On January 1, 2011, Porter Company purchased an 90% interest in the capital stock of Salem Company for $850,000. The fair value of the noncontrolling interest was proportionate to the consideration paid by the controlling interest. At that time, Salem Company had capital stock of $550,000 and retained earnings of $80,000. Differences between the fair value and the book value of the identifiable assets of Salem Company were as follows: Equipment Land Inventory In-Process Research & Development Bonds payable The book values of all other assets and liabilities of Salem Company were equal to their fair values on January 1, 20011 The inventory was sold in 2011 and the equipment has a 5-year remaining life as of January 1, 2011. The bonds payable mature in 5 years from January 1, 2011 At 12/31/13, Salem owes Porter $25000 Required for the year ended December 31, 2013: 1. Prepare the analysis as of acquisition date including unamortized differential at 1/1/11. 2. Prepare the journal entries Porter recorded with respect to its investment in Porter for the year ended 12/31/13. 3. Calculate Net income to controlling interest and Net income to non controlling interest for the year 2013. 4. Prepare all necessary elimination entries for the year ended 2013. 5. Complete the consolidated workpapers for the year ended 12/31/13. Use formulas in all calculations. INCOME STATEMENT P CO. S CO. ELIMINATIONS CONS.TOT. 12/31/2013 (000’s) DR. CR. Sales 2,100.00 450.00 2,550.000 Dividend Income 54.00 54.000 0.000 Total revenues 2,154.00 450.00 2,604.00 Cost of goods sold 950.00 200.00 1,150.00 Depreciation exp 50.00 30.00 80.00 Other Expenses 60.00 50.00 110.00 0.00 Total expenses 1,060.00 280.00 1,340.00 Total Net income 1,094.00 170.00 1,264.00 Less net income to noncontrolling interest 0.00 Net income to controlling interest 1,264.00 RETAINED EARNINGS STATEMENT Retained Earnings 1/1/13 500.00 230.00 730.000 Net income 1,094.00 170.00 1,264.00 Dividends declared 90.00 60.00 150.00 Retained Earnings 12/31/13 1,504.00 340.00 1,844.00 BALANCE SHEET Cash 76.00 65.00 141.00 Accounts receivable 445.00 190.00 635.00 Inventory 780.00 175.00 955.00 Investment in Sub 850.00 850.00 Land 215.00 320.00 535.00 IPR&D 0.00 Plant and Equipment 360.00 280.00 640.00 Goodwill 0.00 Total assets 2,726.00 1,030.00 3,756.00 Accounts payable 132.00 110.00 242.000 bonds payable 90.00 30.00 120.000 Common stock 1,000.00 550.00 1,550.000 Paid in capital 0.000 Retained earnings 1,504.00 340.00 1,844.000 Noncontrolling interest in sub 0.000 Total liabilities and equity 2,726.00 1,030.00 0.00 0.00 3,756.00 0.00 0.00 0.00
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| 2 |
>question Statement
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On January
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| 1 |
,
| 2
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| 0 |
11, Porter Company purchased an
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9 |
0% interest in the capital stock of Salem Company for $
| 8 |
5 |
0
,000.
| The fair value of the noncontrolling interest was proportionate to the consideration paid by the controlling interest. |
| At that time, Salem Company had capital stock of $550,000 and retained earnings of $80,000. |
| Differences between the fair value and the book value of the identifiable assets of Salem Company were as follows: |
| Under (Over) Valued |
| Equipment |
| 120 |
,000
|
| Land |
| 25 |
,000
|
| Inventory |
|
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|
| 4 |
0
,000
| In-Process Research & Development |
40,000
| Bonds payable |
| –
| 10 |
,000
| The book values of all other assets and liabilities of Salem Company were equal to their fair values on January 1, 20011 |
| The
| inventory |
was sold in 2011 and the
equipment |
has a 5-year remaining life as of January 1, 2011.
