Consolidation Working Paper, Noncontrolling Interest, Intercompany Merchandise Transactions Prime Company (Prime) acquired 75 percent of the outstanding stock of Savory Snacks Company (Savory) at the beginning of 2015, for cash and stock totaling $120 million. Savory's assets and liabilities were fairly reported at the date of acquisition, except for these items: (in thousands) Plant & Equipment, net (10-year life, straight-line) Veggie Burger recipe (10-year life, straight-line) Long-term debt (4 year life. straight-line) Book Value Fair Value $150,000 $135,000 25,000 34,000 0 30,000 Savory's book value at the date of acquisition was $74 million, and the fair value of the 25% noncontrolling interest was $35 million. It is now December 31, 2023 (the end of the ninth year since acquisition). Impairment testing on the goodwill arising in this acquisition reveals that total impairment during 2015-2022 is $2 million, and impairment in 2023 is $1 million. Savory sells merchandise and raw materials to Prime at a markup of 30% on cost. Here is information on these intercompany sales (in thousands): Inventory, January 1, 2023, reported on Prime's books $10,400 Inventory, December 31, 2023, reported on Prime's books 13,000 Transfer price for 2023 sales from Savory to Prime 50.000 Below are the separate trial balances of Prime and Savory at December 31, 2023. (in thousands) Current assets Plant and equipment, net Investment in Savory Identifiable intangibles Current liabilities Long-term debt Capital stock Retained earnings. January 11 Sales revenue Equity in net income of Savory Cost of sales Operating expenses Totals Dr(Cr) Prime Savory $35,000 $20,000 262,650 192.000 128.850 100,000 10,000 (30.000) (25.000) (350,000) (100,000) (80,000) (54,000) (57,750) (38,000) (400,000) (140,000) (1.750) 250.000 65.000 143,000 70,000 $0 $0 40°F Haze 4:51 PM For quick access, place your bookmarks here on the bookmarks toolbar. Manage bookmarks... (b) Prepare a schedule computing Prime's equity in net income of Savory and noncontrolling interest in net income for 2023. Use negative signs with answers that reduce net income amounts. (in thousands) Total Equity in net income of Savory Noncontrolling interest in net income of Savory Savory's reported net income for 2023 $ 5,000 $ 3,750 $ 1,250 Revaluation writeoffs for 2023: Plant & Equipment 1,500 1,125 375✓ Intangibles (2.500) ▼ (1.875) ▼ (625) ▼ Goodwill (1,000) ▼ (800) ▼ (200) ▼ Intercompany sales adjustments: Upstream beg. inventory profit confirmed. 2,400✓ 1,800 600✓ Upstream end. inventory profit unconfirmed (3,000) ▼ (2.250) ▼ (750) ▼ Total $ 2,400 $ 1,750 $ 650 (c) Prepare a working paper to consolidate the trial balances of Prime and Savory at December 31, 2023. Remember to use negative signs with your credit balance answers in the Consolidated Balances Dr(Cr) column. Consolidation Working Paper Trial Balances Taken From Books Eliminations Prime Savory Current assets (in thousands) Plant and equipment, net Investment in Savory Dr (Cr) Dr (Cr) Debit Credit Consolidated Balances Dr (Cr) $35,000 $20,000 262,650 192,000 (0) 1,500✔ 3.000 (1-3) $ 7,500 x (R) 52.000 ✔ 448,650 x 128,850 1,750 (C) 67,200✔ (E) 62,150 x (R) Identifiable intangibles 100,000 10,000 (R) 12.500 x 2,500 120,000 x Goodwill 7,300 x 1,000✓ (0) 72.000 ✔ Current liabilities (30,000) (25,000) (55,000) ✔ Long term debt (350,000) (100,000) (450,000)✔ Capital stock (80,000) Retained earnings, Jan. 1 (57,750) (54,000) (E) (38,000) (1-2) (E) 54,000 ✔ 2,400✔ 35.600✔ (80,000)✓ (60,000) x Noncontrolling interest 22.400✔ (38,900) x 15,850 x (R) 650 (N) Sales revenue (400,000) Equity in NI of Savory Cost of goods sold (1,750) 250,000 (140,000) (1-1) (C) 65,000 (1-3) 60,000 ✔ 1.750✔ 3,000✓ (480.000)✔ 2,400 (1-2) 60,000 (-1) 255,600 ✔ Operating expenses 143,000 70.000 (0) 2,000 ✔ 215,000✔ Noncontrolling interest in NI (N) 650 ▼ 650- $0 50 $ 0✓ Total 246,400 x S 246.400 x https://mybusinesscourse.com/platform/mod/quiz/review.php?attempt=11138513&cmid=570893 Q 8 Esc F1 * F2 DII F3 1 @ 2 # 3 $ 4 F4 % 25 F5 E 66 F6 O W E R T Y & 7 F7

