Miller Company acquired an 80 percent interest in Taylor Company on January 1, 2019. Miller paid $744,000 in cash to the owners of Taylor to acquire these shares. In addition, the remaining 20 percent of Taylor shares continued to trade at a total value of $186,000 both before and
Problem 4-35 (Algo) (LO 4-2, 4-3, 4-5)
Miller Company acquired an 80 percent interest in Taylor Company on January 1, 2019. Miller paid $744,000 in cash to the owners of Taylor to acquire these shares. In addition, the remaining 20 percent of Taylor shares continued to trade at a total value of $186,000 both before and after Miller’s acquisition.
On January 1, 2019, Taylor reported a book value of $464,000 (Common Stock = $232,000; Additional Paid-In Capital = $69,600;
During the next three years, Taylor reports income and declares dividends as follows:
| Year | Net Income | Dividends | ||||
| 2019 | $ | 54,400 | $ | 7,800 | ||
| 2020 | 70,200 | 11,700 | ||||
| 2021 | 78,000 | 15,600 | ||||
Determine the appropriate answers for each of the following questions:
-
What amount of excess
depreciation expense should be recognized in the consolidated financial statements for the initial years following this acquisition? -
If a consolidated
balance sheet is prepared as of January 1, 2019, what amount ofgoodwill should be recognized? -
If a consolidation worksheet is prepared as of January 1, 2019, what Entry S and Entry A should be included?
-
On the separate financial records of the parent company, what amount of investment income would be reported for 2019 under each of the following accounting methods?
- The equity method.
- The partial equity method.
- The initial value method.
-
On the parent company’s separate financial records, what would be the December 31, 2021, balance for the Investment in Taylor Company account under each of the following accounting methods?
- The equity method.
- The partial equity method.
- The initial value method.
-
As of December 31, 2020, Miller’s Buildings account on its separate records has a balance of $624,000 and Taylor has a similar account with a $234,000 balance. What is the consolidated balance for the Buildings account?
-
What is the balance of consolidated goodwill as of December 31, 2021?
-
Assume that the parent company has been applying the equity method to this investment. On December 31, 2021, the separate financial statements for the two companies present the following information:
| Miller Company | Taylor Company | ||||||
| Common stock | $ | 390,000 | $ | 232,000 | |||
| Additional paid-in capital | 218,400 | 69,600 | |||||
| Retained earnings, 12/31/21 | 483,600 | 329,900 | |||||
What will be the consolidated balance of each of these accounts?
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