Consolidation on date of acquisition - Equity method with noncontrolling interest and AAP Assume that a parent company acquires an 80% interest in its subsidiary for a purchase price of $1,862,400. The excess of the total fair value of the controlling and noncontrolling interests over the book value of the subsidiary's Stockholders' Equity is assigned to a building (in PPE. net) that the parent believes is worth $150.000 more than its book value, an: unrecorded Patent that the parent valued at $300.000, and Goodwill of $450,000, 80% of which is allocated to the parent. The parent and the subsidiary report the balance sheets on the acquisition date in b. below: a. Prepare the consolidation entries on the acquisition date. Consolidation Worksheet Debit Description [E] Common stock APIC Retained earnings Equity investment Noncontrolling interest Ⓒ (A) PPE, net Patent Goodwill Equity investment Cash Accounts receivable Inventory Equity investment : Patent Goodwill PPE, net Total Assets Current liabilities Long-term liabilities Common stock APIC Noncontrolling interest • 142000 178500 1106700 0 0 150000 300000 450000 0 0 Credit 1142400 285600 Noncontrolling interest b. Prepare the consolidation spreadsheet on the acquisition date. 0 0 0 720000 180000 Parent Subsidiary $1,381,131 $322,728 0 0 0 1,088.640 496,944 1,649.970 638.316 1,862,400 (A) (A) 7.936,866 1.180,956 [A] $13.919.007 $2.638.944 $1.222.169 $496.944 6.000.000 714,000 142.800 [E] 1,033,358 178,500 [E] 1.390.568 Retained earnings 4.272.912 1,106,700 [E] Total Liabilities and Equity $13.919,007 $2.638,944 Elimination Entries Cr Dr 300000 450000 150000 142800 178500 1,106.700 2.328.000 1142400 (E) 720000 [A] 285600 [E] 180000 [A] 2,328,000 Consolidated 1703859 1585584 2288286 S 0 300000 450000 9267822 $ 15595551 $ 1,719,113 6.714,000 1390568 1033358 465.600 4.272.912 $ 15.595.551
Consolidation on date of acquisition - Equity method with noncontrolling interest and AAP Assume that a parent company acquires an 80% interest in its subsidiary for a purchase price of $1,862,400. The excess of the total fair value of the controlling and noncontrolling interests over the book value of the subsidiary's Stockholders' Equity is assigned to a building (in PPE. net) that the parent believes is worth $150.000 more than its book value, an: unrecorded Patent that the parent valued at $300.000, and Goodwill of $450,000, 80% of which is allocated to the parent. The parent and the subsidiary report the balance sheets on the acquisition date in b. below: a. Prepare the consolidation entries on the acquisition date. Consolidation Worksheet Debit Description [E] Common stock APIC Retained earnings Equity investment Noncontrolling interest Ⓒ (A) PPE, net Patent Goodwill Equity investment Cash Accounts receivable Inventory Equity investment : Patent Goodwill PPE, net Total Assets Current liabilities Long-term liabilities Common stock APIC Noncontrolling interest • 142000 178500 1106700 0 0 150000 300000 450000 0 0 Credit 1142400 285600 Noncontrolling interest b. Prepare the consolidation spreadsheet on the acquisition date. 0 0 0 720000 180000 Parent Subsidiary $1,381,131 $322,728 0 0 0 1,088.640 496,944 1,649.970 638.316 1,862,400 (A) (A) 7.936,866 1.180,956 [A] $13.919.007 $2.638.944 $1.222.169 $496.944 6.000.000 714,000 142.800 [E] 1,033,358 178,500 [E] 1.390.568 Retained earnings 4.272.912 1,106,700 [E] Total Liabilities and Equity $13.919,007 $2.638,944 Elimination Entries Cr Dr 300000 450000 150000 142800 178500 1,106.700 2.328.000 1142400 (E) 720000 [A] 285600 [E] 180000 [A] 2,328,000 Consolidated 1703859 1585584 2288286 S 0 300000 450000 9267822 $ 15595551 $ 1,719,113 6.714,000 1390568 1033358 465.600 4.272.912 $ 15.595.551
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Consolidation on date of acquisition - Equity method with noncontrolling interest and AAP
Assume that a parent company acquires an 80% interest in its subsidiary for a purchase price of $1,862,400. The excess of the total fair value of the controlling and noncontrolling interests over the book value of the subsidiary's Stockholders' Equity is assigned to a building (in PPE,
net) that the parent believes is worth $150,000 more than its book value, an: unrecorded Patent that the parent valued at $300,000, and Goodwill of $450,000, 80% of which is allocated to the parent. The parent and the subsidiary report the balance sheets on the acquisition date in b.
below:
a. Prepare the consolidation entries on the acquisition date.
Consolidation Worksheet
Debit
Description
[E] Common stock
APIC
Retained earnings
Equity investment
Noncontrolling interest
[A] PPE, net
Patent
Goodwill
Equity investment
Noncontrolling interest
b. Prepare the consolidation
Cash
Accounts receivable
Inventory
Equity investment
Patent
Goodwill
PPE, net
Total Assets
Current liabilities
Long-term liabilities
Common stock
APIC
Noncontrolling interest
142800
178500
1106700
0
0
150000
300000
450000
0
0
Credit
1142400
285600
720000
180000
0
spreadsheet on the acquisition date.
Parent Subsidiary
$1,381,131 $322,728
1,088,640 496,944
1,649,970 638,316
1,862,400
[A]
[A]
7.936,866 1,180,956 [A]
$13,919,007 $2,638,944
$1,222,169 $496,944
6,000,000 714,000
1.390,568 142,800 [E]
1,033,358 178,500 [E]
Retained earnings
4,272,912 1,106,700 [E]
Total Liabilities and Equity $13,919,007 $2,638,944
Elimination Entries
Cr
Dr
300000
450000
150000
142800
178500
1,106,700
2,328,000
1142400 [E]
720000 [A]
285600 [E]
180000 [A]
2,328,000
Consolidated
1703859
1585584
2288286
S
S
S
0
300000
450000
9267822
15595551
1,719,113
6,714,000
1390568
1033358
465,600
4,272,912
$ 15,595,551](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb7556ff1-a466-450f-b767-c1340b5b8385%2F9575e388-3cfd-4a20-b01a-89caf0a999ec%2Fr6b2c9p_processed.png&w=3840&q=75)
Transcribed Image Text:Consolidation on date of acquisition - Equity method with noncontrolling interest and AAP
Assume that a parent company acquires an 80% interest in its subsidiary for a purchase price of $1,862,400. The excess of the total fair value of the controlling and noncontrolling interests over the book value of the subsidiary's Stockholders' Equity is assigned to a building (in PPE,
net) that the parent believes is worth $150,000 more than its book value, an: unrecorded Patent that the parent valued at $300,000, and Goodwill of $450,000, 80% of which is allocated to the parent. The parent and the subsidiary report the balance sheets on the acquisition date in b.
below:
a. Prepare the consolidation entries on the acquisition date.
Consolidation Worksheet
Debit
Description
[E] Common stock
APIC
Retained earnings
Equity investment
Noncontrolling interest
[A] PPE, net
Patent
Goodwill
Equity investment
Noncontrolling interest
b. Prepare the consolidation
Cash
Accounts receivable
Inventory
Equity investment
Patent
Goodwill
PPE, net
Total Assets
Current liabilities
Long-term liabilities
Common stock
APIC
Noncontrolling interest
142800
178500
1106700
0
0
150000
300000
450000
0
0
Credit
1142400
285600
720000
180000
0
spreadsheet on the acquisition date.
Parent Subsidiary
$1,381,131 $322,728
1,088,640 496,944
1,649,970 638,316
1,862,400
[A]
[A]
7.936,866 1,180,956 [A]
$13,919,007 $2,638,944
$1,222,169 $496,944
6,000,000 714,000
1.390,568 142,800 [E]
1,033,358 178,500 [E]
Retained earnings
4,272,912 1,106,700 [E]
Total Liabilities and Equity $13,919,007 $2,638,944
Elimination Entries
Cr
Dr
300000
450000
150000
142800
178500
1,106,700
2,328,000
1142400 [E]
720000 [A]
285600 [E]
180000 [A]
2,328,000
Consolidated
1703859
1585584
2288286
S
S
S
0
300000
450000
9267822
15595551
1,719,113
6,714,000
1390568
1033358
465,600
4,272,912
$ 15,595,551
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