Assume that, on January 1, 2019, Kuehler Company acquired an 80% interest in Eastwood Company for a
Question:
Assume that, on January 1, 2019, Kuehler Company acquired an 80% interest in Eastwood Company for a purchase price that was $650,000 over the book value of the subsidiary’s Stockholders’ Equity on the acquisition date. Kuehler uses the equity method to account for its investment in Eastwood. Kuehler assigned the acquisition-date AAP as follows:
AAP Items | Initial Fair Value | Useful Life (years) |
PPE | $350,000 | 10 |
Patent | 100,000 | 5 |
Customer List | 150,000 | 5 |
Goodwill | 50,000 | Indefinite |
$650,000 |
80% of if the Goodwill is allocated to the parent. Kuehler and Eastwood report the following financial statements December 31, 2022:
Income Statement | ||
Kuehler | Eastwood | |
Sales | $860,000 | $750,000 |
Cost of goods sold | -458,000 | -430,000 |
Gross Profit | 402,000 | 320,000 |
Income (loss) from subsidiary | 56,000 | |
Operating expenses | -158,000 | -165,000 |
Net income | $300,000 | $155,000 |
Statement of Retained Earnings | ||
Kuehler | Eastwood | |
BOY Retained Earnings | $878,440 | $420,000 |
Net income | 300,000 | 155,000 |
Dividends | -175,000 | -12,500 |
Ending Retained Earnings | $1,003,440 | $562,500 |
Balance Sheet | ||
Kuehler | Eastwood | |
Assets: | ||
Cash | $55,000 | $54,000 |
Accounts receivable | 46,000 | 24,000 |
Inventory | 95,000 | 95,112 |
Equity Investment | 932,880 | |
PPE, net | 288,060 | 1,873,188 |
$1,416,940 | $2,046,300 | |
Liabilities and Stockholders’ Equity: | ||
Current Liabilities | $75,000 | $400,200 |
Long-term Liabilities | 150,000 | 790,000 |
Common Stock | 63,500 | 118,100 |
APIC | 125,000 | 175,500 |
Retained Earnings | 1,003,440 | 562,500 |
$1,416,940 | $2,046,300 | |
Required:
a. Compute the EOY noncontrolling interest equity balance.
b. Prepare the consolidation journal entries.
Intermediate Accounting IFRS
ISBN: 978-1119372936
3rd edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield