Adavanced Accounting
EXERCISE 3-3
(1) Determination and Distribution of Excess Schedule Company Parent NCI Implied Price Value Fair Value (80%) (20%)
Fair value of subsidiary $340,000* $272,000 $ 68,000 Less book value of interest acquired: Common stock ($10 par) $100,000 Retained earnings 150,000 Total equity $250,000 $250,000 $250,000 Interest acquired 80% 20% Book value $200,000 $ 50,000 Excess of fair value over book value $ 90,000 $ 72,000 $ 18,000
Adjustment of identifiable accounts: Worksheet Amortization Adjustment Key Life per Year
Fixed assets $60,000 debit D1 10 $6,000 Goodwill 30,000 debit D2 Total $90,000
*$272,000/80% = $340,000
(2) (CY1) Subsidiary Income 20,000 Investment in Sargo Company 20,000 To eliminate parent’s share of subsidiary earnings for the current year.
(CY2) Investment in Sargo Company ($5,000 × 80%) 4,000 Dividends Declared 4,000 To eliminate parent’s share of dividends for the current year.
(EL) Common Stock—Sargo ($100,000 × 80%) 80,000 Retained Earnings—Sargo ($150,000 × 80%) 120,000 Investment in Sargo Company 200,000 To eliminate pro rata share of the beginning-of- year Sargo equity balances.
(D) Depreciable Fixed Assets 60,000 Goodwill 30,000 Investment in Sargo Company 72,000 Retained Earnings—Sargo (NCI adjustment) 18,000 To distribute excess per determination and distribution of excess schedule.
(A) Depreciation Expense 6,000 Accumulated Depreciation 6,000 To amortize excess for the current year.
Exercise 3–3, Continued
(3) Panther Company and Sargo Company
Consolidated Income Statement
For Year Ended December 31, 2011
Sales $250,000 Less expenses (add $6,000 adjustment) 191,000 Consolidated net income $ 59,000
Distributed to noncontrolling interest 3,800 Distributed to controlling interest $ 55,200
Subsidiary Sargo
(1) Determination and Distribution of Excess Schedule Company Parent NCI Implied Price Value Fair Value (80%) (20%)
Fair value of subsidiary $340,000* $272,000 $ 68,000 Less book value of interest acquired: Common stock ($10 par) $100,000 Retained earnings 150,000 Total equity $250,000 $250,000 $250,000 Interest acquired 80% 20% Book value $200,000 $ 50,000 Excess of fair value over book value $ 90,000 $ 72,000 $ 18,000
Adjustment of identifiable accounts: Worksheet Amortization Adjustment Key Life per Year
Fixed assets $60,000 debit D1 10 $6,000 Goodwill 30,000 debit D2 Total $90,000
*$272,000/80% = $340,000
(2) (CY1) Subsidiary Income 20,000 Investment in Sargo Company 20,000 To eliminate parent’s share of subsidiary earnings for the current year.
(CY2) Investment in Sargo Company ($5,000 × 80%) 4,000 Dividends Declared 4,000 To eliminate parent’s share of dividends for the current year.
(EL) Common Stock—Sargo ($100,000 × 80%) 80,000 Retained Earnings—Sargo ($150,000 × 80%) 120,000 Investment in Sargo Company 200,000 To eliminate pro rata share of the beginning-of- year Sargo equity balances.
(D) Depreciable Fixed Assets 60,000 Goodwill 30,000 Investment in Sargo Company 72,000 Retained Earnings—Sargo (NCI adjustment) 18,000 To distribute excess per determination and distribution of excess schedule.
(A) Depreciation Expense 6,000 Accumulated Depreciation 6,000 To amortize excess for the current year.
Exercise 3–3, Continued
(3) Panther Company and Sargo Company
Consolidated Income Statement
For Year Ended December 31, 2011
Sales $250,000 Less expenses (add $6,000 adjustment) 191,000 Consolidated net income $ 59,000
Distributed to noncontrolling interest 3,800 Distributed to controlling interest $ 55,200
Subsidiary Sargo