Chapter 6 CASH FLOW, EPS, AND TAXATION 363 Problem 6-3 (LO 1) Comprehensive cash flow, indirect method. Presented below are the consolidated workpaper balances of Bush, Inc., and its subsidiary, Dorr Corporation, as of December 31, 2016 and 2015: Assets 2016 2015 Net Change Incr. (Decr.) Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Marketable equity securities (at cost). . . . . . . . . . . . . Allowance to reduce marketable equity securities to market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable (net) . . . . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated depreciation . . . . . . . . . . . . . . . . . . . . Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 313,000 175,000 $ 195,000 175,000 $118,000 0 (13,000) 418,000 595,000 385,000 755,000 (199,000) 60,000 (24,000) 440,000 525,000 170,000 690,000 (145,000) 60,000 11,000 (22,000) 70,000 215,000 65,000 (54,000) 0 Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,489,000 $2,086,000 $403,000 Current portion of long-term note. . . . . . . . . . . . . . . . Accounts payable and accrued liabilities . . . . . . . . . Note payable, long-term . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . Noncontrolling interest in net assets of subsidiary . . . Common stock ($10 par). . . . . . . . . . . . . . . . . . . . . . Additional paid-in capital in excess of par . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . Treasury stock (at cost). . . . . . . . . . . . . . . . . . . . . . . . $ 150,000 595,000 300,000 44,000 179,000 580,000 303,000 338,000 $ 150,000 474,000 450,000 32,000 161,000 480,000 180,000 195,000 (36,000) $ Total liabilities and stockholders’ equity . . . . . . . . $2,489,000 $2,086,000 $ 403,000 Liabilities and Stockholders’ Equity 0 121,000 (150,000) 12,000 18,000 100,000 123,000 143,000 36,000 Additional information: a. On January 20, 2016, Bush, Inc., issues 10,000 shares of its common stock for land having a fair value of $215,000. b. On February 5, 2016, Bush reissues all of its treasury stock for $44,000. c. On May 15, 2016, Bush pays a cash dividend of $58,000 on its common stock. d. On August 8, 2016, equipment is purchased for $127,000. e. On September 30, 2016, equipment is sold for $40,000. The equipment costs $62,000 and has a net book value of $34,000 on the date of the sale. f. On December 15, 2016, Dorr Corporation pays a cash dividend of $50,000 on its common stock. g. Deferred income taxes represent timing differences relating to the use of accelerated depreciation methods for income tax reporting and the straight-line method for financial reporting. h. Net income for 2016 is as follows: Controlling interest in consolidated net income. . . . . . . . . . . . . . . . Dorr Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $201,000 110,000 i. Bush, Inc., owns 70% of Dorr Corporation. There is no change in ownership interest in Dorr during 2015 and 2016. There are no intercompany transactions other than the dividend paid to Bush by its subsidiary. Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 06/25/2018 - RS0000000000000000000001059680 (Jackie Cohen) - Advanced Accounting Name of Company Being Acquired Name of Acquiring Company Date of Acquisition Date of Acquisition Book Market Life Assets Cash Accounts Receivable Inventory Investment in Subsidiary Intercompany Bond Investment Goodwill 15 Total Assets Deferred Tax (Liability) Asset Liabilities - - Total Liabilities Equity Acquired Company Common Stock Paid-in Capital in Excess of Par Retained Earnings Equity Acquiring Company Common Stock Paid-in Capital in Excess of Par Retained Earnings Total Equity Total Liabilities and Equity Net Assets at Market of Acquired Co. Dividends Declared Acquired Company Dividends Declared Acquiring Company Sales - - - Cost of Goods Sold Depreciation Expense of Amortization Expense of Other Expenses Interest Expense Gain on Sale of Assets Interest Revenue Subsidiary Income Total Balances Purchase Price Cash Number of shares exchanged Par value of a share of stock Market value of a share of stock Market value of stock exchanged Total purchase price - Ownership Interest enter as .7 for 70% Goodwill Applicable to NCI Implied Value of NCI Interest Estimated Value of NCI interest if not the implied proportional amount--Enter amount or 0 #DIV/0! - Method of Accounting for Investment--Enter Capital C for Cost or Capital E for Equity Years since Acquisition Intercompany Merchandise Information Parent Sales Parent % Subsidiary Sales By Parent By Sub Current Year Sales Unpaid Account Balance, at year end Beginning Inventory Ending Inventory Intercompany Fixed Asset Sales Type of Fixed Asset--Enter in Columns B or C - Enter 1 for Enter 2 for Enter 3 for Profit Amount Life of Asset--leave blank for land Year of Sale (Assume Beginning of Year) Intercompany Bond Information Maturity Value Face Interest Rate (Enter .08 for 8%,.075 for 7.5%) Original Years to Maturity Year Bond Issued (Assume January Issuance) Issue Rate Year Bond Purchased (Assume January Purchase)) Purchase Rate Face Value Purchased Method of Amortization (Enter capital S for Straight-line and capital E for Effective Interest in Column B.) Issue Price Purchase Price Number of Years from Purchase of Bonds to Consolidation Date Month Interest Paid January =1, December=12) Consolidated Tax Rate (enter .3 for 30%) Value Analysis Company Fair Value Fair Value of Net Assets Excluding Goodwill Goodwill Gain on Acquisition Company Fair Value #DIV/0! #DIV/0! #DIV/0! Parent Price NCI Value #DIV/0! #DIV/0! Determination and Distribution of Excess Schedule Fair Value of Company Less Book Value of Interest Acquired Common Stock Paid-in Capital in Excess of Par Implied Company Value #DIV/0! Parent Price NCI Value #DIV/0! - Retained Earnings Total Equity - Interest Acquired Book Value Excess of Fair Value over Book Value 0 - Elimination Entry Common Stock Paid-in Capital in Excess of Par Retained Earnings Investment in Subsidiary - Adjustment to Identifiable Accounts Inventory Debit (Credit) - Goodwill #DIV/0! - Investment in Subsidiary Gain Taken to Acquiring Co. RE/Income Acquired Company RE Check #DIV/0! #DIV/0! #DIV/0! Amortization Schedule Account Adjustment Annual Amount Key D D D D D D D D D D D D D D D 1.00 #DIV/0! Key EL EL EL EL Life 15 - Current Year Prior Years Inventory Total Amortization Entry Cost of Goods Sold Depreciation Expense of 0 Debit (Credit) Key A A - A A A 0 Amortization Expense of Interest Expense Acquired Company RE Acquiring Company RE Inventory - Total Method Adjustment Schedule Is Adjustment Necessary? Adjustment to Investment Account Adjustment to Retained Earnings Account Debit (Credit) NO Date Alignment Schedule Adjustment to Subsidiary Income Account Adjustment to Subsidiary Dividend Account Adjustment to Investment Account under Equity Method Debit (Credit) A A A A A A A A A A A A A A Key - CV - CV Key - CY - CY - CY Intercompany Inventory Profit Deferral and