CHAPTER 5
SOLUTIONS TO EXERCISES AND PROBLEMS
EXERCISES
E5.1
Combination and Consolidation, Date of Acquisition (see related E3.1)
a.
Calculation of goodwill:
Acquisition cost
Fair value of noncontrolling interest
Total fair value
Book value of Simon
Goodwill
$ 27,000,000
2,750,000
29,750,000
14,000,000
$ 15,750,000
Allocation of goodwill between controlling and noncontrolling interest:
Total goodwill
$ 15,750,000
Progressive’s goodwill: $27,000,000 – 90%(14,000,000)
14,400,000
Goodwill to noncontrolling interest
$ 1,350,000
b.
Consolidation Working Paper (in thousands)
Accounts Taken From
Books
Total assets
Investment in Simon
Progressive
$ 100,000
27,000
Simon
$ 20,000
Eliminations
Dr
Cr
12,600 (E)
14,400 (R)
Consolidated
Balances
$ 120,000
Goodwill
Total assets
______
$ 127,000
______ (R)15,750
$ 20,000
-_15,750
$ 135,750
Total liabilities
Common stock
Additional paid-in capital
Retained earnings
Noncontrolling interest
$
$
$
Total liabilities and equity
20,000
10,270
66,730
30,000
______
$ 127,000
6,000
3,000
7,000
4,000
______
$ 20,000
(E) 3,000
(E) 7,000
(E) 4,000
1,400 (E)
______
1,350 (R)
$ 29,750 $ 29,750
26,000
10,270
66,730
30,000
__2,750
$ 135,750
Note: Progressive’s balance sheet above reflects the following acquisition entry (in thousands):
Investment in Simon
27,000
Common stock
270
Additional paid-in capital
26,730
Solutions Manual, Chapter 5
©Cambridge Business Publishers, 2010
99
c.
Consolidated Balance Sheet, January 1, 2011 (in thousands)
Assets
Total assets
Goodwill
Total assets
Liabilities and stockholders’ equity
Total liabilities
Stockholders’ equity
Progressive’s stockholders’ equity:
Common stock
Additional paid-in capital
Retained earnings
Total Progressive’s stockholders’ equity
Noncontrolling interest
Total stockholders’ equity
Total liabilities and stockholders’ equity
E5.2
$ 120,000
15,750
$ 135,750
$
26,000
10,270
66,730
30,000
107,000
2,750
109,750
$ 135,750
Date of Acquisition Consolidation with In-Process R&D
a.
Calculation of goodwill:
Acquisition cost
Fair value of noncontrolling interest
Total fair value
Book value of Saylor
Fair value – book value:
Land
IPR&D
Goodwill
$ 10,000,000
2,000,000
12,000,000
$ 6,000,000
500,000
1,000,000
$
7,500,000
4,500,000
Allocation of goodwill between controlling and noncontrolling interest:
Total goodwill
$ 4,500,000
Pennant’s goodwill: $10,000,000 – 80%(7,500,000)
4,000,000
Goodwill to noncontrolling interest
$
500,000
b.
Consolidated Financial Statement Working Paper
(E)
Stockholders’
equity – Saylor
6,000,000
Investment in Saylor (80%)
Noncontrolling interest in Saylor (20%)
©Cambridge Business Publishers, 2010
100
4,800,000
1,200,000
Advanced Accounting, 1st Edition
(R)
Land
IPR&D
Goodwill
500,000
1,000,000
4,500,000
Investment in Saylor (1)
Noncontrolling interest in Saylor (2)
(1) 80% x (500,000 + 1,000,000) + 4,000,000
(2) 20% x (500,000 + 1,000,000) + 500,000
E5.3
5,200,000
800,000
Date of Acquisition Consolidation, Bargain Purchase
a.
Acquisition cost
Fair value of noncontrolling interest
Total
Book value of Sparrow
Fair value – book value:
Land
Other plant assets
Investments
Long-term debt
Fair value of identifiable net assets
Gain on acquisition
$ 22,000,000
4,000,000
26,000,000
$ 25,000,000
(800,000)
2,000,000
1,500,000
(700,000)
27,000,000
$ (1,000,000)
Peregrine’s acquisition entry:
Investment in Sparrow
Merger expenses
23,000,000
3,000,000
Cash
Gain on acquisition
b.
25,000,000
1,000,000
Consolidated Financial Statement Working Paper
(E)
Stockholders’ equity –
Sparrow
25,000,000
Investment in Sparrow (80%)
Noncontrolling interest in
Sparrow (20%)
Solutions Manual, Chapter 5
20,000,000
5,000,000
©Cambridge Business Publishers, 2010
101
(R)
Other plant assets, net
Investments
Noncontrolling interest in
Sparrow (1)
2,000,000
1,500,000
1,000,000
Land
Long-term debt
Investment in Sparrow (2)
800,000
700,000
3,000,000
(1) $5,000,000 – 4,000,000
(2) $23,000,000 – 20,000,000
E5.4 Consolidated Balance Sheet, Date of Acquisition, with Goodwill: U.S. GAAP and
IFRS
a.
Calculation of goodwill:
Acquisition cost [($3,000,000 + (200,000 x $80))
Fair value of noncontrolling interest
Total fair value
Book value of Powerline
Fair value – book value:
Current assets
Plant and equipment
Brand names
Goodwill
$ 19,000,000
1,800,000
20,800,000
$ 4,500,000
500,000
6,000,000
2,000,000
$
13,000,000
7,800,000
Allocation of goodwill between controlling and noncontrolling interest:
Total goodwill
$ 7,800,000
Microsoft’s goodwill: $19,000,000 – 90%(13,000,000)
7,300,000
Goodwill to noncontrolling interest
$
500,000
©Cambridge Business Publishers, 2010
102
Advanced Accounting, 1st Edition
b.
Consolidation Working Paper (in thousands)
Accounts Taken From
Books
Current assets
Plant and equipment, net
Investment in Powerline
Brand names
Goodwill
Total assets
Current liabilities
Long-term liabilities
Common stock, par value
Additional paid-in capital
Retained earnings
Noncontrolling interest
Total liabilities and equity
Eliminations
Microsoft Powerline
Dr
$
7,000 $ 2,000 (R) 500
35,000
7,000 (R) 6,000
19,000
$
$
______
61,000
5,000
20,000
5,000
20,000
11,000
______
$ 61,000
$
$
$
______
9,000
1,500
3,000
100
1,400
3,000
______
9,000
Cr
4,050 (E)
14,950 (R)
(R) 2,000
(R) 7,800
Consolidated
Balances
$ 9,500
48,000
-2,000
__7,800
$ 67,300
$
(E) 100
(E) 1,400
(E) 3,000
450 (E)
______
1,350 (R)
$ 20,800 $ 20,800
6,500
23,000
5,000
20,000
11,000
__1,800
$ 67,300
Note 1: Microsoft’s balance sheet above reflects the following acquisition entry (in thousands):
Investment in Powerline
19,000
Cash
3,000
Common stock
2,000
Additional paid-in capital
14,000
Note 2:
The $14,950,000 credit to investment in entry (R) = 90% (500,000 + 6,000,000 +
2,000,000) + 7,300,000 (goodwill).
