Canan Corporation paid $14,400 for a 80% interest in Kodak Corporation on January 1, 2020, when...

  
 
 

Transcribed Image Text:

Canan Corporation paid $14,400 for a 80% interest in Kodak Corporation on January 1, 2020, when Kodak's stockholders' equity consisted of $8,000 Capitol Stock, APIC of $2,000 and $3,000 of Retained Earnings. The excess cost over book value was attributable to trademark, which has not been impaired since acquisition date. Additional information: 1. Canan sells merchandise to Kodak at 120% of Canan's cost. During 2020, Canan's sales to Kodak were $4,800, of which half of the merchandise remained in Kodak's inventory at December 31, 2020. (The 2020 ending inventory was sold in 2021.) During 2021, Canan's sales to Kodak were $6,000 of which 60% remained in Kodak's inventory at December 31, 2021. At year-end 2021, Kodak owed Canan $4,000 for the inventory purchased during 2021. 2. Canan Corporation sold equipment with a book value of $2,000 and a remaining useful life of four years and no salvage value to Kodak Corporation on January 1, 2021 for $2,800, Straight-line depreciation is used. 3. During 2021, Kodak sold to Canan land for $50,000 that had a book value of $20,000. Canan still owns the land at 12/31/21. 4. Separate company financial statements for Canan Corporation and Kodak at December 31, 2021 are summarized in the first two columns of the consolidation working papers. See Spreadsheet Tab. Required: Carefully Follow and label each step. 1. Prepare the acquisition analysis as of acquisition date. Compute the unamortized differential as of 1/1/2021. 2. Analyze each intercompany transaction. Label as either upstream downstream. 3. SEPARATELY Calculate Net income to the controlling interest for the year 2021 4. Verify the calculation of the balance in the acccount equity in sub earnings and record the parent company entries with respect to its investment during 2021 5. Prepare all elimination entries for 2021 6. Complete the consolidating spreadsheet for the year ended 2021. total Points 10 15 20 20 20 15 100 INCOME STATEMENT Sales Equity in sub earnings gain on sale of equip Gain on sale of land Total revenues Cost of goods sold Expenses Total expenses Total Net income Less net income to NCI Net income to controlling interest RETAINED EARNINGS Retained Earnings 1/1 Net income Dividends declared STATEMENT Retained Earnings 12/31 cash accts rec Buildings, net Equipment, net Investment in S trademk Dividends rec Inventory Other current assets Land Total assets BALANCE SHEET Accounts payable Dividends payable Other liabilities Common stock Additional Paid-in capital Retained earnings noncontrolling interest Total liabilities and equity P 60,000 4,000 800 64,800 26,000 28,000 54,000 10,800 10,800 7,833 10,800 7,000 11,633 5,500 7,133 10,000 50,000 24,000 18,000 114,633 53,000 50,000 11,633 114,633 S 14,000 30,000 44,000 4,400 3,600 8,000 36,000 36,000 5.000 36,000 2,000 39,000 33,000 4,000 4,500 3,500 9,000 54,000 5,000 8,000 2,000 39,000 54,000 ELIMINATIONS Dr Cr CONS.TOT. 74,000 4,000 800 30,000 108,800 30,400 31,600 62,000 46,800 0 46,800 12,833 46,800 9,000 50,633 38,500 11,133 0 14,500 0 53,500 0 33,000 18,000 0 0 0 168,633 58,000 0 58,000 2,000 50,633 0 168,633 80% 1. What is the amount for Trademark shown in the consolidated balance sheet? 2. What amount of the intercompany Equipment net gain or loss adjustment be confirmed in 2021? Enter as a positive value if gain or a negative value if loss adjustment to net income to controlling interest Answer Sheet: Must use cell references 3. What is the amount of the Net parent company intercompany inventory profit that must be recognized in 2021? Enter as a positive value if net income is increased and negative if decreased 4. What is the amount of the subsidiary intercompany land gain profit that is confirmed in 20217 5. What is the NonControlling Interest Claim on the Subsidiary's Net Income? Enter as a positive amount. 6. What is the Net Income Attributed to the Controlling Interest? 7. What are consolidated total assets in the Consolidated Balance Sheet? 8. What is the NonControlling Interest Claim on the Subsidiary's Equity at 12/31/21 as presented in the Consolidated Balance Sheet? 9. What is the adjustment to the land account in the elimination entries? Enter as a positive amount. 