Intercompany Sales and Receivables. Sold by Parent Beginning Inventory Ending Inventory Current Year Sales Year End Unpaid Account Balances Elimination Entries Eliminate Intercompany Merchandise Sales Sales Cost of Goods Sold Eliminate Intercompany unpaid trade balance at year end Parent Parent % Profit 0.00 0.00 - Debit (Credit) KEY - IS IS - Accounts Payable Accounts Receivable - IA IA Eliminate Profit made by parent on merchandise in subsidiary's beginning inventory Retained Earnings-Parent Cost of Goods Sold - BI BI Eliminate Profit made by parent on merchandise in subsidiary's ending inventory Cost of Goods Sold Inventory - EI EI Eliminate Profit made by subsidiary on merchandise in parents' beginning inventory Retained Earnings-Parent Retained Earnings-Subsidiary Cost of Goods Sold - BI BI BI Eliminate Profit made by subsidiary on merchandise in parents' ending inventory Cost of Goods Sold Inventory - EI EI Intercompany Fixed Asset Profit Deferral Original Profit Life of Asset Annual Depreciation Adjustment Realized in Prior Years Balance at Start of Year Realized in Current Year Sale by Parent Elimination Entry Retained Earnings Parent Gain on Sale of Asset Retained Earnings Parent Retained Earnings Subsidiary Gain on Sale of Asset Debit (Credit) Sale by Sub - Check - Intercompany Bond Eliminations Amortization Table For - Depreciation Expense Depreciation Expense - Key F F F F F F F F F F F Period (First line is January 1- year of issuance. Second line is December 31- year of issuance.) Cash/Payable 0 0 1 2 3 4 5 6 7 8 9 Elimination Entries Interest Balance - - Debit (Credit) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Key Bonds Payable - B Interest Revenue - B Loss (Gain) on Bond Retirement (Premium) Discount on Bonds Payable - B B Retained Earnings Parent - B Retained Earnings Subsidiary - B Interest Expense Intercompany Bond Investment Check - B B - B B #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Proof: Loss Remaining at Year End Loss Amortized During the Year Balances Interest Payable Interest Receivable Consolidated Worksheet Trial Balance Cash Accounts Receivable Inventory Eliminations - - Key - Investment in Subsidiary - CV CY Intercompany Bond Investment - - - - - - - - - - - A F F - D - - - - - - - - - - - - - Goodwill Deferred Tax (Liability) Asset Common Stock Paid-in Capital in Excess of Par Retained Earnings - Common Stock Paid-in Capital in Excess of Par - D - A F F - D - A - D A - D A - D - T - IA - B - D B - D A B - D A - EL - EL - EL A BI F B - Retained Earnings - A CV BI BI F F B Dividends Declared Acquired Company Dividends Declared Acquiring Company Sales Cost of Goods Sold - - IS A EI EI Depreciation Expense of - - - A - - - A - - A Other Expenses Interest Expense - Subsidiary Income Interest Revenue Gain on Sale of Assets - - CY - B - F F Amortization Expense of - Gain on Acquisition of Business Loss (Gain) on Bond Retirement Total Consolidated Income Before Tax Consolidated Provision for Tax Income Taxes (Payable) Receivable Totals/Net Income After Tax NCI Share Controlling Share of Net Income NCI Controlling Retained Earnings Totals Income Distribution Schedules Internally Generated Net (Income) or Loss Before Tax A A A B Balances Balances T T - Tax Schedule Beginning Inventory Profit - Ending Inventory Profit - Gain on Asset in Income Realized Gain on Asset Sale - Current Year Amortizations Gain/Loss on Bond Retirement Interest Adjustment on Bonds Adjusted (Income) or Loss Before Taxes Internally Generated Net Income Gain on Acquisition of Business Beginning Inventory Profit Ending Inventory Profit Gain on Asset in Income Realized Gain on Asset Sale Internally Generated Net Income Before Tax Provision for Tax Internally Generated Net Income After Tax Controlling Share of Subsidiary Income net of tax Controlling Income 0 0 0 - #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Adjusted Subsidiary Income NCI Share of Asset Adjustment Taxable Income Tax Income After Tax Current Year Trial Balance - - Balances Subsidiary % Balances Total - Sold by Subsidiary Subsidi Subsidiary ary % Profit 0.00 0.00 - - Period Cash/Payable Interest 0 0 1 2 3 4 5 6 7 8 9 - Investment in Bonds at End of Period Carrying Value at End of Period - Balance - 0 0 Interest Expense Eliminated Interest Revenue Eliminated Loss or RE Adjustment at Beginning of Period 0 0 0 0 0 Eliminations Debit Credit Key 0 0 IA EI Non Consolidated Net Control Income Interest Controlling Consolidate Retained d Balance Earnings Sheet - 0 0 EI B - 0 EL 0 D 0 CV 0 CY 0 B 0 D 0 F 0 F 0 D 0 F 0 F 0 A 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 - - - 0 0 0 0 D F F A - 0 0 0 0 0 0 D A D A D A - - - #DIV/0! #DIV/0! #DIV/0! #DIV/0! D T #DIV/0! #DIV/0! 0 0 0 0 0 0 0 0 0 0 0 D 0 0 0 0 0 D A B D A #DIV/0! 0 D A 0 B - #DIV/0! - #DIV/0! 0 - 0 0 D A CV 0 - B CY #DIV/0! - - A IS BI BI 0 0 0 0 0 0 0 A F F A F F A 0 0 A A - - - - - A - B 0 CY 0 0 #DIV/0! 0 #DIV/0! #DIV/0! #DIV/0! - #DIV/0! #DIV/0! #DIV/0! D 0 B T T #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! - - #DIV/0! #DIV/0! #DIV/0! #DIV/0! Controlling NCI Total #DIV/0! #DIV/0! #DIV/0! 0 - - 0 0 0 0 0 0 0 Name of Company Being Acquired Name of Acquiring Company Date of Acquisition Date of Acquisition Book Market Life Assets Cash Accounts Receivable Inventory Investment in Subsidiary Intercompany Bond Investment Goodwill Total Assets Current Tax (Liability) Asset Deferred Tax (Liability) Asset Liabilities - - Total Liabilities Equity Acquired Company Common Stock Paid-in Capital in Excess of Par Retained Earnings Equity Acquiring Company Common Stock Paid-in Capital in Excess of Par Retained Earnings Total Equity Total Liabilities and Equity Net Assets at Market of Acquired Co. Dividends Declared Acquired Company Dividends Declared Acquiring Company - - - Sales Cost of Goods Sold Depreciation Expense of Amortization Expense of Other Expenses Interest Expense Gain on Sale of Intercompany Asset Interest Revenue Provision for Income Taxes Subsidiary Income Total Balances Purchase Price Cash Number of shares exchanged Par value of a share of stock Market value of a share of stock Market value of stock exchanged Total purchase price - Ownership Interest enter as .7 for 70% Goodwill Applicable to NCI Implied Value of NCI Interest Estimated Value of NCI interest if not the implied proportional amount--Enter amount or 0 #DIV/0! - Method of Accounting for Investment--Enter Capital C for Cost or Capital E for Equity Years since Acquisition Intercompany Merchandise Information Parent Sales Parent % Subsidiary Sales By Parent By Sub Current Year Sales Unpaid Account Balance, at year end Beginning Inventory Ending Inventory Intercompany Fixed Asset Sales Type of Fixed Asset--Enter in Columns B or C Enter 1 for Enter 2 for Enter 3 for Profit Amount Life of Asset--leave blank for land Year of Sale (Assume Beginning of Year) - Intercompany Bond Information Maturity Value Face Interest Rate (Enter .08 for 8%,.075 for 7.5%) Original Years to Maturity Year Bond Issued (Assume January Issuance) Issue Rate Year Bond Purchased (Assume January Purchase)) Purchase Rate Face Value Purchased Method of Amortization (Enter capital S for Straight-line and capital E for Effective Interest in Column B.) Issue Price Purchase Price Number of Years from Purchase of Bonds to Consolidation Date Month Interest Paid January =1, December=12) Separate Tax Information Corporate Tax Rate (Enter .3 for 30%) Tax Rate on Subsidiary Dividends (Enter .2 for 20%) Value Analysis Company Fair Value Fair Value of Net Assets Excluding Goodwill Goodwill Gain on Acquisition Company Fair Value #DIV/0! Parent Price - #DIV/0! #DIV/0! NCI Value #DIV/0! #DIV/0! Determination and Distribution of Excess Schedule Fair Value of Company Implied Company Value #DIV/0! Parent Price - NCI Value #DIV/0! Less Book Value of Interest Acquired Common Stock Paid-in Capital in Excess of Par Retained Earnings Total Equity - Interest Acquired Book Value Excess of Fair Value over Book Value 0 - Elimination Entry Common Stock Paid-in Capital in Excess of Par Retained Earnings Investment in Subsidiary - Adjustment to Identifiable Accounts Inventory Debit (Credit) - Goodwill #DIV/0! - Investment in Subsidiary Gain Taken to Acquiring Co. RE/Income Acquired Company RE Check #DIV/0! #DIV/0! #DIV/0! Amortization Schedule Account Adjustment Annual Amount Key D D D D D D D D D D D D D D D 1.00 #DIV/0! Key EL EL EL EL Life - Current Year Prior Years Inventory Total Amortization Entry Cost of Goods Sold Depreciation Expense of 0 Debit (Credit) Key A A - A 0 - A Amortization Expense of Interest Expense Acquired Company RE Acquiring Company RE Inventory - Total Method Adjustment Schedule Is Adjustment Necessary? Adjustment to Investment Account Adjustment to Retained Earnings Account Debit (Credit) NO Date Alignment Schedule Adjustment to Subsidiary Income Account Adjustment to Subsidiary Dividend Account Adjustment to Investment Account under Equity Method Debit (Credit) A A A A A A A A A A A A A A A Key - CV - CV Key - CY - CY - CY Intercompany Inventory Profit Deferral and Intercompany Sales and Receivables. Sold by Parent Beginning Inventory Ending Inventory Current Year Sales Year End Unpaid Account Balances Elimination Entries Eliminate Intercompany Merchandise Sales Sales Cost of Goods Sold Debit (Credit) Parent % 0.00 0.00 KEY - IS IS Parent Profit - Eliminate Intercompany unpaid trade balance at year end Accounts Payable Accounts Receivable - IA IA Eliminate Profit made by parent on merchandise in subsidiary's beginning inventory Retained Earnings-Parent Cost of Goods Sold - BI BI Eliminate Profit made by parent on merchandise in subsidiary's ending inventory Cost of Goods Sold Inventory - EI EI Eliminate Profit made by subsidiary on merchandise in parents' beginning inventory Retained Earnings-Parent Retained Earnings-Subsidiary Cost of Goods Sold - BI BI BI Eliminate Profit made by subsidiary on merchandise in parents' ending inventory Cost of Goods Sold Inventory - EI EI Intercompany Fixed Asset Profit Deferral Original Profit Life of Asset Annual Depreciation Adjustment Realized in Prior Years Balance at Start of Year Realized in Current Year Sale by Parent Elimination Entry Retained Earnings Parent Gain on Sale of Asset Retained Earnings Parent Retained Earnings Subsidiary Gain on Sale of Asset Debit (Credit) - Depreciation Expense Depreciation Expense Check Sale by Sub - Key F F F F F F F F F F F Intercompany Bond Eliminations Amortization Table For - Period (First line is January 1- year of issuance. Second line is December 31- year of issuance.) Cash/Payable 0 0 1 2 3 4 5 6 7 8 9 Elimination Entries Interest - Debit (Credit) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! - B Interest Revenue - B Loss (Gain) on Bond Retirement (Premium) Discount on Bonds Payable - B B Retained Earnings Parent - B Retained Earnings Subsidiary - B Interest Expense Intercompany Bond Investment Check - B B - B B Deferred Tax Asset/Deferred Tax Liability Adjustment Retained Earnings Adjustments Subsidiary Transactions Amortization of Excess--Owner's % #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Key Bonds Payable Interest Payable Interest Receivable Balance Proof: Loss Remaining at Year End Loss Amortized During the Year Balances - - - - Profit by Subsidiary on Intercompany Inventory Sales Profit by Subsidiary on Intercompany Fixed Asset Sales Parents Share of Subsidiary Profit on Intercompany Inventory Sale Parent's Share of Subsidiary Profit on Intercompany Fixed Asset Sales Total Adjustments to Subsidiary Retained Earnings First Tax Net Income After Tax Second Tax Total Tax - - - - - - - - - - - Parent Transactions Parent's Profit on Intercompany Inventory Sales Parent's Profit on Intercompany Fixed Asset Sales - Total Adjustments to Parent's Retained Earnings First Tax Total Retained Earnings Tax Adjustment - - - - 0 0 - - 0 - - 0 - - - Adjustments to Current Year's Income Subsidiary Transactions Amortization of Excess Subsidiary Profit in Beginning Inventory Subsidiary Profit in Ending Inventory Subsidiary Profit in Fixed Asset Sales-Depreciation Adjustment Subsidiary Current Year Gain on Fixed Asset Sales Total Subsidiary Adjustment to Current Year First Tax Net After Tax Second Tax Total Tax Parent Transactions Parent's Profit in Beginning Inventory Parent's Profit in Ending Inventory Parent's Profit in Fixed Asset Sale--Depreciation Adjustment Parent's Current Year Gain on Fixed Asset Sales Total Parent Adjustments First Tax Total Adjustment to Tax Provision - - - - Deferred Tax Liability Retained Earnings Parent Retained Earnings Subsidiary Provision for Tax Check - T T T T Consolidated Worksheet Trial Balance Cash Accounts Receivable Inventory Investment in Subsidiary Eliminations - - Key - - CV CY Intercompany Bond Investment - - - - - - - - - - - A F F - D - - - - - - - - Goodwill Current Tax (Liability) Asset Deferred Tax (Liability) Asset - D - A F F - D - A - D A - D A - D - T - IA - B - - - - - - - - - Common Stock Paid-in Capital in Excess of Par Retained Earnings - - Common Stock Paid-in Capital in Excess of Par Retained Earnings - - D B D A B D A EL EL EL A BI F B T A CV BI BI F F B T Dividends Declared Acquired Company Dividends Declared Acquiring Company Sales Cost of Goods Sold - - IS A EI EI Depreciation Expense of - - - A - - - A - - A Other Expenses Interest Expense - Subsidiary Income - - CY Amortization Expense of - A A A Interest Revenue Gain on Sale of Intercompany Asset Gain on Acquisition of Business Loss (Gain) on Bond Retirement Provision for Income Taxes Total Consolidated Net Income NCI Share Controlling Share of Net Income NCI Controlling Retained Earnings Totals - - - - Balances Income Distribution Schedules Internally Generated Net (Income) or Loss Before Tax B T Balances - Beginning Inventory Profit - Ending Inventory Profit - Gain on Asset in Income