On 1/1/2014, Lion Group purchased 60% (60,000 shares) of Iguana Ltd. for $50 per share, which was a $5 per share control premium. Buildings and Equipment were undervalued by $1,000,000 and had a 10 year remaining life; IPR&D was allocated $550,000 with a two-year remaining life; the remainder was goodwill. Dolphin sold inventory with of $100,000 for $150,000 in 2014 ($30,000 remained in ending inventory) and $120,000 cost for $160,000 in 2015 ($40,000 remainder in ending inventory). Dolphin sold Equipment with a net BV of $450,000 and a 5 year remaining life to Otter for $500,000 in 2014. Dolphin had net income of $450,000 and paid dividends of $50,000 in 2014.

PREPARE THE ORIGINAL PURCHASE PRICE ANALYSIS AT 1/1/2014 AND THE CONSOLIDATION WORKSHEET FOR 12/31/2015. SHOW CALCULATIONS FOR EQUITY IN THE EARNINGS OF SUB., THE INVESTMENT, AND NC INTEREST IN THE SUBS. INCOME

 

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The following data is for 12/31/2015 Otter Dolphin Revenues (2,250,000) (850,000) COGS 555,000 100,000 Operating Expenses Other income and expenses 350,000 (50,000) (208,000) (1,603,000) 45,000 (90,000) Equity in Subs. Earnings Net Income (795,000) Beg. R/E (1,268,000) (1,603,000) (1,400,000) (795,000) 50,000 (2,145,000) Net Income Divs. Paid 500,000 End R/E (2,371,000) Cash 50,000 25,00 Accounts Receivable 100,000 65,000 1,545,000 Inventory 2,300,000 Buildings and Equipment (Net) 5,000,000 2,465,000 Land 500,000 250,000 Investment in Sub. 3,163,000 Total Assets 11,113,000 4,350,000 (35,000) (3,000,000) (500,000) (5,207,000) (2,371,000) (5,000) (1,200,000) (100,000) (900,000) (2,145,000) Current Liabilities LT Liabilities Common Stock Additional Paid in Capital Retained Earnings Total Liabilities and Equity (11,113,000) (4,350,000) The following data is for 12/31/2015 Otter Dolphin Revenues (2,250,000) (850,000) COGS 555,000 100,000 Operating Expenses Other income and expenses 350,000 (50,000) (208,000) (1,603,000) 45,000 (90,000) Equity in Subs. Earnings Net Income (795,000) Beg. R/E (1,268,000) (1,603,000) (1,400,000) (795,000) 50,000 (2,145,000) Net Income Divs. Paid 500,000 End R/E (2,371,000) Cash 50,000 25,00 Accounts Receivable 100,000 65,000 1,545,000 Inventory 2,300,000 Buildings and Equipment (Net) 5,000,000 2,465,000 Land 500,000 250,000 Investment in Sub. 3,163,000 Total Assets 11,113,000 4,350,000 (35,000) (3,000,000) (500,000) (5,207,000) (2,371,000) (5,000) (1,200,000) (100,000) (900,000) (2,145,000) Current Liabilities LT Liabilities Common Stock Additional Paid in Capital Retained Earnings Total Liabilities and Equity (11,113,000) (4,350,000)

Answer rating: 100% (QA)

Parent paid 17000 to acquire 100 of issued shares of the subsidiary when the subsidiarys equity consisted of 9000 issued capital and 8000 retained earnings o At acquisition date the assets and liabili... View the full answer