Consolidation Working Paper, Noncontrolling Interest, Intercompany Merchandise Transactions Prime Company (Prime) acquired 75 percent of the outstanding stock of Savory Snacks Company (Savory) at the beginning of 2015, for cash and stock totaling $120 million. Savory's assets and liabilities were fairly reported at the date of acquisition, except for these items: (in thousands) Plant & Equipment, net (10-year life, straight-line) Veggie Burger recipe (10-year life, straight-line) Long-term debt (4 year life. straight-line) Book Value Fair Value $150,000 $135,000 25,000 34,000 0 30,000 Savory's book value at the date of acquisition was $74 million, and the fair value of the 25% noncontrolling interest was $35 million. It is now December 31, 2023 (the end of the ninth year since acquisition). Impairment testing on the goodwill arising in this acquisition reveals that total impairment during 2015-2022 is $2 million, and impairment in 2023 is $1 million. Savory sells merchandise and raw materials to Prime at a markup of 30% on cost. Here is information on these intercompany sales (in thousands): Inventory, January 1, 2023, reported on Prime's books $10,400 Inventory, December 31, 2023, reported on Prime's books 13,000 Transfer price for 2023 sales from Savory to Prime 50.000 Below are the separate trial balances of Prime and Savory at December 31, 2023. (in thousands) Current assets Plant and equipment, net Investment in Savory Identifiable intangibles Current liabilities Long-term debt Capital stock Retained earnings. January 11 Sales revenue Equity in net income of Savory Cost of sales Operating expenses Totals Dr(Cr) Prime Savory $35,000 $20,000 262,650 192.000 128.850 100,000 10,000 (30.000) (25.000) (350,000) (100,000) (80,000) (54,000) (57,750) (38,000) (400,000) (140,000) (1.750) 250.000 65.000 143,000 70,000 $0 $0 40°F Haze 4:51 PM For quick access, place your bookmarks here on the bookmarks toolbar. Manage bookmarks... (b) Prepare a schedule computing Prime's equity in net income of Savory and noncontrolling interest in net income for 2023. Use negative signs with answers that reduce net income amounts. (in thousands) Total Equity in net income of Savory Noncontrolling interest in net income of Savory Savory's reported net income for 2023 $ 5,000 $ 3,750 $ 1,250 Revaluation writeoffs for 2023: Plant & Equipment 1,500 1,125 375✓ Intangibles (2.500) ▼ (1.875) ▼ (625) ▼ Goodwill (1,000) ▼ (800) ▼ (200) ▼ Intercompany sales adjustments: Upstream beg. inventory profit confirmed. 2,400✓ 1,800 600✓ Upstream end. inventory profit unconfirmed (3,000) ▼ (2.250) ▼ (750) ▼ Total $ 2,400 $ 1,750 $ 650 (c) Prepare a working paper to consolidate the trial balances of Prime and Savory at December 31, 2023. Remember to use negative signs with your credit balance answers in the Consolidated Balances Dr(Cr) column. Consolidation Working Paper Trial Balances Taken From Books Eliminations Prime Savory Current assets (in thousands) Plant and equipment, net Investment in Savory Dr (Cr) Dr (Cr) Debit Credit Consolidated Balances Dr (Cr) $35,000 $20,000 262,650 192,000 (0) 1,500✔ 3.000 (1-3) $ 7,500 x (R) 52.000 ✔ 448,650 x 128,850 1,750 (C) 67,200✔ (E) 62,150 x (R) Identifiable intangibles 100,000 10,000 (R) 12.500 x 2,500 120,000 x Goodwill 7,300 x 1,000✓ (0) 72.000 ✔ Current liabilities (30,000) (25,000) (55,000) ✔ Long term debt (350,000) (100,000) (450,000)✔ Capital stock (80,000) Retained earnings, Jan. 1 (57,750) (54,000) (E) (38,000) (1-2) (E) 54,000 ✔ 2,400✔ 35.600✔ (80,000)✓ (60,000) x Noncontrolling interest 22.400✔ (38,900) x 15,850 x (R) 650 (N) Sales revenue (400,000) Equity in NI of Savory Cost of goods sold (1,750) 250,000 (140,000) (1-1) (C) 65,000 (1-3) 60,000 ✔ 1.750✔ 3,000✓ (480.000)✔ 2,400 (1-2) 60,000 (-1) 255,600 ✔ Operating expenses 143,000 70.000 (0) 2,000 ✔ 215,000✔ Noncontrolling interest in NI (N) 650 ▼ 650- $0 50 $ 0✓ Total 246,400 x S 246.400 x https://mybusinesscourse.com/platform/mod/quiz/review.php?attempt=11138513&cmid=570893 Q 8 Esc F1 * F2 DII F3 1 @ 2 # 3 $ 4 F4 % 25 F5 E 66 F6 O W E R T Y & 7 F7

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter8: Investing Activities

Section: Chapter Questions

Problem 20PC

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