| The
|
| bonds payable |
mature in 5 years from January 1, 2011
| At 12/
| 3 |
1/13, Salem owes Porter $25000
| Required for the year ended December 31, 2013: |
|
| 1. Prepare the analysis as of acquisition date including unamortized
| diff |
erential at 1/1/11.
|
| 2. Prepare the journal entries Porter recorded with respect to its investment in Porter for the year ended 12/31/13. |
| 3. Calculate
|
| Net income |
to controlling interest
and Net income to non controlling interest for the year 2013.
| 4. Prepare all necessary elimination entries for the year ended 2013. |
| 5. Complete the consolidated workpapers for the year ended 12/31/13. |
| Use formulas in all calculations. |
| Clearly label each part in the spreadsheet tab below |
| Do problem on “Additional Question” below for 20 points. |
| Partial credit is awarded for all questions. |
Spreadsheet
| INCOME
| STATEMENT |
P CO. |
S CO. |
ELIMINATIONS |
CONS.TOT. |
1. Prepare the analysis as of acquisition date including unamortized differential at 1/1/11.
| 12/31/2013 (000’s) |
DR. |
CR. |
| Sales |
2,10
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|
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|
|
| 0.00 |
| 4
|
| 50.00 |
2,55
|
|
| 0.000 |
Jan 1, 2011 |
| Dividend Income |
54.00 |
54.000 |
acquisition price |
850
0.000
| fv of nci |
94 |
| Total revenues |
2,154.00 |
450.00
2,
| 6 |
04.00
|
| total |
fv
| 944 |
| book value on Jan 1 |
630 |
| Cost of goods sold |
950.00 |
200.00 |
1,
| 150.00 |
diff
| 314 |
| Depreciation exp |
50.00
| 30.00 |
80.00 |
| Other Expenses |
| 60.00 |
50.00
| 110.00 |
total fv 944
0.00
| fv of ID net assets |
845 |
| Total expenses |
1,060.00 |
| 280.00 |
1,
|
| 340.00 |
goodwill |
99 |
equipment 120
| -24 |
| Total Net income |
| 1,094.00 |
| 1
| 7 |
0.00
|
| 1,264.00 |
land |
25
| Less net income to noncontrolling interest |
0.00 inventory 40
Net income to controlling interest 1,264.00
|
| IPR&D |
40
| RETAINED EARNINGS |
bonds payable -10
STATEMENT
| total diff |
314
| Retained Earnings 1/1/13 |
500.00 |
230.00 |
730.000 |
Net income 1,094.00 170.00 1,264.00 2. Prepare the journal entries Porter recorded with respect to its investment in Porter for the year ended 12/31/13.
| Dividends declared |
| 90.00 |
60.00 150.00
| Retained Earnings 12/31/13 |
| 1,504.00 |
340.00
1,844.00 |
| BALANCE SHEET |
| Cash |
76.00 |
65.00 |
141.00 |
| Accounts receivable |
445.00 |
190.00 |
635.00 |
Inventory
| 780.00 |
175.00 |
955.00 |
| Investment in Sub |
| 850.00 |
850.00
Land
| 215.00 |
320.00 |
535.00 |
IPR&D 0.00
| Plant and Equipment |
360.00 |
280.00
640.00 |
| Goodwill |
0.00
| Total assets |
| 2,726.00 |
| 1,030.00 |
| 3,756.00 |
| Accounts payable |
132.00 |
110.00
242.000 |
bonds payable 90.00 30.00
| 120.000 |
| Common stock |
1,000.00 |
550.00 |
1,550.000 |
| Paid in capital |
0.000
| Retained earnings |
1,504.00 340.00
1,844.000 |
| Noncontrolling interest in sub |
0.000
| Total liabilities and equity |
2,726.00 1,030.00 0.00 0.00 3,756.00