Realized Gain on Asset Sale - Current Year Amortizations Gain/Loss on Bond Retirement Interest Adjustment on Bonds Adjusted (Income) or Loss Before Taxes Provision for Tax Adjusted (Income) or Loss After Tax NCI Share Controlling Share Internally Generated Net Income Gain on Acquisition of Business Beginning Inventory Profit Ending Inventory Profit Gain on Asset in Income Realized Gain on Asset Sale Internally Generated Net Income Before Tax Provision for Tax Internally Generated Net Income After Tax Controlling Share of Subsidiary Income net of tax Controlling Income net of First Tax B F F 0 0 0 - #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Tax Schedule Adjusted Subsidiary Income NCI Share of Asset Adjustment Taxable Income Tax Income After Tax Second Tax Consolidated Net Income 0 #DIV/0! Current Year Trial Balance - - Balances Subsidiary % Balances Total - Sold by Subsidiary Subsidi Subsidiary ary % Profit 0.00 0.00 - - Period Cash/Payable Interest 0 0 1 2 3 4 5 6 7 8 9 Investment in Bonds at End of Period Carrying Value at End of Period Interest Expense Eliminated Interest Revenue Eliminated Loss or RE Adjustment at Beginning of Period - - 0 0 0 0 0 0 0 Balance - Eliminations Debit Credit Key 0 0 0 0 0 EL 0 D 0 CV 0 CY 0 B 0 D 0 F 0 F 0 D 0 F 0 F 0 A 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 #DIV/0! #DIV/0! 0 0 IA EI EI B 0 0 0 0 D F F A 0 0 0 0 0 0 D A D A D A D 0 T Non Consolidated Net Control Income Interest Controlling Retained Earnings 0 0 0 0 0 0 0 0 0 0 0 D 0 0 0 0 0 D A B D A #DIV/0! 0 D A 0 0 B T 0 0 D A CV 0 0 - B T CY #DIV/0! 0 - #DIV/0! #DIV/0! - - A IS BI BI 0 0 0 0 0 0 0 A F F A F F A 0 0 A A - - 0 - A - B 0 CY - - - 0 - #DIV/0! 0 0 #DIV/0! D 0 B 0 T #DIV/0! - #DIV/0! #DIV/0! - - #DIV/0! #DIV/0! #DIV/0! #DIV/0! Controlling NCI 0 Total - - 0 0 0 0 0 0 0 0 Consolidated Balance Sheet - - - - - - #DIV/0! - - - - #DIV/0! #DIV/0! #DIV/0! A 1 Name of Parent 2 Cash Flow Statement 3 4 5 Cash 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 B End of Period C Trial Balance Beginning of Period D E F Account Changes Debit Credit Key - - - - - - - - - - - - - - - - - - - - - - - - - - G H Expalanation of Change Debit Key A 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 B C Totals D - E - F G H - Cash from Operations Net Income Total Cash from Operations Cash from Investing - Total Cash from Investing Cash from Financing - A 73 74 75 76 77 78 Total Cash from Financing 79 80 Total Change in Cash 81 82 Schedule of Non-cash Transactions 83 84 85 86 87 88 89 90 B C D E F G H Item Amount - I 1 2 anation of Change 3 4 Credit 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 J Balance - I 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 J - - - I 73 74 75 76 77 78 79 80 81 Done 82 83 84 85 86 87 88 89 90 J - - Name of Company Being Acquired Name of Acquiring Company Date of Acquisition Johnson Company Acquisitions Inc January 1, 2015 Date of Acquisition Johnson Company Book Market Assets Cash Accounts Receivable Inventory Life 28,000 40,000 28,000 40,000 10,000 60,000 (20,000) 30,000 (10,000) 50,000 80,000 20 50,000 5 15,000 30,000 40,000 5 8 Investment in Subsidiary Intercompany Bond Investment Land Buildings Accumulated Depreciation Equipment Accumulated Depreciation Patents Brand Name Copyrights Goodwill 15 Total Assets Deferred Tax (Liability) Asset Liabilities Accounts Payable 153,000 318,000 (5,000) (5,000) Bonds Payable (20,000) (20,000) Total Liabilities Equity Acquired Company Common Stock Paid-in Capital in Excess of Par Retained Earnings Equity Acquiring Company Common Stock Paid-in Capital in Excess of Par Retained Earnings Total Equity Total Liabilities and Equity Net Assets at Market of Acquired Co. Dividends Declared Acquired Company Dividends Declared Acquiring Company Sales (25,000) (25,000) (1,000) (59,000) (68,000) (128,000) (153,000) 293,000 Cost of Goods Sold Depreciation Expense of Buildings Equipment Amortization Expense of Patents Brand Name Copyrights Other Expenses Interest Expense Gain on Sale of Assets Interest Revenue Subsidiary Income Total Balances Purchase Price Cash Number of shares exchanged Par value of a share of stock Market value of a share of stock Market value of stock exchanged Total purchase price 5,888 1 50 294,400 294,400 Ownership Interest enter as .7 for 70% 0.80 Goodwill Applicable to NCI Implied Value of NCI Interest Estimated Value of NCI interest if not the implied proportional amount-Enter amount or 0 73,600.00 - Method of Accounting for Investment-Enter Capital C for Cost or Capital E for Equity E Years since Acquisition 3.00 Intercompany Merchandise Information Current Year Sales Unpaid Account Balance, at year end Beginning Inventory Ending Inventory Subsidia ry Sales 30,000 Parent Sales Parent % 20,000 2,000 3,000 4,000 0.30 0.25 3,000 4,000 2,000 Intercompany Fixed Asset Sales By Parent Type of Fixed Asset--Enter in Columns B or C Enter 1 for Enter 2 for Enter 3 for Profit Amount Life of Asset--leave blank for land Year of Sale (Assume Beginning of Year) Land Buildings Equipment Intercompany Bond Information Maturity Value Face Interest Rate (Enter .08 for 8%,.075 for 7.5%) Original Years to Maturity Year Bond Issued (Assume January Issuance) Issue Rate Year Bond Purchased (Assume January Purchase)) Purchase Rate Face Value Purchased Method of Amortization (Enter capital S for Straight-line and capital E for Effective Interest in Column B.) S Issue Price Purchase Price If the bonds were repurchased during the current year enter 1. If the bonds were repurchased in a previous year enter 2. Month Interest Paid January =1, December=12) Consolidated Tax Rate (enter .3 for 30%) By Sub 3 4,000 4 3 5,000 5 2 3 20000 0.1 10 2014 0.1 2016 0.1 20000 20000 20000 2 12 0.30 Value Analysis Company Fair Value Company Fair Value 368,000 Fair Value of Net Assets Excluding Goodwill 293,000 Goodwill 75,000 Gain on Acquisition - Parent Price 294,400 234,400 60,000 NCI Value 73,600 58,600 15,000 Determination and Distribution of Excess Schedule Fair Value of Company Less Book Value of Interest Acquired Common Stock Paid-in Capital in Excess of Par Retained Earnings Total Equity Implied Company Value 368,000 NCI Parent Price Value 294,400 73,600 (1,000) (59,000) (68,000) (128,000) Interest Acquired Book Value Excess of Fair Value over Book Value Elimination Entry Common Stock Paid-in Capital in Excess of Par Retained Earnings Investment in Subsidiary 0.80 0.20 (102,400) (25,600) 192,000 48,000 Key EL EL EL (102,400) EL 800 47,200 54,400 Adjustment to Identifiable Accounts Inventory Debit (Credit) - Land Buildings Equipment Patents Brand Name Copyrights Goodwill Bonds Payable Investment in Subsidiary Gain Taken to Acquiring Co. RE/Income Acquired Company RE Check Amortization Schedule Account Adjustment 40,000 40,000 30,000 15,000 40,000 75,000 (192,000) (48,000) - Annual Amount Inventory Buildings Equipment Key D D D D D D D D D D D D D D D Life 20 5 5 8 15 - Current