The $1,350,000 credit to noncontrolling interest in entry (R) = 10% (500,000 +
6,000,000 + 2,000,000) + 500,000 (goodwill).
c.
Calculation of goodwill:
Acquisition cost
90% x fair value of identifiable net assets
Goodwill
Solutions Manual, Chapter 5
90% x $13,000,000
$ 19,000,000
11,700,000
$ 7,300,000
©Cambridge Business Publishers, 2010
103
Consolidation Working Paper (in thousands)
Accounts Taken From
Books
Current assets
Plant and equipment, net
Investment in Powerline
Brand names
Goodwill
Total assets
Eliminations
Microsoft Powerline
Dr
$
7,000 $ 2,000 (R) 500
35,000
7,000 (R) 6,000
19,000
$
Current liabilities
Long-term liabilities
Common stock, par value
Additional paid-in capital
Retained earnings
Noncontrolling interest
$
Total liabilities and equity
$
______
61,000
5,000
20,000
5,000
20,000
11,000
_____
61,000
$
$
______
9,000
1,500
3,000
100
1,400
3,000
_____
$ 9,000
Cr
4,050 (E)
14,950 (R)
(R) 2,000
(R) 7,300
Consolidated
Balances
$ 9,500
48,000
-2,000
__7,300
$ 66,800
$
(E) 100
(E) 1,400
(E) 3,000
450 (E)
______
__850 (R)
$ 20,300 $ 20,300
6,500
23,000
5,000
20,000
11,000
__1,300
$ 66,800
Note: The IFRS alternative valuation method attributes no goodwill to the noncontrolling
interest.
E5.5
Consolidation Eliminating Entries, Date of Acquisition: U.S. GAAP and
IFRS
(amounts in thousands)
a.
Perma’s acquisition entry:
Investment in Seismic
Merger expenses
14,000
400
Cash
Common stock, par value
Additional paid-in capital
©Cambridge Business Publishers, 2010
104
400
2,000
12,000
Advanced Accounting, 1st Edition
Consolidation eliminating entries:
(E)
Common stock
Additional paid-in capital
Retained earnings
200
4,000
6,000
Accumulated OCI
Treasury stock
Investment in Seismic
Noncontrolling interest in
Seismic
(R)
Plant assets, net
Trademarks
Customer lists
Long-term debt
Goodwill (1)
(1)
(2)
(3)
3,000
1,000
800
100
1,700
Investment in Seismic (2)
5,900
Noncontrolling interest in
Seismic (3)
700
($14,000 + $1,600) – ($9,000 + $3,000 + $1,000 + $800 + $100) = $15,600 – $13,900
90% x ($3,000 + $1,000 + $800 + $100) + ($14,000 – 90% x $13,900)
10% x $4,900 + [$1,700 – ($14,000 – 90% x $13,900)]
b.
Consolidation eliminating entries:
(E)
Common stock
Additional paid-in capital
Retained earnings
Accumulated OCI
Treasury stock
Investment in Seismic
Noncontrolling interest in
Seismic
(R)
Plant assets, net
Trademarks
Customer lists
Long-term debt
Goodwill (4)
200
4,000
6,000
500
700
8,100
900
3,000
1,000
800
100
1,490
Investment in Seismic
Noncontrolling interest in
Seismic (5)
(4)
500
700
8,100
900
5,900
490
$14,000 – 90% x $13,900
Solutions Manual, Chapter 5
©Cambridge Business Publishers, 2010
105
(5)
10% x ($3,000 + $1,000 + $800 + $100)
Note: The IFRS alternative valuation method attributes no goodwill to the noncontrolling
interest.
E5.6
Consolidation at End of First Year (see related E4.3)
a.
Calculation of goodwill is as follows:
Acquisition cost ($10,000,000 + $300,000)
Fair value of noncontrolling interest
Total
Book value of Saddlestone
Identifiable intangibles
Goodwill
$ 10,300,000
6,500,000
16,800,000
$ 7,200,000
2,000,000
Allocation of goodwill between controlling and noncontrolling interest:
Total goodwill
Peak’s goodwill: $10,300,000 – 60%($9,200,000)
Goodwill to noncontrolling interest
b.
9,200,000
$ 7,600,000
$ 7,600,000
4,780,000
$ 2,820,000
2011 equity in net income and noncontrolling interest in net income:
Saddlestone’s reported net income
Revaluation writeoff:
Identifiable intangibles $2,000,000/5
Total
$ 3,000,000
Equity in NI
$ 1,800,000
Noncontrolling
interest in NI
$ 1,200,000
(400,000)
$ 2,600,000
(240,000)
$ 1,560,000
(160,000)
$ 1,040,000
c.
Consolidation working paper eliminating entries for 2011:
(C)
Equity in net income of S
1,560,000
Dividends – Saddlestone
Investment in Saddlestone
(E)
Stockholders’ equity—
Saddlestone, 1/1
600,000
960,000
7,200,000
Investment in Saddlestone
Noncontrolling interest in
Saddlestone
©Cambridge Business Publishers, 2010
106
4,320,000
2,880,000
Advanced Accounting, 1st Edition
(R)
Identifiable intangibles
Goodwill
(1)
(2)
2,000,000
7,600,000
Investment in Saddlestone
(1)
Noncontrolling interest in
Saddlestone (2)
60% x $2,000,000 + $4,780,000
40% x $2,000,000 + $2,820,000
(O)
Amortization expense
5,980,000
3,620,000
400,000
Identifiable intangibles
(N)
Noncontrolling interest in
income of Saddlestone
1,040,000
Dividends – Saddlestone
Noncontrolling interest in
Saddlestone
E5.7
400,000
400,000
640,000
Consolidation Two Years after Acquisition
(all numbers in thousands)
a.
Calculation of 2012 equity in net income and noncontrolling interest in net income:
Noncontrolling
Total
Equity in NI
interest in NI
Silver Nugget’s reported NI for 2012
($100,000 – $80,000 – $14,000 = $6,000)
$ 6,000
$
4,800
$ 1,200
Revaluation write-off:
Identifiable intangibles ($20,000/5)
(4,000)
(3,200)
(800)
$ 2,000
$
1,600
$
400
Solutions Manual, Chapter 5
©Cambridge Business Publishers, 2010
107
b.
