Plaza, Ic., acquires 80 percent of the outstanding common stock of Stanford Corporation on January 1, 2021, inexchange for $900,000 cash. At the acquisition date, Stanford's total fair value, including the noncontrollinginterest, was assessed at $1,125,000. Also at the acquisition date, Stanford's book value was $690,000.Several individual items on Stanford's financial records had fair values that differed from their book values asfollows:Book ValueFair ValueTrade names (indefinite life)$ 360,000$ 383,000Property and equipment (net, 8-yearremaining life)Patent (14-year remaining life)290,000132,000330,000272,000For internal reporting purposes, Plaza, Inc., employs the equity method to account for this investment. The followingaccount balances are for the year ending December 31, 2021, for both companies. For internal reporting purposes, Plaza, Inc., employs the equity method to account for this investment. The followingaccount balances are for the year ending December 31, 2021, for both companies.PlazaStanford(825,000)395,75036,25028,000Revenues$(1,400,000)2$Cost of goods soldDepreciation expenseAmortization expense774,000328,000(280,000)$ (578,000)Equity in income of StanfordNet income(365,000)$(530,000)(365,000)50,000$ (845,000)Retained earnings, 1/1/21$(1,275,000)(578,000)300,000Net incomeDividends declaredRetained earnings, 12/31/21$(1,553,000)Current assets860,0001,140,000240,0001,030,000$432,250Investment in StanfordTrade names360,000253,750104,000$ 1,150,000Property and equipment (net)PatentsTotal assets$ 3,270,000Accounts payable(142,000)(145,000)(120,000)( 40,000)(845,000)2$(300,000)(1,275,000)(1,553,000)Common stockAdditional paid-in capitalRetained earnings (above)Total liabilities and equities$(3,270,000)$(1,150,000)At year-end, there were no intra-entity receivables or payables.Prepare a worksheet to consolidate the financial statements of Plaza, Inc., and its subsidiary Stanford. (For accountswhere multiple consolidation entries are required, combine all debit entries into one amount and enter thisamount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enterthis amount in the credit column of the worksheet. Input all amounts as positive values.)

Acquisition accounting is a set of formal guidelines which defines how assets liabilities,NCI and…

Plaza, Inc., acquires 80 percent of the outstanding common stock of Stanford Corporation on January 1, 2021, in exchange for $900,000 cash. At the acquisition date, Stanford's total fair value, including the noncontrolling interest, was assessed at $1,125,000. Also at the acquisition date, Stanford's book value was $690,000. Several individual items on Stanford's financial records had fair values that differed from their book values as follows: Book Value Fair Value $ 383,000 Trade names (indefinite life) Property and equipment (net, 8-year remaining life) Patent (14-year remaining life) $ 360,000 290,000 132,000 330,000 272,000

Plaza, Inc., acquires 80 percent of the outstanding common stock of Stanford Corporation on January 1, 2021, in exchange for $900,000 cash. At the acquisition date, Stanford's total fair value, including the noncontrolling interest, was assessed at $1,125,000. Also at the acquisition date, Stanford's book value was $690,000. Several individual items on Stanford's financial records had fair values that differed from their book values as follows: Book Value Fair Value $ 383,000 Trade names (indefinite life) Property and equipment (net, 8-year remaining life) Patent (14-year remaining life) $ 360,000 290,000 132,000 330,000 272,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

Question

Plaza, Ic., acquires 80 percent of the outstanding common stock of Stanford Corporation on January 1, 2021, in
exchange for $900,000 cash. At the acquisition date, Stanford's total fair value, including the noncontrolling
interest, was assessed at $1,125,000. Also at the acquisition date, Stanford's book value was $690,000.
Several individual items on Stanford's financial records had fair values that differed from their book values as
follows:
Book Value
Fair Value
Trade names (indefinite life)
$ 360,000
$ 383,000
Property and equipment (net, 8-year
remaining life)
Patent (14-year remaining life)
290,000
132,000
330,000
272,000
For internal reporting purposes, Plaza, Inc., employs the equity method to account for this investment. The following
account balances are for the year ending December 31, 2021, for both companies.

For internal reporting purposes, Plaza, Inc., employs the equity method to account for this investment. The following
account balances are for the year ending December 31, 2021, for both companies.
Plaza
Stanford
(825,000)
395,750
36,250
28,000
Revenues
$(1,400,000)
2$
Cost of goods sold
Depreciation expense
Amortization expense
774,000
328,000
(280,000)
$ (578,000)
Equity in income of Stanford
Net income
(365,000)
$(530,000)
(365,000)
50,000
$ (845,000)
Retained earnings, 1/1/21
$(1,275,000)
(578,000)
300,000
Net income
Dividends declared
Retained earnings, 12/31/21
$(1,553,000)
Current assets
860,000
1,140,000
240,000
1,030,000
$
432,250
Investment in Stanford
Trade names
360,000
253,750
104,000
$ 1,150,000
Property and equipment (net)
Patents
Total assets
$ 3,270,000
Accounts payable
(142,000)
(145,000)
(120,000)
( 40,000)
(845,000)
2$
(300,000)
(1,275,000)
(1,553,000)
Common stock
Additional paid-in capital
Retained earnings (above)
Total liabilities and equities
$(3,270,000)
$(1,150,000)
At year-end, there were no intra-entity receivables or payables.
Prepare a worksheet to consolidate the financial statements of Plaza, Inc., and its subsidiary Stanford. (For accounts
where multiple consolidation entries are required, combine all debit entries into one amount and enter this
amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter
this amount in the credit column of the worksheet. Input all amounts as positive values.)

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