ก 2. Problem 3-1 P COMPANY AND SUBSIDIARY Consolidated Balance Sheet Workpaper November 30, 2008

Transcription

1 ก 2 Problem 3-1 P COMPANY AND SUBSIDIARY Consolidated Balance Sheet Workpaper November 30, 2008 P S Eliminations Noncontrolling Consolidated Part I Company Company Dr. Cr. Interest Balance Current Assets 880, ,000 1,140,000 Investment in S Company 190,000 (1) 190,000 Difference between Implied and Book Value (1) 71,111 (2) 71,111 Long-term Assets 1,400, ,000 (2) 71,111 1,871,111 Other Assets 90,000 40, ,000 Total Assets 2,560, ,000 3,141,111 Current Liabilities 640, , ,000 Long-term Liabilities 850, ,000 1,140,000 Common Stock: P Company 600, ,000 S Company 180,000 (1) 180,000 Retained Earnings P Company 470, ,000 S Company (40,000) (1) 40,000 Noncontrolling Interest (2) 21,111 21,111 21,111 Total Liabilities and Equity 2,560, , , ,222 3,141,111 Part II Current Assets 780, ,000 1,060,000 Investment in S Company 190,000 (1) 190,000 Difference between Implied & Book Value (2) 8,889 (1) 8,889 Long-term Assets 1,200, ,000 (2) 8,889 1,591,111 Other Assets 70,000 70, ,000 Total Assets 2,240, ,000 2,791,111 Current Liabilities 700, , ,000 Long-term Liabilities 920, ,000 1,190,000 Common Stock: P Company 600, ,000

2 S Company 180,000 (1) 180,000 Retained Earnings P Company 20,000 20,000 S Company 40,000 (1) 40,000 Noncontrolling Interest (1) 21,111 21,111 21,111 Total Liabilities and Equity 2,240, , , ,889 2,791,111 (1) To eliminate investment account and create noncontrolling interest account (2) To allocate the difference between implied value and book value to long-term assets. Computation and Allocation of Difference (Case 2) Parent Non- Entire Share Controlling Value Share Purchase price and implied value 190,000 21, ,111* Less: Book value of equity acquired 198,000 22, ,000 Difference between implied and book value (8,000) (889) (8,889) Decrease long-term assets to fair value 8, ,889 Balance * $190,000/.90 Problem 3-2 Part A $100,000 Soho Total Par/$10 Par per share = 10,000 shares of Soho issued 8,000 shares acquired/10,000 total shares = 80% Implied Value of Soho (100%) = $120,000/80% = $150,000. Implied Value of Noncontrolling share = $150,000 x 20% = $30,000. Computation and Allocation of Difference Schedule Parent Non- Entire Share Controlling Value Share Purchase price and implied value 120,000 30, ,000* Less: Book value of equity acquired:

3 *$120,000/.80 Common stock 80,000 20, ,000 Other contributed capital 13,200 3,300 16,500 Retained earnings 18,800 4,700 23,500 Total book value 112,000 28, ,000 Difference between implied and book value 8,000 2,000 10,000 Plant Assets (8,000) (2,000) (10,000) Balance

4 Problem 3-2 (continued) PERRY COMPANY AND SUBSIDIARY SOHO Part B Consolidated Balance Sheet Workpaper January 1, 2008 Perry Soho Eliminations Noncontrolling Consolidated Company Company Debit Credit Interest Balance Cash 39,000 19,000 58,000 Accounts Receivable 53,000 31,000 84,000 Inventory 42,000 25,000 67,000 Investment in Soho 120,000 (1) 120,000 Difference between Implied and Book Value (1) 10,000 (2) 10,000 Plant Assets 160, ,500 (2) 10, ,500 Accumulated Depreciation (52,000) (19,500) (71,500) Total 362, , ,000 Current Liabilities 18,500 26,000 44,500 Mortgage Note Payable 40,000 40,000 Common Stock: Perry Company 120, ,000 Soho Company 100,000 (1) 100,000 Other Contributed Capital Perry Company 135, ,000 Soho Company 16,500 (1) 16,500 Retained Earnings: Perry Company 48,500 48,500 Soho Company 23,500 (1) 23,500 Noncontrolling Interest (1) 30,000 30,000 30,000 Total 362, , , , ,000 (1) To eliminate investment account and create noncontrolling interest account. (2) To allocate the difference between implied and book value to plant assets.

5 Problem 3-5 Part A Pat Company Cash balance, 12/31/2007 $540,000 Less: Cash used in the acquisition of Solo 236,000 Pat Company Cash balance after acquisition $304,000 Consolidated Cash balance, 1/1/2008 $352,000 Less: Pat Company Cash balance after acquisition 304,000 Difference 48,000 Less: Cash transfer unrecorded by Solo 10,000 Solo's cash balance, 1/1/2008 $38,000 Part B The noncontrolling interest of $28,500 on the consolidated balance sheet is equal to 10% of the total stockholders' equity of Solo Company. Thus, total stockholders' equity of Solo Company is $ 28, 500 $285,000 = Part C Total stockholders equity of solo from (B) above $285,000 Add: Accounts payable of Solo Company $386,000 $280,000 = $106,000 + $4,000 of intercompany payables eliminated in consolidation 110,000 Add: Long-term liabilities of Solo Company, $605,500 - $520,000 85,500 Total assets of Solo Company 1/1/2008 $480,