Consolidation Working Paper, December 31, 2012
Trial Balances Taken
From Books
Dr (Cr)
Current assets
Plant and equipment, net
Intangibles
Investment in Silver Nugget
Goodwill
Current liabilities
Long-term debt
Common stock
Additional paid-in capital
Retained earnings, Jan. 1
Treasury stock
Noncontrolling interest
Dividends
Sales revenue
Equity in income of Silver
Nugget
Cost of goods sold
Operating expenses
Noncontrolling interest in NI
Mirror
Resorts
Silver
Nugget
$ 35,000
215,700
350,000
86,400
$
5,000
140,000
51,000
--
Eliminations
Consolidated
Dr
Cr
$
(R) 16,000
4,000 (O)
400 (C)
17,200 (E)
68,800 (R)
(R) 68,000
(50,000)
(600,000)
(500)
(6,000)
(25,000)
4,000
(20,000)
(150,000)
(100)
(5,500)
(17,500)
1,600
2,000
1,500
(800,000)
(100,000)
(1,600)
650,000
140,000
-$
-0-
-80,000
14,000
--0-
©Cambridge Business Publishers, 2010
108
$
Balances
(E) 100
(E) 5,500
(E) 17,500
1,600 (E)
4,300 (E)
15,200 (R)
100 (N)
1,200 (C)
300 (N)
40,000
355,700
413,000
-68,000
(70,000)
(750,000)
(500)
(6,000)
(25,000)
4,000
(19,600)
2,000
(900,000)
(C) 1,600
(O) 4,000
(N) 400
$ 113,100
$
_______
113,100
-730,000
158,000
400
$
-0-
Advanced Accounting, 1st Edition
E5.8
Consolidation after Several Years
a.
Paulin’s acquisition cost
Fair value of noncontrolling interest
Total
Fair value of identifiable net assets:
1,850,000 – 10,000 + 20,000 + 100,000 + 40,000
Goodwill
$ 1,800,000
600,000
2,400,000
$
2,000,000
400,000
Paulin’s share of goodwill = $1,800,000 – 75%($2,000,000) = $300,000
Noncontrolling interest’s share of goodwill = $100,000
b.
January 2007 balance
Change in Stevan’s retained earnings, 2007-2012:
(1,550,000 – 1,000,000), divided 75:25
Writeoff of Stevan’s identifiable net asset
revaluations, 2007-2012: (-10,000 + 20,000 + 60,000
+ 40,000), divided 75:25
Goodwill impairment, 2007-2012:
(400,000 – 250,000), divided 75:25
Balance, end of 2012
Noncontrolling
Investment
interest
$ 1,800,000
$
600,000
412,500
137,500
(82,500)
(27,500)
(112,500)
$ 2,017,500
$
(37,500)
672,500
c.
(E)
Stockholders’
equity-Stevan
2,400,000
Investment in Stevan
Noncontrolling interest in Stevan
(R)
Equipment, net (1)
Goodwill
Investment in Stevan (2)
Noncontrolling interest in Stevan (3)
(1) $100,000 – (6/10) x $100,000
(2) 75% x ($40,000 + $250,000)
(3) 25% x ($40,000 + $250,000)
Solutions Manual, Chapter 5
1,800,000
600,000
40,000
250,000
217,500
72,500
©Cambridge Business Publishers, 2010
109
E5.9
Consolidated Cash Flow from Operations
Consolidated net income ($15,000,000 + $5,000,000)
+ Consolidated depreciation expense
+ Amortization of previously unrecognized identifiable intangibles
- Amortization of premium created when revaluing LT debt
- 40% of undistributed equity method income (.4 x $1,700,000)
+ Decrease in noncash current operating assets
- Decrease in current operating liabilities
Cash flow from operating activities
$20,000,000
3,000,000
1,400,000
(80,000)
(680,000)
2,800,000
(2,100,000)
$24,340,000
Note: The $8,000,000 net income reported by the 75%-owned subsidiary is already included in
consolidated income, and is therefore not separately reported.
E5.10 Consolidated Cash Flow from Operations
Consolidated net income (1)
+ Consolidated depreciation expense (2)
+ Consolidated amortization expense (3)
+ Goodwill impairment loss
- Undistributed equity investment income (4)
Cash flow from operating activities
(1)
Calculation of equity in net income:
P’s share of reported income 80% x $200,000
P’s share of revaluation write-offs:
Depreciation
Amortization
Goodwill impairment loss
Equity in net income
Calculation of consolidated net income:
Parent’s reported income
Subsidiary’s reported income
Less equity in net income of subsidiary
Less revaluation writeoffs:
Depreciation
Amortization
Goodwill impairment loss
Consolidated net income
(2)
(3)
(4)
$
981,600
180,000
25,000
30,000
(18,000)
$ 1,198,600
$
160,000
$
(1,600)
(8,000)
(24,000)
126,400
$
$
950,000
200,000
(126,400)
(2,000)
(10,000)
(30,000)
981,600
$150,000 + $28,000 + $2,000
$15,000 + $10,000
$45,000 - $27,000
©Cambridge Business Publishers, 2010
110
Advanced Accounting, 1st Edition
E5.11 Consolidation at Date of Acquisition, IFRS
(in millions)
a.
Calculation of goodwill:
Acquisition cost
Less 49% fair value of identifiable net assets
Goodwill
€ 67
(11)
€ 78
49% x (22.5)
Noncontrolling interests = 51% x €(22.5) = €(11.5)
b.
(E)
Investment in ASTAR
Noncontrolling interest
10
10.5
Stockholders’ equity-ASTAR
20.5
(R)
Noncurrent financial assets
Goodwill
Noncontrolling interests
2
78
1
Intangible assets
Investment in ASTAR
4
77
E5.12 Consolidation Worksheet, Date of Acquisition and One Year Later, IFRS
(in millions)
a.
Calculation of goodwill:
Acquisition cost
Fair value of identifiable net assets:
Book value
Revaluations:
Customer lists
Trade name
Assumed liabilities
Deferred tax assets, net
Total fair value of identifiable net assets
Vivendi’s share
Goodwill
€ 787
€ (118)
150
25
(484)
123
(304)
x 85%
(258)
€ 1,045
Noncontrolling interests = 15% x (304) = €(46)
Solutions Manual, Chapter 5
©Cambridge Business Publishers, 2010
111
b.
