On January 1, 2012 Paris Inc. purchased 80% of the outstanding common stock of Torres Co. for $144,000. On that date, the fair value of the remaining 20% interest was $35,000 and Torres had Common Stock of $104,000 and Retained Earnings of $11,000. On the acquisition date all of Torres’s assets and liabilities had fair values equal to their book values except:

Accounts Receivable which had a book value of $25,000 and a fair value of $20,000.

PP&E which had a book value of $40,000 and a fair value of $70,000.

Patents which were undervalued by $24,000.

Notes Payable which had a book value of $11,000 and a fair value of $16,000.

Both the PP&E and Patent are straight line depreciated or amortized over their expected remaining useful lives of 10 and 6 years respectively. Neither has any salvage value. Torres’s Notes Payable had a remaining term of 5 years at the date of acquisition.

On January 1, 2013, Torres sold equipment with a book value of $40,000 to Paris for $60,000. Both companies use straight line depreciation and estimate the equipment has a remaining useful life of eight years with no salvage value.

Both companies routinely sell inventory to one another with a profit margin of 30% of the selling price. $22,000 of intercompany sales occurred in 2014, with $10,000 of the merchandise remaining in the ending inventory of Paris. $6,400 of the intercompany sales remained unpaid at the end of 2014. $16,000 of intercompany sales took place in 2015. The 2015 ending inventory of Torres included $5,500 of intercompany goods, $2,560 of which had yet to be paid.

During 2015, Paris took a $2,000 impairment loss on the goodwill recognized as part of the acquisition of Torres.

Answer the following questions. The consolidated statement worksheet should be presented as an Excel printout.

How much goodwill will be attributed to Paris? How much to the non-controlling shareholders? Did Paris pay a control premium, and if so how much?

Write all the 2015 equity method journal entries that Paris makes for its internal books. Identify what each entry is for.

Directly calculate the Equity Investment balance at the beginning of 2015. Show your work.

Write all the necessary 2015 consolidating entries necessary to generate the firm’s consolidated financial statements.

Write the “I” entries Paris must make for the equipment purchase in 2013?

Complete Paris’s 2015 consolidated statements.

Paris uses the full equity method for its internal bookkeeping. The following information is taken from the unconsolidated December 31^st, 2015 financial statements of the two companies:

	Parent	Sub
Income Statement
Sales	368,000	160,000
Cost of Goods Sold	(192,000)	(94,400)
Gross Profit	176,000	65,600
Depreciation & Amort Expense	(9,600)	(7,680)
Operating Expenses	(104,000)	(21,040)
Interest Expense	(4,800)	(1,680)
Total Expense	(118,400)	(30,400)
Equity Income	24,430
Net Income	82,030	35,200
NC Income
Controlling Income
Statement of Retained Earnings
Beg. Retained Earnings	211,440	88,000
Net Income	82,030	35,200
Dividends Declared	(48,000)	(16,000)
Ending Retained Earnings	245,470	107,200
Balance Sheet
Cash	34,640	12,000
Accounts Receivable	43,200	38,400
Inventory	104,000	36,800
Investment in Sub	192,430
PPE, net	100,800	88,000
Other Assets	45,600	80,000
Patent		8,000
Goodwill
Total Assets	520,670	263,200
Liabilities & Equity
Accounts Payable	25,600	14,400
Notes Payable	40,000	16,800
Other Liabilities	17,600	20,800
Common Stock	192,000	104,000
Retained Earnings	245,470	107,200
NC Interest
Total Liabilities & Equity	520,670	263,200

Answer rating: 100% (QA)

1 Goodwill will be attributed to Paris as 59430 and to the noncontrolling shareholders as 15070 Pari... View the full answer