On January 1, 2017, Allan Company bought a 15 percent interest in Sysinger Company. The acquisition price

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On January 1, 2017, Allan Company bought a 15 percent interest in Sysinger Company. The acquisition price of $184,500 reflected an assessment that all of Sysinger's accounts were fairly valued within the company's accounting records. During 2017, Sysinger reported net income of $100,000 and declared cash dividends of $30,000. Allan possessed the ability to influence significantly Sysinger's operations and, therefore, accounted for this investment using the equity method.

On January 1, 2018, Allan acquired an additional 80 percent interest in Sysinger and provided the following fair-value assessments of Sysinger's ownership components:

Consideration transferred by Allan for 80% interest. . . . . . . . . . . . . . . . .$1,400,000

Fair value of Allan's 15% previous ownership. . . . . . . . . . . . . . . . . . . . . . . 262,500

Non-controlling interest's 5% fair value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,500

Total acquisition-date fair value for Sysinger Company. . . . . . . . . . . . . $1,750,000

Also, as of January 1, 2018, Allan assessed a $400,000 value to an unrecorded customer contract recently negotiated by Sysinger. The customer contract is anticipated to have a remaining life of four years. Sysinger's other assets and liabilities were judged to have fair values equal to their book values. Allan elects to continue applying the equity method to this investment for internal reporting purposes.

At December 31, 2018, the following financial information is available for consolidation:

_______________________________________Allan Company ________ Sysinger Company

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (931,000) . . . . . . . . . . . . . $ (380,000)

Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 615,000 . . . . . . . . . . . . . . . . 230,000

Equity earnings of Sysinger . . . . . . . . . . . . . . . . . . . . . . (47,500) . . . . . . . . . . . . . . . . . -0-

Gain on revaluation of Investment in Sysinger

To fair value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (67,500) . . . . . . . . . . . . . . . . .-0-

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 431,000 . . . . . . . . . . . . . . $ 150,000

On January 1, 2017, Allan Company bought a 15 percent

a. How should Allan allocate Sysinger's total acquisition-date fair value (January 1, 2018) to the assets acquired and liabilities assumed for consolidation purposes?
b. Show how the following amounts on Allan's pre-consolidation 2018 statements were derived:
∙ Equity in earnings of Sysinger.
∙ Gain on revaluation of Investment in Sysinger to fair value.
∙ Investment in Sysinger.
c. Prepare a worksheet to consolidate the financial statements of these two companies as of
December 31, 2018. At year-end, there were no intra-entity receivables or payables?

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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Advanced Accounting

ISBN: 978-1259444951

13th edition

Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupni

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