(E)
Investment in TPS
Noncontrolling interest
100
18
Stockholders’ equity-TPS
(R)
Goodwill
Customer lists
Trade name
Deferred tax assets, net
Noncontrolling interest
118
1,045
150
25
123
28
Assumed liabilities
Investment in TPS
484
887
c. Calculation of equity in net loss of TPS and noncontrolling interest in TPS income is as
follows:
Noncontrolling
Equity in NL
interest in NI
TPS’ reported income for 2007
€ 68.00
€12.00
Revaluation write-offs:
Customer lists (€150/5)
(25.50)
(4.50)
Goodwill impairment
(100.00)
-Trade name impairment
(4.25)
(0.75)
€ (61.75)
€ 6.75
(C)
Investment in TPS
61.75
Equity in net loss of TPS
(E)
Investment in TPS
Noncontrolling interest
61.75
100
18
Stockholders’ equity-TPS
(R)
Goodwill
Customer lists
Trade name
Deferred tax assets, net
Noncontrolling interest
1,045
150
25
123
28
Assumed liabilities
Investment in TPS
©Cambridge Business Publishers, 2010
112
118
484
887
Advanced Accounting, 1st Edition
(O)
Amortization expense
Impairment losses
30
105
Customer lists
Goodwill
Trade name
(N)
Noncontrolling interest in NI
6.75
Noncontrolling interest
Solutions Manual, Chapter 5
30
100
5
6.75
©Cambridge Business Publishers, 2010
113
PROBLEMS
P5.1 Consolidation Working Paper, Date of Acquisition
(all numbers in millions)
a.
Calculation of goodwill:
Acquisition cost
Fair value of noncontrolling interest
Total fair value
Book value of Bagota
Fair value – book value:
Property, plant and equipment
Patents and trademarks
Customer-related intangibles
Long-term liabilities
Goodwill
$ 1,200
_375
1,575
$ 500
(200)
45
30
__25
_400
$ 1,175
Allocation of goodwill between controlling and noncontrolling interest:
Total goodwill
$ 1,175
Hershey’s goodwill: $1,200 – 75%(400)
900
Goodwill to noncontrolling interest
$ 275
b.
Consolidation Working Paper (in millions)
Accounts Taken From
Eliminations
Books
Current assets
PP&E, net
Investment in Bagota
Hershey
$ 1,500
1,600
1,200
Bagota
$ 325
600
--
1,300
-_____
$ 5,600
$ 1,600
1,900
300
1,950
3,900
(4,000)
(50)
75
_____
$ 1,000
$ 100
400
10
200
300
-(10)
_____
$ 5,600
_____
$ 1,000
Patents and trademarks
Customer-related intangs
Goodwill
Total assets
Current liabilities
Long-term liabilities
Common stock, par value
Additional paid-in capital
Retained earnings
Treasury stock
Accumulated OCI
Noncontrolling interest
Total liabilities and equity
©Cambridge Business Publishers, 2010
114
Dr
(R) 45
(R) 30
(R) 1,175
(R) 25
(E)
10
(E) 200
(E) 300
_____
$ 1,785
Consolidated
Cr
Balances
$ 1,825
200 (R)
2,000
375 (E)
825 (R)
-1,420
30
1,175
$ 6,450
$ 1,700
2,275
300
1,950
3,900
(4,000)
10 (E)
(50)
125 (E)
250 (R)
375
$ 1,785
$ 6,450
Advanced Accounting, 1st Edition
c.
Consolidated Balance Sheet, July 1, 2011
Assets
Current assets
Property, plant and equipment, net
Goodwill
Other intangibles
Total assets
Liabilities and stockholders’ equity
Current liabilities
Long-term liabilities
Total liabilities
Stockholders’ equity
Hershey’s stockholders’ equity:
Common stock
Additional paid-in capital
Retained earnings
Treasury stock
Accumulated other comprehensive loss
Total Hershey stockholders’ equity
Noncontrolling interest
Total stockholders’ equity
Total liabilities and stockholders’ equity
P5.2
$
$
$
1,825
2,000
1,175
1,450
6,450
1,700
2,275
3,975
300
1,950
3,900
(4,000)
(50)
2,100
375
2,475
$ 6,450
Consolidated Balance Sheet Working Paper, Date of Acquisition, Bargain Purchase
(see related P3.4)
a. (amounts in millions)
Acquisition cost
Fair value of noncontrolling interest
Total
Book value of Saxon
Fair value – book value:
Inventory
Long-term marketable securities
Land
Buildings and equipment, net
Long-term debt
Fair value of identifiable net assets
Gain on acquisition
Solutions Manual, Chapter 5
$ 1,000
200
$ 1,200
$ 1,295
100
(50)
245
300
110
2,000
$ (800)
©Cambridge Business Publishers, 2010
115
Paxon’s acquisition entry:
Investment in Saxon
1,800
Cash
Gain on acquisition
1,000
800
b.
Consolidation Working Paper (in millions)
Accounts Taken From
Books
Cash and receivables
Inventory
Marketable securities
Investment in Saxon
Paxon
$ 1,860
1,700
-1,800
Saxon
$ 720
900
300
Land
Buildings and equipment
Accumulated depreciation
Total assets
Current liabilities
Long-term debt
Common stock, par value
Additional paid-in capital
Retained earnings
Noncontrolling interest
Total liabilities and equity
650
3,400
(1,000)
$ 8,410
$ 1,500
2,000
500
1,200
3,210
-$ 8,410
175
600
-$ 2,695
$ 1,000
400
100
350
845
-$ 2,695
Note: In journal entry form, the eliminating entries are:
(E)
Common stock, par value
Additional paid-in capital
Retained earnings
Investment in Saxon
Noncontrolling interest
(R)
Inventory
Land
Buildings and equipment
Long-term debt
Noncontrolling interest
Eliminations
Dr
(R) 100
(R) 245
(R) 300
(R) 110
(E) 100
(E) 350
(E) 845
(R) 59
$ 2,109
Consolidated
Balances
$ 2,580
2,700
50 (R)
250
1,036 (E)
-764 (R)
1,070
4,300
(1,000)
$ 9,900
$ 2,500
2,290
500
1,200
3,210
259 (E)
200
$ 2,109
$ 9,900
Cr
100
350
845
1,036
259
100
245
300
110
59
Marketable securities
Investment in Saxon
©Cambridge Business Publishers, 2010
116
50
764
Advanced Accounting, 1st Edition
The adjustment to noncontrolling interest brings its balance to fair value at the acquisition date.
The adjustment to the investment eliminates the remaining balance.
c.
Consolidated Balance Sheet, December 31, 2012 (amounts in millions)
Assets
Cash and receivables
Inventory
Current assets
Long-term marketable securities
Land
Buildings and equipment, net of $1,000 accumulated depreciation
Total assets
Liabilities and stockholders’ equity
Current liabilities
Long-term debt
Total liabilities
Stockholders’ equity
Paxon stockholders’ equity:
Common stock
Additional paid-in capital
Retained earnings
Total Paxon stockholders’ equity
Noncontrolling interest
Total stockholders’ equity
Total liabilities and stockholders’ equity
P5.3
$
$
$
$
2,500
2,290
4,790
500
1,200
3,210
4,910
200
5,110
9,900
Consolidation Eliminating Entries, Date of Acquisition
(all amounts in thousands)
a.