10. What are consolidated sales for 2021? Enter Here in Shaded Cell WARNING: INSERTING OR CHANGING ANY FORMAT ON this sheet will impact your grade!!! EXAMPLE 38,500 LOOK AT CELL REFERENCE ABOVE Canan Corporation paid $14,400 for a 80% interest in Kodak Corporation on January 1, 2020, when Kodak's stockholders' equity consisted of $8,000 Capitol Stock, APIC of $2,000 and $3,000 of Retained Earnings. The excess cost over book value was attributable to trademark, which has not been impaired since acquisition date. Additional information: 1. Canan sells merchandise to Kodak at 120% of Canan's cost. During 2020, Canan's sales to Kodak were $4,800, of which half of the merchandise remained in Kodak's inventory at December 31, 2020. (The 2020 ending inventory was sold in 2021.) During 2021, Canan's sales to Kodak were $6,000 of which 60% remained in Kodak's inventory at December 31, 2021. At year-end 2021, Kodak owed Canan $4,000 for the inventory purchased during 2021. 2. Canan Corporation sold equipment with a book value of $2,000 and a remaining useful life of four years and no salvage value to Kodak Corporation on January 1, 2021 for $2,800, Straight-line depreciation is used. 3. During 2021, Kodak sold to Canan land for $50,000 that had a book value of $20,000. Canan still owns the land at 12/31/21. 4. Separate company financial statements for Canan Corporation and Kodak at December 31, 2021 are summarized in the first two columns of the consolidation working papers. See Spreadsheet Tab. Required: Carefully Follow and label each step. 1. Prepare the acquisition analysis as of acquisition date. Compute the unamortized differential as of 1/1/2021. 2. Analyze each intercompany transaction. Label as either upstream downstream. 3. SEPARATELY Calculate Net income to the controlling interest for the year 2021 4. Verify the calculation of the balance in the acccount equity in sub earnings and record the parent company entries with respect to its investment during 2021 5. Prepare all elimination entries for 2021 6. Complete the consolidating spreadsheet for the year ended 2021. total Points 10 15 20 20 20 15 100 INCOME STATEMENT Sales Equity in sub earnings gain on sale of equip Gain on sale of land Total revenues Cost of goods sold Expenses Total expenses Total Net income Less net income to NCI Net income to controlling interest RETAINED EARNINGS Retained Earnings 1/1 Net income Dividends declared STATEMENT Retained Earnings 12/31 cash accts rec Buildings, net Equipment, net Investment in S trademk Dividends rec Inventory Other current assets Land Total assets BALANCE SHEET Accounts payable Dividends payable Other liabilities Common stock Additional Paid-in capital Retained earnings noncontrolling interest Total liabilities and equity P 60,000 4,000 800 64,800 26,000 28,000 54,000 10,800 10,800 7,833 10,800 7,000 11,633 5,500 7,133 10,000 50,000 24,000 18,000 114,633 53,000 50,000 11,633 114,633 S 14,000 30,000 44,000 4,400 3,600 8,000 36,000 36,000 5.000 36,000 2,000 39,000 33,000 4,000 4,500 3,500 9,000 54,000 5,000 8,000 2,000 39,000 54,000 ELIMINATIONS Dr Cr CONS.TOT. 74,000 4,000 800 30,000 108,800 30,400 31,600 62,000 46,800 0 46,800 12,833 46,800 9,000 50,633 38,500 11,133 0 14,500 0 53,500 0 33,000 18,000 0 0 0 168,633 58,000 0 58,000 2,000 50,633 0 168,633 80% 1. What is the amount for Trademark shown in the consolidated balance sheet? 2. What amount of the intercompany Equipment net gain or loss adjustment be confirmed in 2021? Enter as a positive value if gain or a negative value if loss adjustment to net income to controlling interest Answer Sheet: Must use cell references 3. What is the amount of the Net parent company intercompany inventory profit that must be recognized in 2021? Enter as a positive value if net income is increased and negative if decreased 4. What is the amount of the subsidiary intercompany land gain profit that is confirmed in 20217 5. What is the NonControlling Interest Claim on the Subsidiary's Net Income? Enter as a positive amount. 6. What is the Net Income Attributed to the Controlling Interest? 7. What are consolidated total assets in the Consolidated Balance Sheet? 8. What is the NonControlling Interest Claim on the Subsidiary's Equity at 12/31/21 as presented in the Consolidated Balance Sheet? 9. What is the adjustment to the land account in the elimination entries? Enter as a positive amount. 10. What are consolidated sales for 2021? Enter Here in Shaded Cell WARNING: INSERTING OR CHANGING ANY FORMAT ON this sheet will impact your grade!!! EXAMPLE 38,500 LOOK AT CELL REFERENCE ABOVE

Answer rating: 100% (QA)

1 Acquisition Analysis To prepare the acquisition analysis as of the acquisition date Book Value of Kodaks Equity Capital Stock 8000 Additional Paidin ... View the full answer