Consolidation subsequent to date of acquisition-Equity method with noncontralling interest, AAP, and upstream intercompany inventory sale...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Consolidation subsequent to date of acquisition-Equity method with noncontralling interest, AAP, and upstream intercompany inventory sale Assume, on January 1. 2013, a parent company acquired an BO interest in ies bnidiary. The totat tair value of the controling and noncontroling interests was $480,000 over the book value of the sutnidiarys Stcktolders Eouty on the acquisidon date. The parent assigned the excess to the following (AJ assets BAJAwe al F vatu Patent S1a0.000 10 years Goodwi 300.000 ndefne S0.000 80% of the Goodwill is allocated to the parent. Assume the subsidiary ses inventory to the parent tupstream) which includes that inventory in products that it ultimately sells to customers outside of the controled group. You have compiled the folowing data as of 2018 and 2019: 2014 2010 Transfer price for invertory sale 500.000 s600.000 1420.000 4s0.000 Cost of goods ssld Gros profe sa0.000 S150.000 Imventory remaining 35 25% Gross profe deferred $28.000 $37,500 EOY recevablepayable SHO.000 $140,000 The inventory not remaining at the end of the year has been sold outside of the controlled group. The parent uses the equity method of pre consolidation investment bookkeeping. The parent and the subsidiary report the folowing pre-consolidation financial staterments at December 31, 2019 Suboidiary Parent Subsidiary Parent Income statement: Balance sheet $6,700.000 $2,500.000 Cash $500.000 $400.000 Sales Cost of goods sold (4,500,0000 (1.500.000 Accounts receable 700.000 so0.000 2.200.000 1,000,000 entory 900,000 HO0.000 Gross profe Income (lossi from subsidiary 13R000 Eiquity investment 1373.200 CROO.000 Property. plant and equipment reE net 4000.000 1,000,000 $7473200 $200.000 Operating expenses 2.000.0001 $338.000 $200.000 Net income Statement of retained earmings $940,000 Currert labilities 200.000 Longe-term labilities $800.000 1500.000 BOY retained eamings $2035.200 3,000.000 900.000 Net income 338.000 s00.000 1,000.000 2173200 100.000 Dividends (200,000 (40.000 Common stuck 32,173.200 s1,100.000 APIC 200.000 EOY retained earnings etained earning 1,100,000 S7473.200 100.000 a. Disaggregate and document the activity for the 100% Acquisition Accounting Premium (AAP), the controlling interest AAP and the noncontrolling interest AAP. (Complete for the first four years only.) Unametined Unemontioed Unamortized Unamortied AAP 2016 2014 AAP 2015 2013 Amornication AAP AAP 12/21/2013Amertication 1231/2014 Aortiation ar201sAmortination 100 Patent Goodwill Patent Goodwill 20% Patent Goodwill 0. ole Dewmtan Uesereem Intercompany profit on 1n9 Intercompany proft on 12a19 e Compute the pre-consolidation Equity Investment account beginning and ending balances starting with the stockholders equity of the subsidiary Use anegative sign with your answer to indicate a reduction to net income. Fguity investment at 1n/19 BON xbook value of the net assets of subsidiary Add Les Equity investment at 12/31/19 RON x book value of the net assets of subsidiary Add 0. Less d. Reconstruct the activity in the parent's pre-consolidation Equity Investment T-account for the year of consolidation. Equity investent Equity Investment at 1/1/19 O Dividends O AAP amortization Net income Equity investment at 12/31/19 e. Independently compute the owners' equity attributable to the noncontrolling interest beginning and ending balances starting with the owners' equity of the subsidiary. Use a negative sign with your answer to indicate a reduction to net income. Noncontrolling interest at 1/19: 204 of book value of the net assets of subsidiary Adt Less Noncontrolling interest at 12/31/19: 20% of book value of the net assets of subsidiary Add Less f. Independently calculate consolidated net income, controlling interest net income and noncontrolling interest net income. Use a negative sign with your answer to indicate a reduction to net income, Parent's stand-alone net income Subsidiarys stand-alone net income Plus Less Less: 100% AAP amortization Cosolidated net income Parent's stand-alone net income 80% Subsidiary's stand alone net income Plus Less Less 80% AAP amortization Consolidated net income attributable to the controlling interest 20% of subsidary's stand alone net income Plus Less Less: 20% AAP amortization Consolidated net income attributable to the noncontrolling interest g Complete the consolidating entries according to the C-E-A-D-I sequence. Consolidation subsequent to date of acquisition-Equity method with noncontralling interest, AAP, and upstream intercompany inventory sale Assume, on January 1. 