Investment in Stark
Merger expenses
7,600
250
Cash
Earnings contingency liability
b.
2,580
2,700
5,280
250
1,070
3,300
9,900
7,250
600
Consolidation working paper eliminating entries:
(E)
Common stock
Retained earnings
1,000
4,000
Investment in Stark
Noncontrolling interest
Solutions Manual, Chapter 5
3,750
1,250
©Cambridge Business Publishers, 2010
117
(R)
Inventories
Intangibles
In-process research and
development
Goodwill (1)
Noncurrent liabilities
500
200
1,000
3,730
300
Cash and receivables
Plant assets, net
Lawsuit liability
Investment in Stark (2)
Noncontrolling interest (3)
(1) Calculation of goodwill:
Acquisition cost
Fair value of noncontrolling interest
Total fair value
Book value of Stark
Fair value – book value:
Cash and receivables
Inventories
Plant assets, net
Intangibles
Noncurrent liabilities
IPR&D
Lawsuit liability
Goodwill
100
200
380
3,850
1,200
$ 7,600
2,450
10,050
$ 5,000
(100)
500
(200)
200
300
1,000
(380)
6,320
$ 3,730
Allocation of goodwill between controlling and noncontrolling interest:
Total goodwill
$ 3,730
Penn’s goodwill: $7,600 – 75%(6,320)
2,860
Goodwill to noncontrolling interest
$ 870
(2)
(3)
$7,600 – 3,750, or 75% x (6,320 – 5,000) + 2,860.
$2,450 – 1,250, or 25% x (6,320 – 5,000) + 870.
©Cambridge Business Publishers, 2010
118
Advanced Accounting, 1st Edition
P5.4
Consolidated Working Paper One Year after Acquisition, Bargain Purchase (see
related P4.4)
(all amounts in millions)
a.
Calculation of gain on acquisition:
Acquisition cost
Fair value of noncontrolling interest
$ 1,620
180
1,800
Book value ($100 + 350 + 845)
Excess of fair value over book value:
Inventory
Marketable securities
Land
Buildings and equipment
Long-term debt (discount)
Gain on acquisition
$ 1,295
100
(50)
245
300
110
2,000
$ (200)
b.
Equity in NI
Noncontrolling
interest in NI
$ 345
$ 310.5
$ 34.5
(100)
50
(15)
(22)
$ 258
(90)
45
(13.5)
(19.8)
$ 232.2
(10)
5
(1.5)
(2.2)
$ 25.8
Total
Saxon’s reported net income for 2013
($10,000 + 10 – 8,000 – 40 – 25 – 1,600 =
$345)
Revaluation writeoffs:
Inventory
Marketable securities
Buildings and equipment ($300/20)
Long-term debt ($110/5)
Solutions Manual, Chapter 5
©Cambridge Business Publishers, 2010
119
c.
Consolidation Working Paper, December 31, 2013
Trial Balances Taken
From Books
Dr (Cr)
Eliminations
Consolidated
Paxon
Cash and receivables
Inventory
Marketable securities
Investment in Saxon
Land
Buildings and equipment, net
Current liabilities
Long-term debt
Common stock
Additional paid-in capital
Retained earnings, Jan. 1
Noncontrolling interest
Dividends
Sales revenue
Equity in income of Saxon
Gain on sale of securities
Gain on acquisition
Cost of goods sold
Depreciation expense
Interest expense
Other operating expenses
Noncontrolling interest in NI
$
3,270
2,260
-1,962.2
Saxon
$
800
940
---
650
3,600
(2,020)
(5,000)
(500)
(1,200)
(2,410)
--
300
1,150
(1,200)
(450)
(100)
(350)
(845)
--
500
100
(30,000)
(232.2)
-(200)
26,000
300
250
2,770
____-$
-0-
(10,000)
-(10)
-8,000
40
25
1,600
____-$
-0-
©Cambridge Business Publishers, 2010
120
Dr
(R) 100
(O-2) 50
Cr
100 (O-1)
50 (R)
142.2 (C)
1,165.5 (E)
654.5 (R)
(R) 245
(R) 300
15 (O-3)
(R) 110
(E) 100
(E) 350
(E) 845
22 (O-4)
129.5 (E)
50.5 (R)
15.8 (N)
90 (C)
10 (N)
(C) 232.2
50 (O-2)
(O-1) 100
(O-3) 15
(O-4) 22
$
(N) 25.8
2,495
_______
2,495
$
Balances
$ 4,070
3,200
---
1,195
5,035
(3,220)
(5,362)
(500)
(1,200)
(2,410)
(195.8)
500
(40,000)
-(60)
(200)
34,100
355
297
4,370
__25.8
$ -0-
Advanced Accounting, 1st Edition
P5.5
Consolidated Working Paper Two Years after Acquisition, Bargain Purchase (see
related P5.4)
(all amounts in millions)
a.
Total
Saxon’s reported net income for 2014
($12,000 – 9,500 – 60 – 40 – 2,200 = $200)
Revaluation writeoffs:
Buildings and equipment ($300/20)
Long-term debt ($110/5)
Equity in
NI
$ 200
$
Noncontrolling
interest in NI
180
$
20
(15)
(13.5)
(1.5)
(22)
(19.8)
(2.2)
$ 163
$ 146.7
$ 16.3
Note: Inventory (FIFO) and marketable securities revaluations were realized through sale in
2013.
b.
Consolidation Working Paper, December 31, 2014
Trial Balances
Eliminations
Taken From Books
Dr (Cr)
Consolidated
Paxon
Saxon
Cash and receivables
Inventory
Investment in Saxon
$ 3,000
2,500
2,063.9
$
Land
Buildings and equipment, net
Current liabilities
Long-term debt
Common stock
Additional paid-in capital
Retained earnings, Jan. 1
Noncontrolling interest
650
5,905
(2,500)
(6,000)
(500)
(1,200)
(3,022.2)
--
250
1,440
(1,000)
(800)
(100)
(350)
(1,090)
--
500
50
(35,000)
(146.7)
30,000
450
300
3,000
___-$
-0-
(12,000)
-9,500
60
40
2,200
___-$ -0-
Dividends
Sales revenue
Equity in income of Saxon
Cost of goods sold
Depreciation expense
Interest expense
Other operating expenses
Noncontrolling interest in NI
Solutions Manual, Chapter 5
Dr
850
950
--
Cr
Balances
$
101.7 (C)
1,386 (E)
576.2 (R)
(R) 245
(R) 285
15 (O-1)
(R) 88
(E) 100
(E) 350
(E) 1,090
22 (O-2)
154 (E)
41.8 (R)
11.3 (N)
45 (C)
5 (N)
(C) 146.7
(O-1) 15
(O-2) 22
$
(N) 16.3
2,358
_______
2,358
$
3,850
3,450
--
1,145
7,615
(3,500)
(6,734)
(500)
(1,200)
(3,022.2)
(207.1)
500
(47,000)
-39,500
525
362
5,200
___16.3
$
-0-
©Cambridge Business Publishers, 2010
121
P5.6
Consolidation Working Paper, Second Year Following Acquisition
(amounts in millions)
a.
