Adams Corporation acquired 90 percent of the outstanding voting shares of Barstow, Inc., on December 31, 2016. Adams paid a total of $603,000 in cash for these shares. The 10 percent noncontrolling interest shares traded on a daily basis at fair value of $67,000 both before and after Adams’s acquisition. On December 31, 2016, Barstow had the following account balances: Book Value Fair Value Current assets $ 160,000 $ 160,000 Land 120,000 150,000 Buildings (10-year remaining life) 220,000 200,000 Equipment (5-year remaining life) 160,000 200,000 Patents (10-year remaining life) 0 50,000 Notes payable (due in 5 years) (200,000 ) (180,000 ) Common stock (180,000 ) Retained earnings, 12/31/16 (280,000 ) December 31, 2018, adjusted trial balances for the two companies follow: AdamsCorporation Barstow,Inc. Debits Current assets $ 610,000 $ 250,000 Land 380,000 150,000 Buildings 490,000 250,000 Equipment 873,000 150,000 Investment in Barstow, Inc. 702,000 0 Cost of goods sold 480,000 90,000 Depreciation expense 100,000 55,000 Interest expense 40,000 15,000 Dividends declared 110,000 70,000 Total debits $ 3,785,000 $ 1,030,000 Credits Notes payable $ 860,000 $ 230,000 Common stock 510,000 180,000 Retained earnings, 1/1/18 1,367,000 340,000 Revenues 940,000 280,000 Investment income 108,000 0 Total credits $ 3,785,000 $ 1,030,000 At year-end, there were no intra-entity receivables or payables. a. Prepare schedules for acquisition-date fair-value allocations and amortizations for Adams’s investment in Barstow. b. Determine Adams’s method of accounting for its investment in Barstow. c.&d. Prepare a consolidation worksheet for Adams Corporation and Barstow, Inc., as of December 31, 2018.

Adams Corporation acquired 90 percent of the outstanding voting shares of Barstow, Inc., on December 31, 2016. Adams paid a total of $603,000 in cash for these shares. The 10 percent noncontrolling interest shares traded on a daily basis at fair value of $67,000 both before and after Adams’s acquisition. On December 31, 2016, Barstow had the following account balances: Book Value Fair Value Current assets $ 160,000 $ 160,000 Land 120,000 150,000 Buildings (10-year remaining life) 220,000 200,000 Equipment (5-year remaining life) 160,000 200,000 Patents (10-year remaining life) 0 50,000 Notes payable (due in 5 years) (200,000 ) (180,000 ) Common stock (180,000 ) Retained earnings, 12/31/16 (280,000 ) December 31, 2018, adjusted trial balances for the two companies follow: AdamsCorporation Barstow,Inc. Debits Current assets $ 610,000 $ 250,000 Land 380,000 150,000 Buildings 490,000 250,000 Equipment 873,000 150,000 Investment in Barstow, Inc. 702,000 0 Cost of goods sold 480,000 90,000 Depreciation expense 100,000 55,000 Interest expense 40,000 15,000 Dividends declared 110,000 70,000 Total debits $ 3,785,000 $ 1,030,000 Credits Notes payable $ 860,000 $ 230,000 Common stock 510,000 180,000 Retained earnings, 1/1/18 1,367,000 340,000 Revenues 940,000 280,000 Investment income 108,000 0 Total credits $ 3,785,000 $ 1,030,000 At year-end, there were no intra-entity receivables or payables. a. Prepare schedules for acquisition-date fair-value allocations and amortizations for Adams’s investment in Barstow. b. Determine Adams’s method of accounting for its investment in Barstow. c.&d. Prepare a consolidation worksheet for Adams Corporation and Barstow, Inc., as of December 31, 2018.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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	Book Value		Fair Value
Current assets	$	160,000		$	160,000
Land		120,000			150,000
Buildings (10-year remaining life)		220,000			200,000
Equipment (5-year remaining life)		160,000			200,000
Patents (10-year remaining life)		0			50,000
Notes payable (due in 5 years)		(200,000	)		(180,000	)
Common stock		(180,000	)
Retained earnings, 12/31/16		(280,000	)

December 31, 2018, adjusted trial balances for the two companies follow:

	Adams Corporation		Barstow, Inc.
Debits
Current assets	$	610,000		$	250,000
Land		380,000			150,000
Buildings		490,000			250,000
Equipment		873,000			150,000
Investment in Barstow, Inc.		702,000			0
Cost of goods sold		480,000			90,000
Depreciation expense		100,000			55,000
Interest expense		40,000			15,000
Dividends declared		110,000			70,000
Total debits	$	3,785,000		$	1,030,000
Credits
Notes payable	$	860,000		$	230,000
Common stock		510,000			180,000
Retained earnings, 1/1/18		1,367,000			340,000
Revenues		940,000			280,000
Investment income		108,000			0
Total credits	$	3,785,000		$	1,030,000

At year-end, there were no intra-entity receivables or payables.

a. Prepare schedules for acquisition-date fair-value allocations and amortizations for Adams’s investment in Barstow.

b. Determine Adams’s method of accounting for its investment in Barstow.

c.&d. Prepare a consolidation worksheet for Adams Corporation and Barstow, Inc., as of December 31, 2018.

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