Year Prior Years 2,000 2,000 4000 6,000 6,000 12000 3,000 3,000 6000 5,000 5,000 10000 Patents Brand Name Copyrights - Total Amortization Entry Cost of Goods Sold Depreciation Expense of Buildings Equipment 16,000 Debit (Credit) A A 2,000 A 6,000 A Amortization Expense of Patents Brand Name Copyrights Interest Expense Acquired Company RE Acquiring Company RE Inventory Accumulated Depreciation Accumulated Depreciation 3,000 5,000 Patents Brand Name Copyrights Total 32000 Key 6,400 25,600 (6,000) (18,000) (9,000) (15,000) - Method Adjustment Schedule Is Adjustment Necessary? Adjustment to Investment Account Adjustment to Retained Earnings Account Debit (Credit) NO Date Alignment Schedule Adjustment to Subsidiary Income Account Adjustment to Subsidiary Dividend Account Adjustment to Investment Account under Equity Method Debit (Credit) A A A A A A A A A A A A A A A Key - CV - CV Key 45,600 CY (8,000) CY (37,600) CY Intercompany Inventory Profit Deferral and Intercompany Sales and Receivables. Beginning Inventory Ending Inventory Current Year Sales Sold by Parent 3,000 4,000 20,000 Parent % 0.30 0.25 Parent Profit 900 1,000 Year End Unpaid Account Balances 2,000 Elimination Entries Debit (Credit) KEY Eliminate Intercompany Merchandise Sales Sales 50,000 IS Cost of Goods Sold (50,000) IS Eliminate Intercompany unpaid trade balance at year end Accounts Payable Accounts Receivable 5,000 IA (5,000) IA Eliminate Profit made by parent on merchandise in subsidiary's beginning inventory Retained Earnings-Parent Cost of Goods Sold 900 BI (900) BI Eliminate Profit made by parent on merchandise in subsidiary's ending inventory Cost of Goods Sold Inventory 1,000 EI (1,000) EI Eliminate Profit made by subsidiary on merchandise in parents' beginning inventory Retained Earnings-Parent Retained Earnings-Subsidiary Cost of Goods Sold 800 BI 200 BI (1,000) BI Eliminate Profit made by subsidiary on merchandise in parents' ending inventory Cost of Goods Sold Inventory Intercompany Fixed Asset Profit Deferral Original Profit Life of Asset Annual Depreciation Adjustment Realized in Prior Years Balance at Start of Year Realized in Current Year Elimination Entry Retained Earnings Parent Gain on Sale of Asset 600 EI (600) EI Sale by Parent 4,000 4 1,000 1,000 3,000 1,000 Sale by Sub Debit (Credit) Key F F 3,000 - 5,000 5 1,000 5,000 1,000 Retained Earnings Parent Retained Earnings Subsidiary Gain on Sale of Asset Accumulated Depreciation Accumulated Depreciation Depreciation Expense Depreciation Expense Equipment Equipment Check 5,000 2,000 1,000 (1,000) (1,000) (4,000) (5,000) - Intercompany Bond Eliminations Amortization Table For Johnson Company Period (First line is January 1- year of issuance. Second line is December 31year of issuance.) Cash/Payable 2014 2014 2,000 2015 2,000 2016 2,000 2017 2,000 2018 2,000 2019 2,000 2020 2,000 2021 2,000 2022 2,000 2023 2,000 Elimination Entries Debit (Credit) F F F F F F F F F Interest 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 Balance 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 Key Proof: 20,000 B Loss Remainin g at Year End 2,000 B Loss (Gain) on Bond Retirement - B (Premium) Discount on Bonds Payable - B Bonds Payable Interest Revenue Retained Earnings Parent - B Retained Earnings Subsidiary - B Interest Expense Intercompany Bond Investment Check Interest Payable (2,000) B (20,000) B Balances 2,000 B Loss Amortize d During the Year Interest Receivable (2,000) B Consolidated Worksheet Trial Balance Eliminations Acquisitions Inc 163,400 46,000 95,000 Cash Accounts Receivable Inventory Investment in Subsidiary 413,600 Johnson Company Key 123,400 46,000 60,000 CV CY Intercompany Bond Investment Land 20,000 60,000 10,000 Buildings 200,000 60,000 Accumulated Depreciation (60,000) Equipment 60,000 Accumulated Depreciation (32,000) Patents - Brand Name Copyrights - Goodwill Accounts Payable Bonds Payable - (40,000) (120,000) - D (21,000) A F F 30,000 D (14,000) A F F - D - A 12,000 D A - D A - D (6,400) IA - B (20,000) D B - D A Common Stock Paid-in Capital in Excess of Par Retained Earnings B D A (1,000) EL (59,000) EL (168,000) EL A BI F B A CV BI BI F F B 10,000 (200,000) IS 95,000 A - - - Common Stock Paid-in Capital in Excess of Par Retained Earnings (21,000) (199,000) (485,000) Dividends Declared Acquired Company Dividends Declared Acquiring Company Sales Cost of Goods Sold 20,000 (320,000) 180,000 EI EI Depreciation Expense of Buildings Equipment Amortization Expense of Patents Brand Name Copyrights Other Expenses Interest Expense Subsidiary Income Interest Revenue Gain on Sale of Assets Gain on Acquisition of Business Loss (Gain) on Bond Retirement Total NCI Share 10,000 1,000 A 7,000 4,000 A 44,000 8,000 3,000 38,000 2,000 A (45,600) (2,000) - A A A - CY - B (5,000) F F B 4,400 Balances Controlling Share NCI Controlling Retained Earnings Income Distribution Schedules Johnson Company Internally Generated Net (Income) or Loss (62,000) Beginning Inventory Profit (1,000) Ending Inventory Profit 600 Gain on Asset in Income Realized Gain on Asset Sale (1,000) Current Year Amortizations 16,000 Gain/Loss on Bond Retirement 0 Interest Adjustment on Bonds 0 Adjusted (Income) or Loss (47,400) NCI Share 9,480 Controlling Share (37,920) Internally Generated Net Income Gain on Acquisition of Business Beginning Inventory Profit Ending Inventory Profit Gain on Asset in Income Realized Gain on Asset Sale Controlling Share of Subsidiary Total Consolidated Net Income Acquisitions Inc (73,000) (900) 1,000 5,000 (1,000) (37,920) (106,820) (116,300) Current Year Trial Balance Acquisitions Inc Johnson Company 163,400 46,000 95,000 123,400 46,000 60,000 413,600 20,000 60,000 200,000 (60,000) 60,000 (32,000) 10,000 60,000 (21,000) 30,000 (14,000) 12,000 (2,400) (40,000) (6,400) (120,000) (20,000) (1,000) (59,000) (168,000) (21,000) (199,000) (485,000) 10,000 20,000 (320,000) (200,000) 180,000 95,000 10,000 7,000 1,000 4,000 3,000 44,000 8,000 38,000 2,000 (5,000) (2,000) (45,600) Balances Balances Subsidiary % 0.25 0.30 Total 6,000 18,000 9,000 15,000 - Sold by Subsidiary 4,000 2,000 30,000 Subsidiary % 0.25 0.30 Subsidiary Profit 1,000 600 3,000 Acquisitions Inc Period Cash/Payable 0 2014 Purchase Date 2016 2017 2018 2019 2020 2021 2022 2023 Investment in Bonds at End of Period Carrying Value at End of Period Interest Expense Eliminated Interest Revenue Eliminated Loss or RE Adjustment at Beginning of Period Interest 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 Balance 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 20,000 20,000 0 2,000 2,000 0 0 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 Eliminations Debit Credit 0 0 40000 40000 0 0 0 30000 0 2000 1000 0 0 15000 0 40000 0 Key (5000) (1000) (600) (2000) IA EI EI B (182400) (192000) 0 (37600) (20000) 0 0 0 0 0 0 (6000) EL D CV CY B D F F D F F A 0 (4000) (5000) (18000) D F F A 0 0 0 (9000) 0 (15000) D A D A D A 75000 5,000 2000 0 D 0 20000 0 0 