sal Corporation, for 2012 are summarized here. Pop acquired its interest in Sal on January 1, 2011, at a price in excess of book value, which was due to an unrecorded patent. POP CORPORATION AND SUBSIDIARY SEPARATE COMPANY AND CONSOLIDATED FINANCIAL STATEMENTS AT AND FOR THE YEAR ENDED DECEMBER 31, 2012 (IN THOUSANDS) Pop Sal Consolidated Income Statement Sales $ 500 $300 $ 716 Income from Sal 17.4 Gain on equipment 20 Cost of sales (200) (150) (275) Depreciation expense (60) (40) (95) Other expenses (77) (60) (141) Noncontrolling interest share ( 4.6 ) Controlling share of net income $ $ 50 $ Retained Earnings Retained earnings $ 250 $120 $ 250 Net income Dividends (100) (30) (100) Retained earnings $ $140 $ Balance Sheet Cash $ 21.1 $ 35 $ 56.1 Accounts receivable net Dividends receivable 13.5 Inventories Other current assets Land Buildings net Equipment net (continued) 225