Calculation of goodwill is as follows:
Acquisition cost
Fair value of noncontrolling interest
Total
Book value of S
Identifiable intangibles
Goodwill
$ 600
225
825
$ 580
100
Allocation of goodwill between controlling and noncontrolling interest:
Total goodwill
Harrah’s goodwill: $600 – 70% x $680
Goodwill to noncontrolling interest
680
$ 145
$ 145
124
$ 21
b.
Calculation of 2008 equity in net loss and noncontrolling interest in net loss:
Equity in Noncontrolling
Total
NL
interest in NL
Emerald Safari Resort reported income
($2,200 + 300 + 200 – 1,670 – 1,000 = $30)
$
30
$
21
$
9
Revaluation writeoffs:
Identifiable intangibles
( 8)
(5.6)
(2.4)
Goodwill
(145)
(124)
(21)
$ (123) $ (108.6)
$ (14.4)
©Cambridge Business Publishers, 2010
122
Advanced Accounting, 1st Edition
c.
Consolidation Working Paper, December 31, 2008
Trial Balances
Taken From Books
Dr (Cr)
Harrah’s
Current assets
Land, buildings, riverboats and
equipment, net
Intangible assets
Investment in Emerald
$
1,400
17,696.2
Emerald
Safari
Resort
$
800
--
-(1,500)
(14,000)
(20)
(5,500)
(900)
--
-(300)
(2,600)
(4)
(320)
(300)
--
100
5
(6,600)
(1,400)
(1,000)
108.6
7,200
(2,200)
(300)
(200)
-1,670
1,400
1,000
Dividends
Casino revenues
Food and beverage revenues
Rooms revenues
Equity in net loss of Emerald
Direct casino, food and beverage,
rooms expenses
General and administrative expenses
Amortization expense
Goodwill impairment loss
Noncontrolling interest in net loss
$
--0-
$
Consolidated
Dr
Cr
200
2,549
2,500
515.2
Goodwill
Current liabilities
Long-term liabilities
Common stock
Capital surplus
Retained earnings, Jan. 1
Noncontrolling interest
Solutions Manual, Chapter 5
Eliminations
--0-
Balances
$
(R) 95
(C) 112.1
(R)
145
(E)
4
(E) 320
(E) 300
(N) 15.9
8 (O)
436.8 (E)
190.5 (R)
145 (O)
3,387
--(1,800)
(16,600)
(20)
(5,500)
(900)
(220.8)
187.2 (E)
49.5 (R)
3.5 (C)
1.5 (N)
100
(8,800)
(1,700)
(1,200)
-8,870
108.6 (C)
(O) 8
(O) 145
_____
14.4 (N)
$ 1,145 $ 1,145
1,600
20,245.2
$
2,400
8
145
(14.4)
-0-
©Cambridge Business Publishers, 2010
123
P5.7
Equity Method and Eliminating Entries Three Years after Acquisition (see related
P4.2)
a.
Calculation of equity in net income and noncontrolling interest in net income for 2012:
Equity in Noncontrolling
Total
NI
interest in NI
Sea Coast’s reported net income for 2012
$ 130,000
$ 117,000
$ 13,000
Revaluation writeoffs:
Plant assets ($100,000)/10
10,000
9,000
1,000
Identifiable intangibles $300,000/20 (1)
(15,000)
(13,500)
(1,500)
$ 125,000
$ 112,500
$ 12,500
(1)
$300,000 = $1,800,000 + 200,000 – (1,400,000 + 400,000 – 100,000)
b.
Calculation of investment balance at December 31, 2012:
Investment in Sea Coast, December 31, 2009
90% x Sea Coast’s reported income, 2010-2012
90% x Sea Coast’s reported dividends, 2010-2012
(60% of reported income)
Revaluation writeoffs, 2010-2012:
Plant assets [($100,000)/10] x 3 x 90%
Identifiable intangibles ($300,000/20) x 3 x 90%
Investment in Sea Coast, December 31, 2012
$1,800,000
360,000
(216,000)
27,000
(40,500)
$1,930,500
Note: Under LIFO and increasing inventory, the revalued inventory is assumed to still be on
hand.
c.
Calculation of noncontrolling interest balance at December 31, 2012:
Fair value of noncontrolling interest, December 31, 2009
$200,000
10% x Sea Coast’s reported income, 2010-2012
40,000
10% x Sea Coast’s reported dividends, 2010-2012 (60% of reported
(24,000)
income)
Revaluation writeoffs, 2010-2012:
Plant assets [($100,000)/10] x 3 x 10%
3,000
Identifiable intangibles ($300,000/20) x 3 x 10%
(4,500)
Noncontrolling interest in Sea Coast, December 31, 2012
$214,500
©Cambridge Business Publishers, 2010
124
Advanced Accounting, 1st Edition
d.
Consolidation working paper eliminating entries for 2012:
(C)
Equity in net income of Sea Coast
112,500
Dividends – Sea Coast
(.6 x $130,000 x 90%)
Investment in Sea
Coast
(E)
Stockholders’ equity—Sea Coast, 1/1
70,200
42,300
1,508,000
Investment in Sea
Coast
1,357,200
Noncontrolling interest
in Sea Coast
150,800
Sea Coast’s stockholders’ equity, January 1, 2012 = $1,400,000 + (1 - .6)(400,000 – 130,000) =
$1,508,000.
(R)
Inventory
Identifiable intangibles
400,000
270,000
Plant assets, net
80,000
Investment in Sea
Coast
531,000
Noncontrolling interest
in Sea Coast
59,000
Revaluations at January 1, 2012 = original revaluations less writeoffs for 2010 and 2011.
(O)
Plant assets, net
Amortization expense
10,000
15,000
Depreciation expense
Identifiable intangibles
(N)
Noncontrolling interest in NI of Sea
Coast
12,500
Dividends – Sea Coast
(.6 x $130,000 x 10%)
Noncontrolling interest
in Sea Coast
Solutions Manual, Chapter 5
10,000
15,000
7,800
4,700
©Cambridge Business Publishers, 2010
125
P5.8
Consolidation Working Paper after Several Years
(amounts in thousands)
a.