0 D 0 0 D A Non Consolidated Net Control Income Interest Controlling Retained Earnings 0 0 0 800 47,200 134,400 6,400 200 0 0 25,600 900 800 3,000 - 0 0 0 B D A (200) (11,800) (75,000) (48000) D 0 A 0 B 0 0 0 D A CV (454,700) 0 B (8,000) CY 2,000 20,000 50,000 (50,000) (900) (1,000) A IS BI BI 0 0 0 0 (1,000) (1,000) 0 A F F A F F A (470,000) 224,700 1,000 600 2,000 6,000 3,000 5,000 45600 2000 5,000 0 609500 0 0 A A - A (2,000) B 0 CY 0 D 0 B (609500) 13,000 15,000 6,000 5,000 82,000 8,000 (116,300) 9,480 (9,480) 106,820 (106,820) (94,480) (541,520) Consolidate d Balance Sheet 286,800 87,000 153,400 (2,000) 1,600 110,000 300,000 (87,000) 111,000 (61,000) 18,000 25,000 75,000 (41,400) 2,000 (120,000) - - (21,000) (199,000) (94,480) (541,520) 2,400 Name of Company Being Acquired Name of Acquiring Company Date of Acquisition Assets Cash Accounts Receivable Inventory Johnson Company Acquisitions Inc January 1, 2015 Date of Acquisition Johnson Company Book Market Life 28,000 40,000 28,000 40,000 10,000 60,000 (20,000) 30,000 (10,000) 50,000 80,000 20 50,000 5 15,000 30,000 40,000 5 8 Investment in Subsidiary Intercompany Bond Investment Land Buildings Accumulated Depreciation Equipment Accumulated Depreciation Patents Brand Name Copyrights Goodwill 15 Total Assets Deferred Tax (Liability) Asset Liabilities Accounts Payable 153,000 318,000 (5,000) (5,000) Bonds Payable (20,000) (20,000) Total Liabilities Equity Acquired Company Common Stock Paid-in Capital in Excess of Par Retained Earnings Equity Acquiring Company Common Stock Paid-in Capital in Excess of Par Retained Earnings Total Equity Total Liabilities and Equity Net Assets at Market of Acquired Co. Dividends Declared Acquired Company Dividends Declared Acquiring Company Sales (25,000) (25,000) (1,000) (59,000) (68,000) (128,000) (153,000) 293,000 Cost of Goods Sold Depreciation Expense of Buildings Equipment Amortization Expense of Patents Brand Name Copyrights Other Expenses Interest Expense Gain on Sale of Assets Interest Revenue Subsidiary Income Total Balances Purchase Price Cash Number of shares exchanged Par value of a share of stock Market value of a share of stock Market value of stock exchanged Total purchase price 5,888 1 50 294,400 294,400 Ownership Interest enter as .7 for 70% 0.80 Goodwill Applicable to NCI Implied Value of NCI Interest Estimated Value of NCI interest if not the implied proportional amount--Enter amount or 0 Method of Accounting for Investment--Enter Capital C for Cost or Capital E for Equity Years since Acquisition 73,600.00 - E 3.00 Intercompany Merchandise Information Current Year Sales Unpaid Account Balance, at year end Beginning Inventory Ending Inventory Subsidiary Parent Sales Parent % Sales 20,000 30,000 2,000 3,000 3,000 0.30 4,000 4,000 0.25 2,000 Intercompany Fixed Asset Sales By Parent By Sub Type of Fixed Asset--Enter in Columns B or C 3 3 Enter 1 for Enter 2 for Enter 3 for Profit Amount Life of Asset--leave blank for land Year of Sale (Assume Beginning of Year) Land Buildings Equipment Intercompany Bond Information Maturity Value Face Interest Rate (Enter .08 for 8%,.075 for 7.5%) Original Years to Maturity Consolidated Tax Rate (enter .3 for 30%) 3 5,000 5 3 20000 0.1 10 Year Bond Issued (Assume January Issuance) Issue Rate Year Bond Purchased (Assume January Purchase)) Purchase Rate Face Value Purchased Method of Amortization (Enter capital S for Straight-line and capital E for Effective Interest in Column B.) E Issue Price Purchase Price If the bonds were repurchased during the current year enter 1. If the bonds were repurchased in a previous year enter 2. Month Interest Paid January =1, December=12) 3 4,000 4 2 2014 0.1 2016 0.1 20000 20000 20000 2 12 0.30 Value Analysis Company Fair Value Fair Value of Net Assets Excluding Goodwill Goodwill Gain on Acquisition Company Fair Value 368,000 293,000 75,000 - Parent Price NCI Value 294,400 73,600 234,400 58,600 60,000 15,000 Determination and Distribution of Excess Schedule Fair Value of Company Less Book Value of Interest Acquired Common Stock Implied Company Value 368,000 (1,000) Parent Price NCI Value 294,400 73,600 Paid-in Capital in Excess of Par Retained Earnings Total Equity (59,000) (68,000) (128,000) Interest Acquired Book Value Excess of Fair Value over Book Value 0.80 (102,400) 192,000 Elimination Entry Common Stock Paid-in Capital in Excess of Par Retained Earnings Investment in Subsidiary Key EL EL EL (102,400) EL 800 47,200 54,400 Adjustment to Identifiable Accounts Inventory Debit (Credit) - Land Buildings Equipment Patents Brand Name Copyrights Goodwill Bonds Payable Investment in Subsidiary Gain Taken to Acquiring Co. RE/Income Acquired Company RE Check Amortization Schedule Account Adjustment 40,000 40,000 30,000 15,000 40,000 75,000 (192,000) (48,000) - Annual Amount Inventory Buildings Equipment 0.20 (25,600) 48,000 Key D D D D D D D D D D D D D D D Life 20 5 5 8 15 - Current Year Prior Years 2,000 2,000 4000 6,000 6,000 12000 3,000 3,000 6000 5,000 5,000 10000 16,000 32000 Patents Brand Name Copyrights Total Amortization Entry Cost of Goods Sold Depreciation Expense of Buildings Equipment Debit (Credit) Key A A 2,000 A 6,000 A Amortization Expense of Patents Brand Name Copyrights Interest Expense Acquired Company RE Acquiring Company RE Inventory Accumulated Depreciation Accumulated Depreciation 3,000 5,000 Patents Brand Name Copyrights Total 6,400 25,600 (6,000) (18,000) (9,000) (15,000) - A A A A A A A A A A A A A A A Method Adjustment Schedule Is Adjustment Necessary? Adjustment to Investment Account Adjustment to Retained Earnings Account Debit (Credit) NO Key Date Alignment Schedule Adjustment to Subsidiary Income Account Adjustment to Subsidiary Dividend Account Adjustment to Investment Account under Equity Method Debit (Credit) Key 45,600 CY (8,000) CY - CV - CV (37,600) CY Intercompany Inventory Profit Deferral and Intercompany Sales and Receivables. Beginning Inventory Ending Inventory Current Year Sales Year End Unpaid Account Balances Parent Sold by Parent Parent % Profit 3,000 0.30 900 4,000 0.25 1,000 20,000 2,000 Elimination Entries Debit (Credit) Eliminate Intercompany Merchandise Sales Sales Cost of Goods Sold Eliminate Intercompany unpaid trade balance at year end KEY 50,000 IS (50,000) IS Accounts Payable Accounts Receivable 5,000 IA (5,000) IA Eliminate Profit made by parent on merchandise in subsidiary's beginning inventory Retained Earnings-Parent Cost of Goods Sold 900 BI (900) BI Eliminate Profit made by parent on merchandise in subsidiary's ending inventory Cost of Goods Sold Inventory 1,000 EI (1,000) EI Eliminate Profit made by subsidiary on merchandise in parents' beginning inventory Retained Earnings-Parent Retained Earnings-Subsidiary Cost of Goods Sold 800 BI 200 BI (1,000) BI Eliminate Profit made by subsidiary on merchandise in parents' ending inventory Cost of Goods Sold Inventory 600 EI (600) EI Intercompany Fixed Asset Profit Deferral