heet on the date of acquisition: Assets $ Liabilities $ Accounts receivable 90,000 Accounts payable 50,000 Depreciable fixed asstes 200,000 Bonds payable 50,000 Land 50,000
Pineapple Company acquired an 80% interest in Samsung Company for $272,000 cash on January 1, 2018. Samsung had the following Balance Sheet on the date of acquisition:
| Assets | $ | Liabilities | $ |
| Accounts receivable | 90,000 | Accounts payable | 50,000 |
| 200,000 | Bonds payable | 50,000 | |
| Land | 50,000 | Discount on bonds payable | (1,620) |
| 10,000 | Comm stock ($10 par) | 100,000 | |
| 151,620 | |||
| Total Asstes | 350,000 | Total liabilities & Equity | 350,000 |
The excess of the price paid over book value is attributable to the Depreciable Fixed Assets, which have a fair
value of $260,000. The Depreciable Assets have a 10 year remaining life.
Samsung sold a piece of Land to Pineapple for $60,000 on January 1, 2019. It cost Samsung $50,000 to purchase
the land.
On January 1, 2020, Samsung held merchandise acquired from Pineapple for $20,000. This beginning inventory
had an applicable gross profit of 40%. During 2020, Pineapple sold $60,000 worth of merchandise to Samsung.
Samsung held $30,000 of this merchandise at December 31, 2020. This ending inventory and an applicable gross
profit of 35%. Samsung owed Pineapple $23,000 on December 31, 2020 as a result of these intercompany sales.
On January 1, 2020, Pineapple held merchandise acquired from Samsung for $10,000. This beginning inventory
had an applicable gross profit of 25%. During 2020, Samsung sold $40,000 worth of merchandise to Pineapple.
Pineapple held $6,000 of this merchandise at December 31, 2020. This ending inventory had an applicable gross
profit of 30%. Pineapple owed Samsung $11,000 on December 31, 2020 as a result of these intercompany sales.
On January 1, 2017, Samsung received $48,055 for $50,000 of 8%, 5 year bonds it issued when the market rate
was 9%. When Pineapple purchased these bonds for $47,513 on January 1, 2019, the market rate was 10%. Both
companies use the Effective Interest method to amortize the premium/discount on the bonds.
Pineapple used the following bond amortization schedules:
| Period | Nominal Interest $ | Effective interest $ | Balance $ |
| Jan 2019 | 47,513 | ||
| Jan 1 2020 | 4,000 | 4,751 | 48,264 |
| Jan 1 2021 | 4,000 | 4,826 | 49,090 |
| Jan 1 2022 | 4,000 | 4,909 | 50,000 |
Samsung used the following bond amortization schedules:
| Period | Nominal interest $ | effective intered $ | Balance $ |
| Jan 1 2017 | 48,055 | ||
| Jan 1 2018 | 4,000 | 4,325 | 48,380 |
| Jan 1 2019 | 4,000 | 4,354 | 48,734 |
| Jan 1 2020 | 4,000 | 4,386 | 49,120 |
| Jan 1 2021 | 4,000 | 4,421 | 49,541 |
| Jan 1 2022 | 4,000 | 4,459 | 50,000 |
Pineapple and Samsung had the following
| Balance | Pineapple | Samsung |
| Accounts receivable | 124,000 | 85,000 |
| Iventory | 6,000 | 30,000 |
| Depreciable fixed assets | 400,000 | 200,000 |
| (130,000) | (40,000) | |
| Land | 60,000 | |
| Investment in subsidiary | 272,000 | |
| Investment in subsidiary bonds | 49,090 | |
| Goodwill | 10,000 | |
| Accounts payable | (80,000) | |
| Bonds payable | (50,000) | |
| Discount on bonds payable | 459 | |
| Common stock | (300,000) | (100,000) |
| Retained Earning, Jan 1 | (348,264) | (134,880) |
| Sales | (200,000) | (100,000) |
| Expenses | 160,000 | 85,000 |
| Interest revenue | (4,826) | |
| Interest expense | 4,421 | |
| Dividend income (from subsidiary) | (8,000) | |
| Dividends declared | 0 | 10,000 |
| Total | 0 | 0 |
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