Parsons Corporation is a US-based entertainment company. On December 31, 2018, Parsons completed the acquisition of...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Parsons Corporation is a US-based entertainment company. On December 31, 2018, Parsons completed the acquisition of 64% (6,000,000 shares) of the outstanding shares of Sheldon Industries for $73.00 per share or $438,000,000. Sheldon Industries had 9,375,000 shares outstanding at this time. Both Parsons and Sheldon Industries have a December 31 year- end for financial reporting purposes. On January 2, 2019, the first trading day post-acquisition, the shares of Sheldon Industries not held by Parsons trade at $62.80 per share, Parsons Corporation uses this to determine the fair value of the noncontrolling interest at the date of acquisition. Sheldon's total stockholder's on December 31, 2018 is S286,512,000. Sheldon's assets on December 31, 2018 include Goodwill of 12,835,000 from a prior acquisition. On the acquisition date Sheldon held equipment undervalued by $5,220,000 (9-year remaining life), a patent undervalued by $14,058,000 (6-year remaining life), and an identified customer-related intangible asset which has no book value but an acquisition date fair value of $17,970,000 and a 15-year life. The remaining excess was attributed to goodwill. Assume Parsons accounts for the investment in Sheldon on its books (parent-only books) using the equity method. For 2019, Sheldon Industries reported net income of $51,680,000 and paid dividends of $25,800,000. For 2020, Sheldon Industries reported net income of $48,820,000 and paid dividends of $27,520,000. For 2021, Sheldon Industries reported net income S62,780,000 or S7.30 per share. Sheldon declares and pays a dividend of $32,680,000 or $3.80 per share in 2021. The book value of Sheldon's net assets on December 31, 2021 is $363,792,000. Sales from Parsons to Sheldon total $72,480,000 (Cost to Parsons $47,112,000) in 2020. Sheldon has $15,945,600 of inventory related to this purchase on hand at December 31, 2020. Sales from Sheldon to Parsons total $87,500,000 (Cost to Sheldon $52,062,500) in 2020. Parsons has $15,750,000 of inventory related to this purchase on hand at December 31, 2020. Sales from Parsons to Sheldon total $83,460,000 (Cost to Parsons $53,415,000) in 2021. Sheldon has $17,526,600 of inventory related to this purchase on hand at December 31, 2021. Sales from Sheldon to Parsons total $113,750,000 (Cost to Sheldon $68,110,000) in 2021. Parsons has $22,750,000 of inventory related to this purchase on hand at December 31, 2021. On January 1, 2020, Parsons sold equipment to Sheldon for $58,344,000. The equipment has a remaining life of 12 years and is depreciated on a straight-line basis. The original cost to Parsons was $78,400,000 and the book value on January 1, 2020 is $47,040,000. The equipment is being depreciated on a straight-line basis over 20 years and is 8 years old at the date of sale to Sheldon. Required: a. What is the amount of goodwill reported on the consolidated balance sheet on December 31, 2021 due to Parsons' acquisition of Sheldon Industries? How much of the goodwill is allocated to NCI? HINT: When determining the new goodwill total, the existing goodwill is excluded from the fair value (or book value) of net assets acquired. b. What is the amount of net income from Sheldon reported internally on the books of Parsons Corporation (using the equity method) for 2021? What is the amount of net income attributable to NCI reported in the consolidated income statement for 2021? Assume that in computing these numbers only upstream intra-entity transactions are included in net income attributable to NCI. c. How do the numbers change in b. if all intra-entity transactions are included in net income from Sheldon recorded by Parsons and none is attributable to NCI? Briefly explain the implications of these changes (b versus c). d. What is the amount of NCI as at December 31, 2021 (using the numbers from b) and where is it reported on the consolidated balance sheet? Parsons Corporation is a US-based entertainment company. On December 31, 2018, Parsons completed the acquisition of 64% (6,000,000 shares) of the outstanding shares of Sheldon Industries for $73.00 per share or $438,000,000. Sheldon Industries had 9,375,000 shares outstanding at this time. Both Parsons and Sheldon Industries have a December 31 year- end for financial reporting purposes. On January 2, 2019, the first trading day post-acquisition, the shares of Sheldon Industries not held by Parsons trade at $62.80 per share, Parsons Corporation uses this to determine the fair value of the noncontrolling interest at the date of acquisition. Sheldon's total stockholder's on December 31, 2018 is S286,512,000. Sheldon's assets on December 31, 2018 include Goodwill of 12,835,000 from a prior acquisition. On the acquisition date Sheldon held equipment undervalued by $5,220,000 (9-year remaining life), a patent undervalued by $14,058,000 (6-year remaining life), and an identified customer-related intangible asset which has no book value but an acquisition date fair value of $17,970,000 and a 15-year life. The remaining excess was attributed to goodwill. Assume Parsons accounts for the investment in Sheldon on its books (parent-only books) using the equity method. For 2019, Sheldon Industries reported net income of $51,680,000 and paid dividends of $25,800,000. For 2020, Sheldon Industries reported net income of $48,820,000 and paid dividends of $27,520,000. For 2021, Sheldon Industries reported net income S62,780,000 or S7.30 per share. Sheldon declares and pays a dividend of $32,680,000 or $3.80 per share in 2021. The book value of Sheldon's net assets on December 31, 2021 is $363,792,000. Sales from Parsons to Sheldon total $72,480,000 (Cost to Parsons $47,112,000) in 2020. Sheldon has $15,945,600 of inventory related to this purchase on hand at December 31, 2020. Sales from Sheldon to Parsons total $87,500,000 (Cost to Sheldon $52,062,500) in 2020. Parsons has $15,750,000 of inventory related to this purchase on hand at December 31, 2020. Sales from Parsons to Sheldon total $83,460,000 (Cost to Parsons $53,415,000) in 2021. Sheldon has $17,526,600 of inventory related to this purchase on hand at December 31, 2021. Sales from Sheldon to Parsons total $113,750,000 (Cost to Sheldon $68,110,000) in 2021. Parsons has $22,750,000 of inventory related to this purchase on hand at December 31, 2021. On January 1, 2020, Parsons sold equipment to Sheldon for $58,344,000. The equipment has a remaining life of 12 years and is depreciated on a straight-line basis. The original cost to Parsons was $78,400,000 and the book value on January 1, 2020 is $47,040,000. The equipment is being depreciated on a straight-line basis over 20 years and is 8 years old at the date of sale to Sheldon. Required: a. What is the amount of goodwill reported on the consolidated balance sheet on December 31, 2021 due to Parsons' acquisition of Sheldon Industries? How much of the goodwill is allocated to NCI? HINT: When determining the new goodwill total, the existing goodwill is excluded from the fair value (or book value) of net assets acquired. b. What is the amount of net income from Sheldon reported internally on the books of Parsons Corporation (using the equity method) for 2021? What is the amount of net income attributable to NCI reported in the consolidated income statement for 2021? Assume that in computing these numbers only upstream intra-entity transactions are included in net income attributable to NCI. c. How do the numbers change in b. if all intra-entity transactions are included in net income from Sheldon recorded by Parsons and none is attributable to NCI? Briefly explain the implications of these changes (b versus c). d. What is the amount of NCI as at December 31, 2021 (using the numbers from b) and where is it reported on the consolidated balance sheet?