Original Profit Life of Asset Annual Depreciation Adjustment Realized in Prior Years Balance at Start of Year Realized in Current Year Sale by Parent 4,000 4 1,000 1,000 3,000 1,000 Sale by Sub 5,000 5 1,000 5,000 1,000 Elimination Entry Retained Earnings Parent Gain on Sale of Asset Retained Earnings Parent Retained Earnings Subsidiary Gain on Sale of Asset Accumulated Depreciation Accumulated Depreciation Depreciation Expense Depreciation Expense Equipment Equipment Check Debit (Credit) Key F F F F F F F F F F F Intercompany Bond Eliminations Amortization Table For 3,000 5,000 2,000 1,000 (1,000) (1,000) (4,000) (5,000) - Johnson Company Period (First line is January 1- year of issuance. Second line is December 31- year of issuance.) Cash/Payable 2014 2014 2,000 2015 2,000 2016 2,000 2017 2,000 2018 2,000 2019 2,000 2020 2,000 2021 2,000 2022 2,000 2023 2,000 Elimination Entries Debit (Credit) Bonds Payable Interest 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 Key 20,000 B 2,000 B - B B Interest Revenue Loss (Gain) on Bond Retirement (Premium) Discount on Bonds Payable Retained Earnings Parent - B Retained Earnings Subsidiary - B Interest Expense Intercompany Bond Investment Check Balance 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 Proof: Loss Remaining at Year End Loss Amortized During the Year (2,000) B (20,000) B Balances 0 0 - B B Consolidated Worksheet Trial Balance Cash Accounts Receivable Inventory Acquisitions Inc 163,400 46,000 95,000 Eliminations Johnson Company Key 123,400 46,000 60,000 Investment in Subsidiary 413,600 CV CY Intercompany Bond Investment Land 20,000 60,000 10,000 Buildings 200,000 60,000 Accumulated Depreciation (60,000) Equipment 60,000 Accumulated Depreciation (32,000) Patents - Brand Name Copyrights - Goodwill Deferred Tax (Liability) Asset Accounts Payable Bonds Payable Common Stock Paid-in Capital in Excess of Par Retained Earnings Common Stock Paid-in Capital in Excess of Par (2,400) (40,000) (120,000) - - - - (21,000) (199,000) D (21,000) A F F 30,000 D (14,000) A F F - D - A 12,000 D A - D A - D - T (6,400) IA - B (20,000) D B - D A B - D A (1,000) EL (59,000) EL (168,000) EL A BI F B - Retained Earnings (485,000) A CV BI BI F F B Dividends Declared Acquired Company Dividends Declared Acquiring Company Sales Cost of Goods Sold 20,000 (320,000) 180,000 10,000 (200,000) IS 95,000 A EI EI Depreciation Expense of Buildings Equipment Amortization Expense of Patents Brand Name Copyrights Other Expenses Interest Expense Subsidiary Income Interest Revenue Gain on Sale of Assets Gain on Acquisition of Business Loss (Gain) on Bond Retirement Total Consolidated Income Before Tax Consolidated Provision for Tax Income Taxes (Payable) Receivable Totals/Net Income After Tax NCI Share Controlling Share of Net Income NCI Controlling Retained Earnings Totals Income Distribution Schedules Internally Generated Net (Income) or Loss Before Tax 10,000 1,000 A 7,000 4,000 A 44,000 8,000 3,000 38,000 2,000 A (45,600) (2,000) - A A A - CY - B (5,000) F F B Balances Balances T T Johnson Company (62,000) Tax Schedule Beginning Inventory Profit Ending Inventory Profit Gain on Asset in Income Realized Gain on Asset Sale Current Year Amortizations Gain/Loss on Bond Retirement Interest Adjustment on Bonds Adjusted (Income) or Loss Before Taxes Internally Generated Net Income Gain on Acquisition of Business Beginning Inventory Profit Ending Inventory Profit Gain on Asset in Income Realized Gain on Asset Sale Internally Generated Net Income Before Tax Provision for Tax Internally Generated Net Income After Tax Controlling Share of Subsidiary Income net of tax Controlling Income (1,000) 600 5,000 (1,000) 16,000 0 0 (42,400) Acquisitions Inc (73,000) (900) 1,000 (1,000) (73,900) 22,170 (51,730) (23,744) (75,474) Adjusted Subsidiary Income NCI Share of Asset Adjustment Taxable Income Tax Income After Tax Current Year Trial Balance Acquisitions Inc Johnson Company 163,400 46,000 95,000 123,400 46,000 60,000 413,600 20,000 60,000 200,000 (60,000) 60,000 (32,000) 10,000 60,000 (21,000) 30,000 (14,000) 12,000 (2,400) (40,000) (6,400) (120,000) (20,000) (1,000) (59,000) (168,000) (21,000) (199,000) (485,000) 10,000 20,000 (320,000) (200,000) 180,000 95,000 10,000 7,000 1,000 4,000 3,000 44,000 8,000 38,000 2,000 (5,000) (2,000) (45,600) Balances Balances Subsidiary % 0.25 0.30 Total 6,000 18,000 9,000 15,000 - Sold by Subsidiary Subsidiar Subsidiary % y Profit 4,000 0.25 1,000 2,000 0.30 600 30,000 3,000 Acquisitions Inc Period Cash/Payable Interest 0 2014 Purchase Date 2016 2017 2018 2019 2020 2021 2022 2023 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 Investment in Bonds at End of Period Carrying Value at End of Period Balance 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 Interest Expense Eliminated Interest Revenue Eliminated Loss or RE Adjustment at Beginning of Period 0 2,000 2,000 0 0 Eliminations Debit Credit Key (5000) IA (1000) EI Non Consolidated Net Control Income Interest Controlling Consolidated Retained Balance Earnings Sheet 286,800 87,000 153,400 (600) EI 0 B 0 0 40000 40000 0 0 0 30000 0 2000 1000 0 0 15000 0 40000 0 75000 0 5,000 0 0 20000 0 0 0 0 0 800 47,200 134,400 6,400 200 0 0 1,600 (182400) (192000) 0 (37600) (20000) 0 0 0 0 0 0 (6000) EL D CV CY B D F F D F F A 0 (4000) (5000) (18000) D F F A 111,000 0 0 0 (9000) 0 (15000) D A D A D A 18,000 110,000 300,000 (87,000) (61,000) 25,000 75,000 (3,600) (41,400) (120,000) 0 D (1,200) T 0 D 0 0 0 0 0 D A B D A (48000) D 0 A 0 - (200) (11,800) (75,000) B (21,000) (199,000) 0 0 0 25,600 900 800 3,000 - D A CV (454,700) 0 B (8,000) CY 2,000 20,000 50,000 (50,000) (900) (1,000) A IS BI BI 0 0 0 0 (1,000) (1,000) 0 A F F A F F A (470,000) 224,700 1,000 600 2,000 6,000 3,000 5,000 0 0 A A - A (2,000) B 0 CY 45600 2000 5,000 0 D 0 B 0 35850 0 643,350 0T (34650) T (643,350) 13,000 15,000 6,000 5,000 82,000 8,000 (116,300) 35,850 (34,650) (80,450) 4,976 (75,474) (4,976) (75,474) (89,976) (510,174) Controlling NCI Total (89,976) (510,174) Balances (33,920) (8,480) (42,400) (3,200) (33,920) 10,176 (11,680) 3,504 (23,744) (4,976) (28,720) Name of Company Being Acquired Name of Acquiring Company Date of Acquisition S P January 1, 2015 Date of Acquisition S Book Market Life Assets Cash Accounts Receivable Inventory Investment in Subsidiary Intercompany Bond Investment Plant and Equipment Accumulated Depreciation Patents 900,000 900,000 - 93,750 Goodwill Total Assets Deferred Tax (Liability) Asset Liabilities Liabilities Total Liabilities Equity Acquired Company Common Stock Paid-in Capital in Excess of Par Retained Earnings Equity Acquiring Company Common Stock Paid-in Capital in Excess of Par Retained Earnings Total Equity Total Liabilities and Equity Net Assets at Market of Acquired Co. Dividends Declared Acquired Company Dividends Declared Acquiring Company Sales 15 15 900,000 993,750 - - (500,000) (400,000) (900,000) (900,000) 993,750 Cost of Goods