Problem 3-6 (LO2) Equity method, 80% interest, worksheet, statements. Sandin Company prepares the following balance sheet on January 1, 2015: Assets Liabilities and Equity Current assets $ 50,000 Liabilities $140,000 Land. 75,000 Common stock ($10 par) 100,000 Buildings 350,000 Paid-in capital in excess of par 120,000 Accumulated depreciation??? Retained earnings (deficit) (25,000) buildings (140,000) Total assets $ 335,000 Total liabilities and equity $335,000 On this date, Prescott Company purchases 8,000 shares of Sandin Company's outstanding stock for a total price of $270,000. Also on this date, the buildings are understated by $40,000 and have a 10-year remaining life. Any remaining discrepancy between the price paid and book value is attributed to goodwill. Since the purchase, Prescott Company has used the simple equity method to record the investment and its related income. Prescott Company and Sandin Company prepare the following separate trial balances on December 31, 2016: Prescott Sandin Current Assets 180,000 115,000 Land 150,000 75,000 Buildings 590,000 350,000 Accumulated Depreciation???Buildings. (265,000) (182,000) Investment in Sandin Company 294,000 Liabilities (175,000) (133,000) Common Stock ($10 par) (200,000) (100,000) Paid-In Capital in Excess of Par (120,000) Retained Earnings, January 1, 2016 (503,000) 15,000 Sales (360,000) (120,000) Cost of Goods Sold 179,000 50,000 Expenses

Problem 3-6
Common Information
Ownership Interest		80%
Price Paid	Cash	Number of Shares	Market Price per Share		Total
270,000	8,000	34		540,000
Acquired Company's Balance Sheet Before Purchase
	Book Value	Market Value	Life		Book Value	Market Value	Life
Assets				Liabilities
				Equity
Goodwill
Total Assets	0	0		Total Liabilities and Equity	0	0
Value Analysis	Company Implied Fair Value	Parent Price	NCI Value
Price Paid	337,500	270,000	67,500
Fair Value of Net Assets Excluding Goodwill	(235,000)	(188,000)	(47,000)
Goodwill	102,500	82,000	20,500
Gain on Acquisition
Determination and Distribution of Excess Schedule
	Company Value	Parent Price	NCI
Fair Value of Subsidiary	337,500	270,000	67,000
Less Book Value of Interest Acquired
Common Stock	(100,000)
Paid in Excess	(120,000)
Retained Earnings	25,000
Total Equity	(195,000)	195,000	195,000
Interest Acquired		80%	20%
Book Value		156,000	39,000
Excess of Cost over Book Value	142,500	114,000	28,500
Accounts Adjusted		Worksheet Distribution
Building
Goodwill
Goodwill
Gain on Acquisition
Total	0
Amortization Schedule
Account Adjusted	Life	Annual Amount	Current Year	Prior Years	Total	Key
Inventory
Accounts Subject to Amortization
Total Amortizations
Income Distribution Schedules
Subsidiary		Debit	Credit
Internally Generated Net Income
Inventory Adjustment
Amortizations
Total
NCI Share
Controlling Share
Parent
Internally Generated Net Income
Controlling Share of Subsidiary
Total
Problem 3-6 Consolidated Worksheet
	Trial Balance			Eliminations			Consol	NCI	Control.	Consol.
	Prescott	Sandin		Dr		Cr	Net Inc.		R.E.	Bal. Sht.
Current Assets	180,000	115,000		295,000						295,000
Investment in Subsidiary	294,000					(294,000)				(294,000)
Land	150,000	75,000		225,000
Buildings	590,000	350,000
Accumulated Depreciation	(265,000)	(182,000)
Goodwill
Liabilities	(175,000)	(133,000)
Common stock -Sandin		(100,000)
Paid-in excess - Sandin		(120,000)
Retained earnings - Sandin		15,000
Common stock - Prescott	(200,000)
Retained earnings-Prescott	(503,000)
Sales	(360,000)	(120,000)
Cost of goods sold	179,000	50,000
Expenses	120,000	45,000
Gain on acquisition
Subsidiary (dividend) Income	(20,000)
Dividends Declared-Sandin		5,000
Dividends declared - Prescott	10,000
Totals	0	0
Consolidated net income
NCI share
Controlling share
NCI
Controlling retained earnings
Totals
	Eliminations