Expert Answer:
Answer rating: 100% (QA)
Answer Solution Complete profit paid to Preferred and Common invest... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0078025839
9th edition
Authors: J. David Spiceland, James Sepe , Mark Nelson , Wayne Thomas
Posted Date:
Students also viewed these accounting questions
-
On September 23, 2016, Marriott completed the acquisition of the Startwood Hotels & Resorts Worldwide. Marriott paid $13.3 billion for Starwood. Did Marriott overpaid or get a good deal? What needs...
-
The Sweetwater Candy Company would like to buy a new machine that would automatically "dip" chocolates. The dipping operation is currently done largely by hand. The machine the company is considering...
-
On December 31, 2018, the Company completed the acquisition of Versace for a total enterprise value of approximately 1.753 billion (or approximately $2.005 billion). The following table summarizes...
-
Solve Problem using augmented matrix methods. Use a graphing calculator to perform the row operations 5.7x1 - 8.55x2 = -35.91 4.5x1 +5.73x2 = 76.17
-
A study by the University Of Texas Southwestern Medical Center examined 626 people to see if there was an increased risk of contracting hepatitis C associated with having a tattoo. If the subject had...
-
On August 1, 2019, the following were the account balances of B&B Repair Services. During August, the following summary transactions were completed. Aug. 1 Paid $400 cash for advertising in local...
-
What is the implication of the statement "the books are not in balance"? What corrective action should be taken?
-
Explain why sunk costs should not be included in a capital budgeting analysis, but opportunity costs and externalities should be included.
-
Zama CC acquired Machine A ( a second - hand machine ) for R 2 0 0 0 0 0 0 and brought it into use in its manufacturing process on 1 0 January 2 0 1 7 . Zama CC acquired a new manufacturing machine B...
-
Consider the assignment problem having the following cost table. (a) Draw the network representation of this assignment problem. (b) Formulate this problem as a transportation problem by constructing...
-
Mason Company provided the following data for this year: Sales Direct labor cost Raw material purchases Selling expenses Administrative expenses Manufacturing overhead applied to work in process...
-
A client of yours is meeting with you, and during the meeting asks you about a stock position they have that just announced a 2-for-1 stock split. Prior to the split your client held 100 shares worth...
-
Three important details of a credit report are your personal information, how much you spent or owe, and the bank who reviews your credit report. The bank has access to your credit report to see if...
-
3.7 Sherville Racquet Club would like to expand their existing suite of organisational guidelines and procedures to ensure their financial statements are accurately prepared. The new policies...
-
SESSION DATE JUNE 21, 2024 15 To: Binh's Bins 672 Alleyway Drive Red Deer, AB T4R 2T4 BINH'S BINS - GENERAL JOURNAL Sylvan Motors 179 Towing Blvd., Red Deer, AB T4P 1S2 Date: June 15, 2024 Truck...
-
The altitude of a triangle is increasing at a rate of 1 cm/min while the area of the triangle is increasing at a rate of 2 cm2/min. At what rate is the base of the triangle changing when the altitude...
-
Explain the uses and limitations of social media, digital media, and virtual communication in global business. Your thoughts and conclusions on the process of how well the businesses used this direct...
-
Use integration by parts to evaluate the following. Check your answer by taking the derivative. x2e-xdx
-
When is a gain or a loss from a cash flow hedge reported in earnings?
-
A company constructs a building for its own use. Construction began on January 1 and ended on December 30. The expenditures for construction were as follows: January 1, $500,000; March 31, $600,000;...
-
On March 1, 2018, Baddour, Inc., issued 10% bonds, dated January 1, with a face amount of $160 million. The bonds were priced at $140 million (plus accrued interest) to yield 12%. Interest is paid...
-
Understanding the Feds actions that are needed to stabilize the interest rate The diagram below shows three different money demand curves and a target interest rate i*. Fill in the table below using...
-
This section looks at US recessions over the past 60 years. To work out this problem, first obtain quarterly data on US output growth for the period 1960 to the most recent data from www.bea.gov....
-
This question asks you to examine the movements of investment and consumption before, during and after the recession of 2001. It also asks you to consider the response of investment and consumption...
Study smarter with the SolutionInn App