Calculation of goodwill:
Acquisition cost
Fair value of noncontrolling interest
Total fair value
Book value of Piedmont
Fair value – book value of franchise rights
Goodwill
$ 50,000
10,000
60,000
$ 23,000
15,000
38,000
$ 22,000
Allocation of goodwill between controlling and noncontrolling interest:
Total goodwill
$ 22,000
Coca-Cola Consolidated’s goodwill: $50,000 – 75%(38,000)
21,500
Goodwill to noncontrolling interest
$
500
b.
Calculation of equity in net loss and noncontrolling interest in net loss for 2010:
Equity in
Noncontrolling
Total
NL
interest in NL
Piedmont’s reported net income for 2010
(1)
$ 3,000
$ 2,250
$ 750
Revaluation write-offs:
Franchise rights impairment
(3,000)
(2,250)
(750)
Goodwill impairment ($4,000 in the
21.5:.5 ratio from a. above)
(4,000)
(3,909)
__(91)
$ (4,000)
$ (3,909)
$ (91)
(1)
$3,000 = $300,000 – (175,000 + 114,000 + 8,000)
c.
Calculation of investment balance at December 31, 2010:
Investment in Piedmont, January 1, 2003
75% x Piedmont reported income less dividends, 2003-2009 (1)
75% x Revaluation write-offs for franchise rights, 2003-2009
Equity in net loss, 2010
Investment in Piedmont, December 31, 2010
(1)
$ 50,000
5,850
(1,500)
(3,909)
$ 50,441
Change in book value 2003-2009 of $7,800 (= $30,800 – $23,000) is attributed to
accumulated income less dividends, since the stock accounts did not change; $30,800 =
$1,000 + $12,000 + $18,000 – $200.
©Cambridge Business Publishers, 2010
126
Advanced Accounting, 1st Edition
d.
Consolidation Working Paper, December 31, 2010
Trial Balances
Taken From Books
Dr (Cr)
Current assets
Property, plant & equipment, net
Franchise rights, net
Investment in Piedmont
Goodwill
Current liabilities
Long-term debt
Common stock
Additional paid-in capital
Retained earnings, Jan. 1
Accumulated other
comprehensive loss
Treasury stock
Noncontrolling interest
Dividends
Net sales
Equity in loss of Piedmont
Cost of sales
Selling, delivery and
administrative expenses
Amortization expense
Interest expense
Goodwill impairment loss
Noncontrolling interest in NI
Consolidated
Coca-Cola
Consolidated
Piedmont
$ 160,000
250,000
485,650
50,441
$ 30,000
233,800
---
-(120,000)
(700,000)
(12,000)
(100,000)
(50,500)
12,000
-(20,000)
(210,000)
(1,000)
(12,000)
(18,000)
--
30,000
--
200
--
2,000
(1,200,000)
3,909
760,000
400,000
-(300,000)
-175,000
114,000
500
28,000
-___ --0-
-8,000
-___--0-
$
Solutions Manual, Chapter 5
Eliminations
$
Dr
Cr
Balances
$
(R) 13,000
(C) 3,909
(R) 22,000
3,000 (O)
23,100 (E)
31,250 (R)
4,000 (O)
(E) 1,000
(E) 12,000
(E) 18,000
(N)
91
190,000
483,800
495,650
-18,000
(140,000)
(910,000)
(12,000)
(100,000)
(50,500)
12,000
200 (E)
7,700 (E)
3,750 (R)
3,909 (C)
30,000
(11,359)
2,000
(1,500,000)
-935,000
514,000
(O) 3,000
(O) 4,000
_____
__91 (N)
$ 77,000 $77,000
$
3,500
36,000
4,000
(91)
-0-
©Cambridge Business Publishers, 2010
127
e.
Consolidated Income Statement and Statement of Retained Earnings,
Year Ended December 31, 2010
Net sales
Cost of sales
Gross profit
Selling, delivery and administrative expenses
Amortization expense
Interest expense
Goodwill impairment loss
Consolidated net income
Plus: Net loss attributable to noncontrolling interest
Net income attributable to Coca-Cola Consolidated
Plus retained earnings, January 1
Less dividends
Retained earnings, December 31
Consolidated Balance Sheet, December 31, 2010
Assets
Current assets
Property, plant and equipment, net
Franchise rights, net
Goodwill
Total assets
Liabilities and stockholders’ equity
Current liabilities
Long-term liabilities
Total liabilities
Stockholders’ equity
Coca-Cola Consolidated stockholders’ equity:
Common stock
Additional paid-in capital
Retained earnings
Treasury stock
Accumulated other comprehensive loss
Total Coca-Cola Consolidated stockholders’ equity
Noncontrolling interest
Total stockholders’ equity
Total liabilities and stockholders’ equity
©Cambridge Business Publishers, 2010
128
$ 1,500,000
(935,000)
565,000
(514,000)
(3,500)
(36,000)
(4,000)
7,500
____91
7,591
50,500
_(2,000)
$
56,091
$
190,000
483,800
495,650
18,000
$ 1,187,450
$
140,000
910,000
1,050,000
12,000
100,000
56,091
(30,000)
(12,000)
126,091
11,359
137,450
$ 1,187,450
Advanced Accounting, 1st Edition
P5.9
Consolidated Statement of Cash Flows
Sunny Valley Resort and Subsidiary
Consolidated Statement of Cash Flows
For the year 2012
Cash from operating activities
Consolidated net income ($400,000 + $24,000) (1)
Add (subtract) items not affecting cash:
Depreciation expense
$ 350,000
Goodwill impairment loss
30,000
Loss on retirement of plant assets (2)
50,000
Changes in current assets and liabilities:
Increase in other current assets
(400,000)
Decrease in current liabilities
(268,000)
Net cash from operating activities
Cash from investing activities
Acquisition of plant assets (3)
Cash from financing activities
Increase in noncurrent liabilities
100,000
Dividends paid to controlling stockholders
(70,000)
Dividends paid to noncontrolling stockholders
(16,000)
Net decrease in cash
Plus cash balance, January 1
Cash balance, December 31
(1)
(2)
(3)
$ 424,000
430,000
(668,000)
186,000
(300,000)
14,000
(100,000)
700,000
$ 600,000
Noncontrolling interest in net income = $120,000 x 20%
$1,600,000 + 350,000 – 1,500,000 = $450,000 accumulated depreciation on plant assets
scrapped; $500,000 – 450,000 = $50,000 loss on retirement of plant assets.