2013, a parent company acquired an BO interest in ies bnidiary. The totat tair value of the controling and noncontroling interests was $480,000 over the book value of the sutnidiarys Stcktolders Eouty on the acquisidon date. The parent assigned the excess to the following (AJ assets BAJAwe al F vatu Patent S1a0.000 10 years Goodwi 300.000 ndefne S0.000 80% of the Goodwill is allocated to the parent. Assume the subsidiary ses inventory to the parent tupstream) which includes that inventory in products that it ultimately sells to customers outside of the controled group. You have compiled the folowing data as of 2018 and 2019: 2014 2010 Transfer price for invertory sale 500.000 s600.000 1420.000 4s0.000 Cost of goods ssld Gros profe sa0.000 S150.000 Imventory remaining 35 25% Gross profe deferred $28.000 $37,500 EOY recevablepayable SHO.000 $140,000 The inventory not remaining at the end of the year has been sold outside of the controlled group. The parent uses the equity method of pre consolidation investment bookkeeping. The parent and the subsidiary report the folowing pre-consolidation financial staterments at December 31, 2019 Suboidiary Parent Subsidiary Parent Income statement: Balance sheet $6,700.000 $2,500.000 Cash $500.000 $400.000 Sales Cost of goods sold (4,500,0000 (1.500.000 Accounts receable 700.000 so0.000 2.200.000 1,000,000 entory 900,000 HO0.000 Gross profe Income (lossi from subsidiary 13R000 Eiquity investment 1373.200 CROO.000 Property. plant and equipment reE net 4000.000 1,000,000 $7473200 $200.000 Operating expenses 2.000.0001 $338.000 $200.000 Net income Statement of retained earmings $940,000 Currert labilities 200.000 Longe-term labilities $800.000 1500.000 BOY retained eamings $2035.200 3,000.000 900.000 Net income 338.000 s00.000 1,000.000 2173200 100.000 Dividends (200,000 (40.000 Common stuck 32,173.200 s1,100.000 APIC 200.000 EOY retained earnings etained earning 1,100,000 S7473.200 100.000 a. Disaggregate and document the activity for the 100% Acquisition Accounting Premium (AAP), the controlling interest AAP and the noncontrolling interest AAP. (Complete for the first four years only.) Unametined Unemontioed Unamortized Unamortied AAP 2016 2014 AAP 2015 2013 Amornication AAP AAP 12/21/2013Amertication 1231/2014 Aortiation ar201sAmortination 100 Patent Goodwill Patent Goodwill 20% Patent Goodwill 0. ole Dewmtan Uesereem Intercompany profit on 1n9 Intercompany proft on 12a19 e Compute the pre-consolidation Equity Investment account beginning and ending balances starting with the stockholders equity of the subsidiary Use anegative sign with your answer to indicate a reduction to net income. Fguity investment at 1n/19 BON xbook value of the net assets of subsidiary Add Les Equity investment at 12/31/19 RON x book value of the net assets of subsidiary Add 0. Less d. Reconstruct the activity in the parent's pre-consolidation Equity Investment T-account for the year of consolidation. Equity investent Equity Investment at 1/1/19 O Dividends O AAP amortization Net income Equity investment at 12/31/19 e. Independently compute the owners' equity attributable to the noncontrolling interest beginning and ending balances starting with the owners' equity of the subsidiary. Use a negative sign with your answer to indicate a reduction to net income. Noncontrolling interest at 1/19: 204 of book value of the net assets of subsidiary Adt Less Noncontrolling interest at 12/31/19: 20% of book value of the net assets of subsidiary Add Less f. Independently calculate consolidated net income, controlling interest net income and noncontrolling interest net income. Use a negative sign with your answer to indicate a reduction to net income, Parent's stand-alone net income Subsidiarys stand-alone net income Plus Less Less: 100% AAP amortization Cosolidated net income Parent's stand-alone net income 80% Subsidiary's stand alone net income Plus Less Less 80% AAP amortization Consolidated net income attributable to the controlling interest 20% of subsidary's stand alone net income Plus Less Less: 20% AAP amortization Consolidated net income attributable to the noncontrolling interest g Complete the consolidating entries according to the C-E-A-D-I sequence.