0.00 0.00 0.00
St Joseph’s College:
Minority interest(Non-controlling interest = MI% times the book value of the sub
|
MI Exam
NTD Spring 2008
Answer Sheet
| Answer Sheet: Must use cell formulas except for Q9 below |
enter here |
WARNING! INSERTING OR CHANGING ANY FORMAT ON |
| enter all amounts as positive. |
| THIS SPREADSHEET WILL IMPACT YOUR GRADE |
| 1. Net income to the controlling interest from consolidated statement of income |
| 2. Net income to the controlling interest from Step 3 |
| 3. Consolidated Retained Earnings Balance at end of year |
| 4. Consolidated Total Assets |
| 5. Consolidated Total Liabilities and Equity |
| 6. Net income to noncontrolling interest (AKA MI expense) (from consolidated total) |
| 7. Noncontrolling Interest on Sub Equity (from consolidated total) |
| 8. Adjustment to Parent’s Retained Earnings at 1/1/13 |
| 9. How many journal entries did the parent record during the year |
| with respect to its investment in the sub? Enter 1,2,3,or 4 |
| 10. What was the total debits for all of the parent co entries? |
Temporary Grade For Spreadsheet
20
| TEMPORARY GRADE |
20
1 0
2 1
3 0
4 0
5 1
6 0
7 0
8 0
9 0
10 0
total 2
Sheet1
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| |
INCOME
| STATEMENT |
P CO. |
S CO. |
ELIMINATIONS |
CONS.TOT. |
| 12/31/13 |
DR. |
CR. |
analysis of acquisition |
| Sales |
1,843 |
| 6
| 7 |
5
| 2,518 |
| Equity in
| sub |
earnings
|
| 122 |
122
|
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|
| 0 |
1/1/12 |
90% |
0
| Total revenues |
1,965 |
675 2,518
| acquisition price |
| 1710 |
| 190 |
0
| fv of nci |
190
| Cost of goods sold |
1,100 |
322 |
1,422 |
|
|
| total fv |
| 1
|
| 900 |
| depr exp |
1
|
| 25 |
120 |
245 |
| book value |
|
|
| 72 |
5
|
|
| amort |
exp
275 |
| 11 |
|
|
|
|
|
|
|
|
| 80 |
366 |
|
| diff |
| 1175 |
| interest exp |
28 |
7
35 |
0
| Total expenses |
1,528 |
4
|
|
|
|
|
| 60 |
2,068 |
total fv 1900
2012 |
unamort diff |
2013 |
|
| Net income |
| 451 |
fv of ID net assets |
| 1525 |
amort
@
| 1/1/13 |
amort
| Less Net income to NCI |
| 13.5 |
14 |
|
| goodwill |
|
|
|
|
|
|
| 375 |
0 375 0
| Net income to controlling |
|
|
|
| 437 |
|
| 215 |
437
|
|
|
| cust base |
| 800 |
80
|
|
|
| 720 |
80
|
| total diff |
1175 80
|
| RE |
TAINED EARNINGS
STATEMENT
| step 2 parent co entries during 2013 (parent is using the equity method) |
| Retained Earnings 1/1 |
| 2,625 |
|
|
| 395 |
395 2,625
|
| 193.5 |
| -72 |
Net income 437 215 437
| 121.5 |
| dr investment in sub |
193.5
| Dividends declared |
| 350 |
25 25 350
cr equity in sub earnings |
193.5
| Retained Earnings 12/31 |
|
|
| 2,712 |
|
|
| 585 |
2,712
dr cash |
|
| 2
| 2.5 |
0
|
|
|
| cr investment in sub |
22.5
| BALANCE SHEET |
dr equity in sub earnings |
72
cr investment in sub 72
|
| Current assets |
1,204 |
|
| 430 |
1,634 |
|
| Inestment in S |
|
| 1,854 |
1,854 0
|
| Land |
0
calc of net income to controlling interest |
|
| Buildings |
931 |
|
| 863 |
1,794 |
|