X = cost of plant assets acquired; $4,200,000 + X – 500,000 = $4,000,000; X = $300,000.
Solutions Manual, Chapter 5
©Cambridge Business Publishers, 2010
129
P5.10 Consolidated Statement of Cash Flows
Prime Casinos and Saratoga International Hotels
Consolidated Statement of Cash Flows
For the Year ended December 31, 2013
(in millions)
Cash from operating activities:
Consolidated net income
Add (subtract) items not affecting cash from operations:
Depreciation expense
Goodwill impairment loss
Loss on sale of plant assets
Changes in current assets and liabilities:
Increase in other current assets
Increase in current liabilities
Net cash from operating activities
Cash from investing activities:
Sale of plant assets (1)
Acquisition of plant assets
Cash from financing activities:
Increase in long-term liabilities
Issuance of capital stock
Dividends paid to majority stockholders
Dividends paid to noncontrolling interest (2)
Net increase in cash
Plus cash balance, January 1, 2013
Cash balance, December 31, 2013
(1)
(2)
$ 612
$ 250
25
10
285
(100)
250
150
1,047
15
(675)
150
200
(435)
(2)
(660)
(87)
300
200
$ 500
Cost of plant assets sold = $2,500 + $675 - $3,100 = $75
Accumulated depreciation on plant assets sold = $800 + $250 - $1,000 = $50
Cash received from sale of plant assets = $75 - $50 - $10 = $15
$150 + 12 – 160 = $2
©Cambridge Business Publishers, 2010
130
Advanced Accounting, 1st Edition
P5.11 Consolidation Two Years after Acquisition, IFRS
(all dollar amounts in millions)
a. Calculation of goodwill is as follows:
Acquisition cost
Book value of Monaco
Revaluations:
Inventory
Property, plant and equipment
Identifiable intangibles
Fair value of identifiable net assets
Goodwill
€ 4,000
€ 1,000
(100)
400
300
1,600
x 80%
1,280
€ 2,720
b. Calculation of equity in net income and noncontrolling interest in net income for 2010:
Noncontrolling
Total
Equity in NI interest in NI
Monaco’s reported net income for 2010 (1) € 600
€ 480
€ 120
Revaluation writeoffs:
Property, plant and equipment $400/10
(40)
(32)
(8)
Identifiable intangibles $300/3
(100)
(80)
(20)
Goodwill
(200)
(200)
__-€ 260
€ 168
€
92
(1) $600 = $3,500 – (2,500 + 400)
Solutions Manual, Chapter 5
©Cambridge Business Publishers, 2010
131
c.
Consolidation Working Paper, December 31, 2010
Trial Balances
Taken From Books
Dr (Cr)
Rendezvous
Current assets
Property, plant and equipment, net
Investment in Monaco
€
Identifiable intangibles
Goodwill
Liabilities
Capital stock
Retained earnings, Jan. 1
Noncontrolling interest
Dividends
€
©Cambridge Business Publishers, 2010
132
500
3,000
4,316
Monaco
€
900
2,000
--
--(4,648)
(1,500)
(1,000)
--
200
-(1,150)
(800)
(600)
--
--
Sales revenue
Equity in net income of Monaco
Cost of sales
Goodwill impairment loss
Administrative and other operating
expenses
Noncontrolling interest in NI
Eliminations
Dr
Cr
(R) 360
(R) 200
(R) 2,620
(E)
(E)
800
600
280 (E)
112 (R)
82 (N)
40 (C)
10 (N)
50
(5,000)
(168)
4,200
--
(3,500)
-2,500
--
300
--0-
400
--0-
€
40 (O)
128 (C)
1,120 (E)
3,068 (R)
100 (O)
200 (O)
(C) 168
(O) 200
(O)
40
(O) 100
(N) __92
____
€
5,180 € 5,180
Consolidated
Balances
€ 1,400
5,320
-300
2,420
(5,798)
(1,500)
(1,000)
(474)
-(8,500)
-6,700
200
€
Advanced Accounting, 1st Edition
840
92
-0-
P5.12 Consolidation Several Years after Acquisition, IFRS
(dollar amounts in thousands)
a. Calculation of goodwill is as follows:
Acquisition cost
Book value of Wholesome
Revaluations:
Plant and equipment
Identifiable intangibles
Long-term debt
Fair value of identifiable net assets
Goodwill
€ 120,000
€ 74,000
(15,000)
25,000
(4,000)
80,000
x 75%
60,000
€ 60,000
b. Calculation of equity in net income and noncontrolling interest in net income for 2010:
Noncontrolling
Total
Equity in NI
interest in NI
Wholesome’s reported net income for 2010
(1)
€ 5,000
€ 3,750
€ 1,250
Revaluation writeoffs:
Property, plant and equipment
(€15,000/10)
1,500
1,125
375
Identifiable intangibles (€25,000/10)
(2,500)
(1,875)
(625)
Goodwill
(1,000)
(1,000)
-€ 3,000
€ 2,000
€ 1,000
(1) €5,000 = €140,000 – (65,000 + 70,000)
Solutions Manual, Chapter 5
©Cambridge Business Publishers, 2010
133
c.
Consolidation Working Paper, December 31, 2010
Trial Balances
Taken From Books
Dr (Cr)
Current assets
Property, plant and equipment, net
Investment in Wholesome
Orchid
€ 35,000
260,500
133,500
Wholesome
€ 20,000
192,000
--
Identifiable intangibles
Goodwill
Current liabilities
Long-term debt
Capital stock
Retained earnings, Jan. 1
Noncontrolling interest
100,000
-(30,000)
(350,000)
(80,000)
(60,000)
--
10,000
-(25,000)
(100,000)
(54,000)
(38,000)
--
Sales revenue
(400,000)
(2,000)
250,000
-143,000
-€
-0-
(140,000)
-65,000
-70,000
-€
-0-
Equity in net income of Wholesome
Cost of goods sold
Goodwill impairment loss
Other operating expenses
Noncontrolling interest in NI
©Cambridge Business Publishers, 2010
134
Eliminations
Dr
Cr
Consolidated
Balances
(O) 1,500
€
55,000
445,000
(E) 54,000
(E) 38,000
-122,500
57,000
(55,000)
(450,000)
(80,000)
(60,000)
9,000 (R)
2,000 (C)
69,000 (E)
62,500 (R)
(R) 15,000 2,500 (O)
(R) 58,000 1,000 (O)
23,000 (E)
1,500 (R)
1,000 (N)
(C) 2,000
(O) 1,000
(O) 2,500 1,500 (O)
(N) 1,000 ______
€ 173,000 €173,000
(25,500)
(540,000)
-315,000
1,000
214,000
1,000
€
-0-
Advanced Accounting, 1st Edition