Expert Answer:
Answer rating: 100% (QA)
a Unamortized 2013 Unamortized AAP 2014 Unamortized AAP 2015 Unamorti... View the full answer
Related Book For
Advanced Accounting
ISBN: 978-0538480284
11th edition
Authors: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Posted Date:
Students also viewed these accounting questions
-
Assume that on January 1, 2009, a parent company acquired a 90% interest in a subsidiary's voting common stock. On the date of acquisition, the fair value of the subsidiary's net assets equaled their...
-
Assume that a parent company acquired a subsidiary on January 1, 2013. The purchase price was $500,000 million in excess of the subsidiary's book value of Stockholders' Equity on the acquisition...
-
A parent company acquired a 75% interest in a subsidiary company in Year 4. The acquisition price was $1,000,000, made up of cash of $700,000 and the parents common shares with a current market value...
-
A sales invoice included the following information: merchandise price, $12,000; terms 1/10, n/eom, FOB shipping point with prepaid freight of $900 added to the invoice. Assuming that a credit for...
-
Briefly describe the concept of sampling efficiency and discuss the ways in which it could be improved.
-
Let U be an n n orthogonal matrix. Show that the rows of U form an orthonormal basis of R n .
-
Find the percentile that corresponds to an age of 57 years old. Use the data set, which represents the ages of 30 executives. 43 57 65 47 57 41 56 53 61 54 56 50 66 56 50 61 47 40 50 43 54 41 48 45...
-
1. What are the potential advantages and disadvantages of entering into these power-by-the-mile arrangements? 2. What should be done if the problem with the locomotives continues even with the...
-
Calculate the maturity risk premium. At present the real risk free rate of interest is .4 percent while inflation is expected to be 1.9 percent for the next two years. If a 2 year treasury note...
-
Use a time series chart to display the data shown in the table. The table represents the percentages of the U.S. gross domestic product (GDP) that come from the manufacturing sector. Organize the...
-
How do transactional and relationship marketing methodologies differ, and how does this variance contribute to a heightened emphasis on logistical performance within the realm of supply chain...
-
Do you expect to be able to observe the diffraction of light through \((a)\) the front door to your house; \((b)\) the holes in a button; (c) the gaps between threads of the fabric of an umbrella?
-
Does online success as an e-commerce company automatically translate into successful bricks-and-mortar commerce? Discuss and research the strategy behind Amazon's recent decision to open retail...
-
Identify and define each of the three categories of advertising based on their purpose. Which type of advertising might marketers use for the following products? a. cars b. virtual reality headset c....
-
Data is given below; use least square method to find the linear model. $x$ 3 5 7 9 10 15 20 22 25 $y$ 12 18 22 32 38 53 67 72 78
-
A chemical company has acquired a site for their new plant. They required to enclose that field with a fence. They have 700 meter of fencing material with a building on one side of the field where...
-
There are several possible heights at which the higher end of the bridge can be attached to the higher mountain. Fill in the table below to use 5 possible values for y, and calculate the resulting...
-
Figure displays a 12.0 V battery 3 four uncharged capacitors of capacitances C1 = 4.00F, C2 = 6.00F, and C3 = 3.00F. The switch is thrown to the left side until capacitor 1 is fully charged. Then the...
-
Par Company acquires 100% of the common stock of Sub Company for an agreed-upon price of $900,000. The book value of the net assets is $700,000, which includes $50,000 of subsidiary cash equivalents....
-
Rose Corporation was unable to service its outstanding debt. In an attempt to avoid filing for bankruptcy, it took the following measures: a. Patents with book value of $140,000 and accumulated...
-
Granger Supply, Inc., has two main areas of inventory, industrial supplies and industrial cleaning equipment. The FIFO inventory method is used for industrial supplies, and the LIFO method is used...
-
D, a single taxpayer, holds a 25% ownership interest in an LLC that operates a department store. Ds allocable share of net operating income from the LLC is \($100,000\) for the year. D also works...
-
A and B form the AB partnership by contributing \($10,000\) each. A and B agree to share profits and losses 75% to A, 25% to B. In Year 1 of operations, AB had business revenues of \($10,000,\)...
-
Can an allocation that does not have economic effect be cured by state law?
Study smarter with the SolutionInn App