| copyrights |
950 |
|
| 107 |
1,057 |
|
| Goodwill |
375 375
P co only net income |
316 |
cust base 720 80
|
|
|
| 640 |
Sub net income |
215
0
| Less amortization of diff |
-80 |
0
| total net income |
451
|
| Total assets |
| 4,939 |
1,
|
|
|
|
|
| 400 |
| 5,500 |
Less net income to NCI |
-13.5 |
| Net income to controlling interest |
437
|
| Accounts payable |
485 |
|
| 200 |
685 |
|
| Long-term debt |
542 |
|
| 155 |
697 |
|
| Common stock |
900 400 400 900
|
| Paid in capital |
| 300 |
60 60 300
|
| Retained earnings |
2,712 585 2,712
|
| Noncontrolling interest in sub |
|
| 206 |
206
|
| Total liabilities and equity |
4,939
1,400 |
| 2165 |
2165 5,500
| elim investment A/c vs equity of the sub, create goodwill & allocate differentials as of 1/1/13 |
|
| Dr.Common stock |
400
Investment in sub |
|
| Dr. Paid in cap |
60
B/B |
|
| 1,755 |
22.5
|
| Dr. Retained earnings |
395
194 |
72
|
| Dr. Goodwill |
375 1,854
|
| Dr. cust base |
720
|
| Dr. Land |
proof of NCI @ 12/31/13 |
|
| Cr Investment in Sub |
1,755
determine the sub adjusted equity |
|
| cr Noncontrolling interest |
195 |
| 1,950 |
1,950
St Joseph’s College:
Minority interest(Non-controlling interest = MI% times the book value of the sub
|
0
common stk |
400
| PIC |
60
RE 585
| to eliminate the investment a/c activity for year |
goodwill 375
cust base 640
| dr equity In sub earnings |
122
Total adjusted sub equity |
2,060 |
|
| cr dividends declared |
23 |
”NCI@10% |
206
cr investment in sub
| 99 |
| set up NCI expense, elim NCI portion of sub dividends, and record net change in NCI |
| dr nci expense |
13.5
cr dividends declared 2.5
| cr NCI |
11
| to amortize the diff |
| dr amort exp |
80 0
| cr cust bas |
80
|
| 2,165 |
2,165
| to eliminate interco rec/pay |
| dr payable |
| cr receivables |
|
| 4,330 |
4,330
| Part b |
| NCI FV at acquisition date is
| 152.5 |
| acquisition analysis |
acquisition price 1710
| FV of NCI |
152.5
total fv
|
| 1862.5 |
book value
| 725 |
diff
|
| 1137.5 |
total fv 1862.5
| FV of ID net assets |
1525
2012 amort |
1/1/13
2013 amort |
goodwill
|
|
| 337.5 |
0 337.5 0
cust base 800 80 720 80
total diff 1137.5 80
| dr common stk |
400
| dr PIC |
60
| dr RE |
395
| dr cust base |
720
| dr goodwill |
337.5
cr investment in sub 1,755
| cr NCI |
157.5 |
|
| 1,913 |
1,913
Template
Sheet2
| push |
sub
| down |
| B/s |
diff
Current assets 430 430
Inestment in S 0
Land 0
Buildings 863 863
copyrights 107 107
Goodwill 375 375
cust base 640 640
0
Total assets
|
| 1400 |
| 2415 |
Accounts payable 200 200
Long-term debt 155 155
Common stock 400
Paid in capital 60
Retained earnings 585
Noncontrolling interest in sub
| 2060 |
Total liabilities and equity 1400 2415
| elim investment A/c vs equity of the sub, create goodwill & allocate differentials as of 1/1/11 |
Dr.Common stock
Dr. Paid in cap
Dr. Retained earnings
Dr. Goodwill
Dr. cust base
Dr. Land
Cr Investment in Sub
cr Noncontrolling interest
Sheet3
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