6 Problem 4-1 Journal Entries - Cost Method Year Net Income (Loss) Cumulative Net Income Cumulative Dividends Undistributed Income ,997,800 1,997, ,000 1,497, ,000 2,473,800 1,000,000 1,473, (179,600) 2,294,200 1,500, , (323,800) 1,970,400 2,000,000 (29,600) Part A Cost Method Investment in Singer Co. 4,972,000 Cash 4,972,000 Dividend Income 450,000 Dividend Income 450,000 Dividend Income 450,000 Dividend Income 423,360 Investment in Singer Co. (.90 $29,600) 26,640 To account for liquidating dividend Part B Partial Equity Method Investment in Singer Co. 4,972,000 Cash 4,972,000 Investment in Singer Co. 1,798,020 Equity in Subsidiary Income 1,798,020 (.90)($1,997,800) 6

7 2005 Investment in Singer Co. 428,400 Equity in Subsidiary Income 428,400 (.90)($476,000) Problem 4-1 (continued) Equity in Subsidiary Income (.90)($179,600) 161,640 Investment in Singer Co. 161,640 Equity in Subsidiary Income (.90)($323,800) 291,420 Investment in Singer Co. 291,420 Part C Complete Equity Method Computation and Allocation of Difference between Implied and Book Value Acquired Parent Non- Entire Share Controlling Value Share Purchase price and implied value 4,972, ,444 5,524,444 * Less: Book value of equity acquired: 4,961, ,240 5,512,400 Difference between implied and book value 10,840 1,204 12,044 Undervalued depreciable assets (15 year life) (10,840) (1,204) (12,044) Balance * $4,972,000/ Investment in Singer Co. 4,972,000 Cash 4,972,000 Investment in Singer Co. 1,798,020 7

8 Equity Income (.90)($1,997,800) 1,798, Equity in Subsidiary Income ($10,840/15 years) 723 Investment in Singer Co. 723 Investment in Singer Co. 428,400 Equity Income (.90)($476,000) 428,400 Equity in Subsidiary Income ($10,840/15 years) 723 Investment in Singer Co Equity in Subsidiary Income (.90)($179,600) 161,640 Investment in Singer Co. 161,640 Equity in Subsidiary Income ($10,840/15 years) 723 Investment in Singer Co Equity in Subsidiary Income (.90)($323,800) 291,420 Investment in Singer Co. 291,420 Equity in Subsidiary Income ($10,840/15 years) 723 Investment in Singer Co

9 Problem 4-5 Part A Perez Company uses the cost method. If the cost method is used, Perez Company recognizes dividends received as income. Part B Perez Company and Subsidiary Consolidated Statements Workpaper Workpaper Cost Method For the Year Ended December 31, 2011 Perez Sanchez Eliminating Entries Noncontrolling Consolidated Company Company Dr. Cr. Interest Balance Income Statement Sales 110,000 42, ,000 Dividend Income 10,800 (3) 10,800 Total Revenue 120,800 42, ,000 Cost of Goods Sold Inventory 1/1 14,000 8,000 22,000 Purchases 84,000 20, ,000 Available for Sale 98,000 28, ,000 Inventory 12/31 40,000 15,000 55,000 Cost of Goods Sold 58,000 13,000 71,000 Other Expenses 10,000 16,000 26,000 Total Cost and Expense 68,000 29,000 97,000 Net Income 52,800 13,000 55,000 Noncontrolling Interest 1,300 * (1,300) Net Income to Retained Earnings 52,800 13,000 10,800 1,300 53,700 Retained Earnings Retained Earnings 1/1 Perez Company 50,000 (1) 16,200 66,200 Sanchez Company 30,000 (4) 30,000 Net Income from above 52,800 13,000 10,800 1,300 53,700 Dividends Declared Perez Company (10,000) (10,000) Sanchez Company (12,000) (3) 10,800 (1,200) Retained Earnings 12/31 92,800 31,000 40,800 27, ,900 * ($13,000.10) = $1,300 9

10 Perez Sanchez Eliminating Entries Noncontrol. Consolidated Company Company Dr. Cr. Interest Balance Balance Sheet Cash 13,000 14,000 27,000 Accounts Receivable 22,000 36,000 58,000 Inventory 12/31 40,000 15,000 55,000 Advance to Sanchez 8,000 (2) 8,000 Investment in Sanchez 85,000 (1) 16,200 (4) 101,200 Difference b/w Implied & Book Value (4) 12,444 (5) 12,444 Plant and Equipment 50,000 44,000 94,000 Land 17,800 6,000 23,800 Goodwill (5) 12,444 12,444 Total 235, , ,244 Accounts Payable 6,000 6,000 12,000 Other Liabilities 37,000 37,000 Advances from Perez 8,000 (2) 8,000 Common Stock: Perez Company 100, ,000 Sanchez Company 70,000 (4) 70,000 Retained Earnings from above 92,800 31,000 40,800 27, ,900 Noncontrolling Interest 1/1 (4) 11,244 ** 11,244 Noncontrolling Interest 12/31 11,344 11, , , , , ,244 ** $9,444 + [($30,000 $12,000) x.10] = $11,244 (1) To establish reciprocity/convert to the equity method (2) To eliminate intercompany advances (3) To eliminate intercompany dividends (4) To eliminate investment in Sanchez Company and establish noncontrolling interest account (5) To allocate the difference between implied and book value 10

11 Computation and Allocation of Difference between Implied and Book Value Acquired Parent Non- Entire Share Controlling Value Share Purchase price and implied value 85,000 9,444 94,444 * Less: Book value of equity acquired: 73,800 8,200 82,000 Difference between implied and book value 11,200 1,244 12,444 Goodwill (11,200) (1,244) (12,444) Balance *85,000/.90 11