Soft Bound Version for Advanced Accounting 13th Edition
13th Edition
ISBN: 9781260110579
Author: Hoyle
Publisher: McGraw Hill Education
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Question
Chapter 3, Problem 34P
a.
To determine
Provide entry to record the acquisition of the shares of Company W.
b.
To determine
Provide entries at the end of 2017 and 2018 to adjust its contingent performance obligation for changes in fair value and the December 31, 2018, payment.
c.
To determine
Provide consolidation worksheet entries as of December 31, 2018, assuming that B has applied the equity method.
d.
To determine
Provide consolidation worksheet entries as of December 31, 2018, assuming that B has applied the initial value method.
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Branson paid $537,100 cash for all of the outstanding common stock of Wolfpack, Inc., on January 1, 2017. On that date, the subsidiary had a book value of $353,000 (common stock of $200,000 and retained earnings of $153,000), although various unrecorded royalty agreements (10-year remaining life) were assessed at a $153,000 fair value. Any remaining excess fair value was considered goodwill.
In negotiating the acquisition price, Branson also promised to pay Wolfpack’s former owners an additional $57,000 if Wolfpack’s income exceeded $120,000 total over the first two years after the acquisition. At the acquisition date, Branson estimated the probability-adjusted present value of this contingent consideration at $39,900. On December 31, 2017, based on Wolfpack’s earnings to date, Branson increased the value of the contingency to $45,600.
During the subsequent two years, Wolfpack reported the following amounts for income and dividends:
Net Income
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$
66,400…
Branson paid $573,200 cash for all of the outstanding common stock of Wolfpack, Inc., on January 1, 2020. On that date, the
subsidiary had a book value of $430,000 (common stock of $200,000 and retained earnings of $230,000), although various
unrecorded royalty agreements (10-year remaining life) were assessed at a $133,000 fair value. Any remaining excess fair value was
considered goodwill.
In negotiating the acquisition price, Branson also promised to pay Wolfpack's former owners an additional $44,000 if Wolfpack's
income exceeded $150,000 total over the first two years after the acquisition. At the acquisition date, Branson estimated the
probability-adjusted present value of this contingent consideration at $30,800. On December 31, 2020, based on Wolfpack's earnings
to date, Branson increased the value of the contingency to $35,200.
During the subsequent two years, Wolfpack reported the following amounts for income and dividends:
Dividends Declared
$ 15,000
25,000
Net Income
$…
Branson paid $543,800 cash for all of the outstanding common stock of Wolfpack, Inc., on January 1, 2020. On that
date, the subsidiary had a book value of $401,000 (common stock of $200,000 and retained earnings of $201,000).
although various unrecorded royalty agreements (10-year remaining life) were assessed at a $124.000 fair value. Any
remaining excess fair value was considered goodwill.
In negotiating the acquisition price, Branson also promised to pay Wolfpack's former owners an additional $56,000 if
Wolfpack's income exceeded $130,000 total over the first two years after the acquisition. At the acquisition date,
Branson estimated the probability-adjusted present value of this contingent consideration at $39,200. On December 31,
2020, based on Wolfpack's earnings to date, Branson increased the value of the contingency to $44,800.
During the subsequent two years, Wolfpack reported the following amounts for income and dividends:
Net
Income
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2021
82,400
Dividends…
Chapter 3 Solutions
Soft Bound Version for Advanced Accounting 13th Edition
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