Branson paid $537,100 cash for all of the outstanding common stock of Wolfpack, Inc., on January 1, 2017. On that date, the subsidiary had a book value of $353,000 (common stock of $200,000 and retained earnings of $153,000), although various unrecorded royalty agreements (10-year remaining life) were assessed at a $153,000 fair value. Any remaining excess fair value was considered goodwill. In negotiating the acquisition price, Branson also promised to pay Wolfpack’s former owners an additional $57,000 if Wolfpack’s income exceeded $120,000 total over the first two years after the acquisition. At the acquisition date, Branson estimated the probability-adjusted present value of this contingent consideration at $39,900. On December 31, 2017, based on Wolfpack’s earnings to date, Branson increased the value of the contingency to $45,600. During the subsequent two years, Wolfpack reported the following amounts for income and dividends: Net Income Dividends Declared 2017 $ 66,400 $ 25,000 2018 76,400 35,000 In keeping with the original acquisition agreement, on December 31, 2018, Branson paid the additional $57,000 performance fee to Wolfpack’s previous owners. Prepare consolidation worksheet entries as of December 31, 2018, assuming that Branson has applied the equity method. Prepare consolidation worksheet entries as of December 31, 2018, assuming that Branson has applied the initial value method
Branson paid $537,100 cash for all of the outstanding common stock of Wolfpack, Inc., on January 1, 2017. On that date, the subsidiary had a book value of $353,000 (common stock of $200,000 and
In negotiating the acquisition price, Branson also promised to pay Wolfpack’s former owners an additional $57,000 if Wolfpack’s income exceeded $120,000 total over the first two years after the acquisition. At the acquisition date, Branson estimated the probability-adjusted present value of this contingent consideration at $39,900. On December 31, 2017, based on Wolfpack’s earnings to date, Branson increased the value of the contingency to $45,600.
During the subsequent two years, Wolfpack reported the following amounts for income and dividends:
| Net Income | Dividends Declared | |||||
| 2017 | $ | 66,400 | $ | 25,000 | ||
| 2018 | 76,400 | 35,000 | ||||
In keeping with the original acquisition agreement, on December 31, 2018, Branson paid the additional $57,000 performance fee to Wolfpack’s previous owners.
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Prepare consolidation worksheet entries as of December 31, 2018, assuming that Branson has applied the equity method.
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Prepare consolidation worksheet entries as of December 31, 2018, assuming that Branson has applied the initial value method
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