Assignment Problems For Chapter 4
Page 9
Assignment Problems For Chapter 4
(The solutions for these problems are only available in
the solutions manual that has been provided to your instructor.)
Assignment Problem Four - 1
(Consolidated Balance Sheet at Acquisition - NCI On Identifiable Assets)
On December 31, 2009, the closed Trial Balances of the Pass Company and the Sass
Company, before the business combination transaction, were as follows:
Pass
Sass
$ 100,000
3,300,000
$ 110,000
190,000
$3,400,000
9,000,000
( 3,400,000)
$ 300,000
3,000,000
( 1,200,000)
Total Assets
$9,000,000
$2,100,000
Current Liabilities
Long-Term Liabilities
Mortgage Payable
$ 300,000
3,500,000
N/A
$ 200,000
800,000
300,000
Total Liabilities
Shareholders’ Equity
Common Stock - No Par
Common Stock - Par $50
Contributed Surplus
Retained Earnings (Deficit)
$3,800,000
$1,300,000
Total Equities
$9,000,000
Cash And Receivables
Inventories
Current Assets
Plant And Equipment (At Cost)
Accumulated Amortization
1,000,000
N/A
N/A
4,200,000
(
N/A
900,000
300,000
400,000)
$2,100,000
The Pass Company has 25,000 shares outstanding on December 31, 2009 which are trading at
$50 per share on this date. On December 31, 2009, the identifiable assets and liabilities of
both companies had fair values that were equal to their carrying values except for the
following fair values:
Fair Values
Plant And Equipment (Net)
Long-Term Liabilities
Pass
Sass
$7,000,000
3,000,000
$1,500,000
900,000
It was also determined that on December 31, 2009, Sass Company had a registered trademark
with a fair value of $120,000 that was not recorded on its books.
Prior to the business combination, in 2009, Pass sold merchandise to Sass for $200,000 and
Sass sold Pass merchandise for $100,000. On December 31, 2009, one-half of these
intercompany purchases had been resold to parties outside the consolidated entity. On
December 31, 2009, Sass owed Pass $50,000 on its intercompany merchandise purchases.
On December 31, 2009, Pass issued 15,000 of its shares to acquire 75 percent of the
outstanding shares of Sass.
Management has decided to record the Non-Controlling Interest at an amount equal to its
share of the net identifiable assets of Sass.
Required: Prepare a classified consolidated Balance Sheet as at December 31, 2009 for the
Pass Company and its subsidiary, the Sass Company. Your answer should comply with all of the
recommendations of Sections 1582, 1601, and 1602 of the CICA Handbook.
Canadian Advanced Accounting (2nd IC Edition) - Assignment Problems
Assignment Problems For Chapter 4
Page 10
Assignment Problem Four - 2
(Consolidated Balance Sheet at Acquisition - NCI At Fair Value)
The Peretti Company and the Blakelock Company are two successful Canadian companies
operating on Prince Edward Island. On December 31, 2009, the condensed Balance Sheets
and the identifiable fair values of the Peretti Company and the Blakelock Company are as
follows:
Peretti Company
December 31, 2009
Balance Sheet
Fair Values
Current Assets
Non-Current Assets (Net)
$2,220,000
3,600,000
$2,340,000
3,900,000
Total Assets
$5,820,000
Current Liabilities
Long-Term Liabilities
Common Stock - No Par
Retained Earnings
$ 420,000
1,500,000
1,800,000
2,100,000
Total Equities
$5,820,000
$ 420,000
1,440,000
Blakelock Company
December 31, 2009
Balance Sheet
Fair Values
Current Assets
Non-Current Assets (Net)
$1,800,000
3,540,000
$1,980,000
2,400,000
Total Assets
$5,340,000
Current Liabilities
Long-Term Liabilities
Common Stock - No Par
Retained Earnings
$ 720,000
2,400,000
1,200,000
1,020,000
Total Equities
$5,340,000
$ 720,000
2,520,000
The Peretti Company has 300,000 common shares outstanding with a market price of $12 per
share. The Blakelock Company has 60,000 common shares outstanding with a market price of
$23 per share. On December 31, 2009, Peretti owes Blakelock $48,000 for the use of
Blakelock’s accounting staff during 2009.
On December 31, 2009, subsequent to the preparation of the preceding single entity Balance
Sheets, the Peretti Company purchases 60 percent of the outstanding shares of the Blakelock
Company for $900,000 in cash.
Peretti management has decided to record the Non-Controlling interest at its fair value. This
value is determinated on the basis of the price paid for the controlling interest.
Required: Prepare a classified consolidated Balance Sheet for Peretti and its subsidiary
Blakelock, as at December 31, 2009.
Canadian Advanced Accounting (2nd IC Edition) - Assignment Problems