Introduction:
Consolidation of statements:
The result of parent as well as all of its subsidiaries financial position is reflected in consolidated statements. It is beneficial for creditors and owners of the parent company to know the outcome of the operations of parent and its subsidiaries.
To calculate: Consolidated worksheet for paulcraft corporation and its subsidiary Switzer corporation as of Dec 31 2017. Also preparing supporting amortization and income distribution schedules.

Answer to Problem 3.10.2P
The Fair value of subsidiary is $480000 parent price of $480000. The fair value of net assets excluding
Explanation of Solution
1. Worksheet Paulcraft Corporation and Subsidiary Switzer Company.
Particular | Eliminations & Adjustments | Con Inc.stmt | NCI | Controlling interest RE | Con BS | |||
Company P | Company S | Debit | Credit | |||||
Cash | $100000 | $110000 | $210000 | |||||
$90000 | $55000 | $145000 | ||||||
Inventory | $120000 | $86000 | $206000 | |||||
Land | $100000 | $60000 | $90000 (4) | $250000 | ||||
Investment in S | $480000 | $70000 (6) | $10000(1) | |||||
$10000(2) | ||||||||
$282000(3) | ||||||||
$268000(4) | ||||||||
Buildings | $800000 | $250000 | $130000(4) | $1180000 | ||||
Acc depre | ($220000) | ($80000) | $19500 (5) | ($319500) | ||||
Equipment | $150000 | $100000 | $30000 (4) | $280000 | ||||
Acc depre | ($90000) | ($72000) | $18000 (5) | ($180000) | ||||
Goodwill | $16000(4) | $16000 | ||||||
Current liabilities | ($60000) | ($102000) | ($162000) | |||||
Bond payable | ($100000) | ($100000) | ||||||
Discount (premium) | $4000 (4) | |||||||
$2400 (5) | $1600 | |||||||
Common stock- S | ($10000) | $10000 (3) | ||||||
Paid in cap in excess of Par − S | ($90000) | $90000 (3) | ||||||
RE- S | ($182000) | $182000 (3) | ||||||
Common stock − P | ($100000) | |||||||
Paid in cap in excess of Par − P | ($900000) | |||||||
RE- P | ($315000) | $70000 (6) | ||||||
$2000 (4) | ||||||||
$26600 (5) | ($360400) | |||||||
Sales | ($800000) | ($350000) | ($1150000) | |||||
COGS | $450000 | $210000 | $660000 | |||||
Depe exp- Bldg | $30000 | $15000 | $6500 (5) | $51500 | ||||
Depre exp- equipment | $15000 | $14000 | $6000 (5) | $35000 | ||||
Other expenses | $140000 | $68000 | $208000 | |||||
Interest exp | $8000 | $800 (5) | $8800 | |||||
Sub (dividend) Income | ($10000) | $10000 (1) | ||||||
Div declared − S | $10000 | $10000 (2) | ||||||
Div declared- P | $20000 | $20000 | ||||||
Total | $681900 | $681900 | ||||||
Cons Net income | ($186700) | |||||||
To NCI | ||||||||
To CI | $186700 | ($186700) | ||||||
Total NCI | ($527100) | ($527100) | ||||||
RE CI |
Where , (1) Current year subsidiary income (2) Current year dividend (3)Eliminate controlling interest in subsidiary equity (4) D and D schedule excess distribution (5) Per amortization schedule, excess amortize (6) Conversion to equity 2. Determination of Value analysis schedule:-
Particulars | Company Implied Value | Parent (100%) | NCI (0%) |
Fair Value of Company | $480000 ( working #1) | $480000 | 0 |
Fair value of net assets excluding goodwill | $464000 (Working #2) | $464000 | 0 |
Goodwill | $16000 | $16000 |
3. Determination and Distribution of Excess schedule
Particulars | Company Implied Fair value | Parent (100%) | NCI (0%) | |
Fair value of subsidiary (A) | $480000 | $480000 | 0 | |
Book Value of Interest acquired | ||||
Common stock | $10000 | |||
Paid in capital in excess of par | $90000 | |||
$112000 | ||||
Total Equity | $212000 | $212000 | ||
Interest acquired | 100% | |||
Excess of Fair value over Book Value (a − 212000) | $268000 ($480000-$212000) | $268000 | ||
Adjustment of Identifiable accounts | Adjustment | Life | Amortization per year | |
Inventory (Working #4) | ($2000) | Credit D1 | ||
Land(Working #4) | $90000 | Debit D2 | ||
Bonds Payable(Working #4) | $4000 | 5 years | $800 | Debit D3 |
Buildings(Working #4) | $130000 | 20 | $6500 | Debit D4 |
Equipment(Working #4) | $30000 | 5 | $6000 | Debit D5 |
Goodwill ( per Value analysis table ) | $16000 | Debit D6 | ||
Total | $208000 |
Where Debit D records non-controlling interest portion of excess of fair value over the book value, excess in investment account is distributed and patent is adjusted to fair value.
Working :-
1. Company fair value of subsidiary
P Company purchase stock of S company for $480000
2. Fair value of net assets excluding goodwill
= Total Equity +Inventory +land+ Bonds payable+ Buildings+ Equipment
3. Goodwill
4. Assets
Assets | Adjustment (a-b) | Cost (a) | Market Value (b) |
Inventory | ($2000) | 40000 | 38000 |
Land | $90000 | 60000 | 150000 |
Bonds Payable | $4000 | 100000 | 96000 |
Buildings | $130000 | 150000 ( $200000-$50000) | 280000 |
Equipment | $30000 | 70000 ($10000-$30000) | 100000 |
5 Calculating adjustment value of investment Adjustment value of investment = S company earnings as on dec 31 2017 − S company retained earnings as on purchasing date .
6. Total amortization table
Account adjustments | Life | Annual amount | Current year | Prior year | Total | Key |
Inventory | 1 | ($2000) | ($2000) | ($2000) | D1 | |
Subject to amortization | ||||||
Bonds payable | 5 | $800 | $800 | $1600 | $2400 | A3 |
Buildings | 20 | $6500 | $6500 | $13000 | $19500 | A4 |
Equipment | 5 | $6000 | $6000 | $12000 | $18000 | A5 |
Total amortizations | $13300 | $13300 | $26600 | $39900 |
7. Internally generated income - S company Internally generated income = S company sales −[COGS+
S company income distribution
Particular | Amount | Particular | Amount |
Current year amortizations | $13300 | Internally generated income (Working #7) | $35000 |
Adjusted income before tax | $21700 | ||
NCI in subsidiary | 0 | ||
Controlling interest share (100%) | $21700 |
8. Internally generated income - P Company Internally generated income = S company sales −[COGS+Depreciation (bldg.)+Depreciation(equipment)+Other expense]
P company income distribution
Particular | Amount | Particular | Amount |
Current year amortizations | $13300 | Internally generated income (Working #8) | $165000 |
Controlling share of subsidiary | $21700 | ||
Controlling interest share | $186700 |
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