Sold Depreciation Expense of Plant and Equipment Amortization Expense of Patents Other Expenses Interest Expense Gain on Sale of Intercompany Asset Interest Revenue Subsidiary Income Total Balances Purchase Price Cash Number of shares exchanged Par value of a share of stock Market value of a share of stock Market value of stock exchanged Total purchase price 795,000 795,000 Ownership Interest enter as .7 for 70% 0.80 Goodwill Applicable to NCI Implied Value of NCI Interest Estimated Value of NCI interest if not the implied proportional amount--Enter amount or 0 Method of Accounting for Investment--Enter Capital C for Cost or Capital E for Equity 198,750.00 - E Years since Acquisition 3.00 Intercompany Merchandise Information Parent Sales Subsidiary Sales 100,000 50,000 70,000 Parent % Current Year Sales Unpaid Account Balance, at year end Beginning Inventory Ending Inventory Intercompany Fixed Asset Sales By Parent By Sub Type of Fixed Asset--Enter in Columns B or C 2 - Enter 1 for Enter 2 for Enter 3 for Profit Amount Life of Asset--leave blank for land Year of Sale (Assume Beginning of Year) Plant and Equipment - 2 20,000 5 2 Intercompany Bond Information Maturity Value Face Interest Rate (Enter .08 for 8%,.075 for 7.5%) Original Years to Maturity Year Bond Issued (Assume January Issuance) Issue Rate Year Bond Purchased (Assume January Purchase)) Purchase Rate Face Value Purchased Method of Amortization (Enter capital S for Straight-line and capital E for Effective Interest in Column B.) Issue Price Purchase Price If the bonds were repurchased during the current year enter 1. If the bonds were repurchased in a previous year enter 2. Month Interest Paid January =1, December=12) Consolidated Tax Rate (enter .3 for 30%) 0.30 Value Analysis Company Fair Value Fair Value of Net Assets Excluding Goodwill Goodwill Gain on Acquisition Company Fair Value 993,750 993,750 - Parent Price NCI Value 795,000 198,750 795,000 198,750 - Determination and Distribution of Excess Schedule Fair Value of Company Less Book Value of Interest Acquired Implied Company Value 993,750 Parent Price NCI Value 795,000 198,750 Common Stock Paid-in Capital in Excess of Par Retained Earnings Total Equity (500,000) (400,000) (900,000) Interest Acquired Book Value Excess of Fair Value over Book Value 0.80 (720,000) 75,000 Elimination Entry Common Stock Paid-in Capital in Excess of Par Retained Earnings Investment in Subsidiary Key EL EL EL (720,000) EL 400,000 320,000 Adjustment to Identifiable Accounts Inventory Debit (Credit) - Plant and Equipment Patents Goodwill Investment in Subsidiary Gain Taken to Acquiring Co. RE/Income Acquired Company RE Check Amortization Schedule Account Adjustment 93,750 (75,000) (18,750) (0) Annual Amount 0.20 (180,000) 18,750 Key D D D D D D D D D D D D D D D Life 15 15 - Current Year Prior Years Inventory Plant and Equipment Patents 6,250 6,250 12500 6,250 12500 Total Amortization Entry Cost of Goods Sold Depreciation Expense of Plant and Equipment Debit (Credit) Key A A A Amortization Expense of Patents A 6,250 - Interest Expense Acquired Company RE Acquiring Company RE Inventory Accumulated Depreciation Patents Total 2,500 10,000 (18,750) - A A A A A A A A A A A A A A A Method Adjustment Schedule Is Adjustment Necessary? Adjustment to Investment Account Adjustment to Retained Earnings Account Debit (Credit) NO Key Date Alignment Schedule Adjustment to Subsidiary Income Account Adjustment to Subsidiary Dividend Account Adjustment to Investment Account under Equity Method Debit (Credit) Key 80,000 CY - CY - CV - CV (80,000) CY Intercompany Inventory Profit Deferral and Intercompany Sales and Receivables. Sold by Parent Beginning Inventory Ending Inventory Current Year Sales Year End Unpaid Account Balances Elimination Entries Eliminate Intercompany Merchandise Sales Sales Cost of Goods Sold Debit (Credit) Parent Parent % Profit 0.00 0.00 KEY 100,000 IS (100,000) IS - Eliminate Intercompany unpaid trade balance at year end Accounts Payable Accounts Receivable - IA IA Eliminate Profit made by parent on merchandise in subsidiary's beginning inventory Retained Earnings-Parent Cost of Goods Sold - BI BI Eliminate Profit made by parent on merchandise in subsidiary's ending inventory Cost of Goods Sold Inventory - EI EI Eliminate Profit made by subsidiary on merchandise in parents' beginning inventory Retained Earnings-Parent Retained Earnings-Subsidiary Cost of Goods Sold 20,000 BI 5,000 BI (25,000) BI Eliminate Profit made by subsidiary on merchandise in parents' ending inventory Cost of Goods Sold Inventory 35,000 EI (35,000) EI Intercompany Fixed Asset Profit Deferral Original Profit Life of Asset Annual Depreciation Adjustment Realized in Prior Years Balance at Start of Year Realized in Current Year Sale by Parent 20,000 5 4,000 4,000 16,000 4,000 Sale by Sub Elimination Entry Retained Earnings Parent Gain on Sale of Asset Retained Earnings Parent Retained Earnings Subsidiary Gain on Sale of Asset Accumulated Depreciation Debit (Credit) 16,000 8,000 (4,000) (20,000) - Key F F F F F F F F F F F Depreciation Expense Depreciation Expense Plant and Equipment Check - Intercompany Bond Eliminations Amortization Table For S Period (First line is January 1- year of issuance. Second line is December 31- year of issuance.) Cash/Payable 0 0 1 2 3 4 5 6 7 8 9 Elimination Entries Interest Balance - - Debit (Credit) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Key Bonds Payable - B Interest Revenue - B Loss (Gain) on Bond Retirement (Premium) Discount on Bonds Payable - B B Retained Earnings Parent - B Retained Earnings Subsidiary - B Interest Expense Intercompany Bond Investment Check - B B - B B #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Proof: Loss Remaining at Year End Loss Amortized During the Year Balances Interest Payable Interest Receivable Consolidated Worksheet Trial Balance P Cash Eliminations S 205,000 Key 380,000 Accounts Receivable Inventory Investment in Subsidiary 150,000 120,000 1,115,000 CV CY Intercompany Bond Investment - Plant and Equipment Accumulated Depreciation - 900,000 1,100,000 (440,000) - - - - - - - - - - - - - - - Patents Goodwill Deferred Tax (Liability) Asset Liabilities Common Stock Paid-in Capital in Excess of Par Retained Earnings - - D (150,000) A F F - D - A F F - D - A - D A - D A - D - T (150,000) IA - B - D B - D A B - D A (500,000) EL - EL (700,000) EL A BI F B Common Stock Paid-in Capital in Excess of Par Retained Earnings (800,000) (900,000) A CV BI BI F F B Dividends Declared Acquired Company Dividends Declared Acquiring Company Sales Cost of Goods Sold (600,000) 350,000 (400,000) IS 200,000 A EI EI Depreciation Expense of Plant and Equipment 25,000 20,000 A - - - A - 75,000 - 80,000 - A Amortization Expense of Patents Other Expenses Interest Expense Subsidiary Income Interest Revenue Gain on Sale of Intercompany Asset Gain on Acquisition of Business Loss (Gain) on Bond Retirement Total Consolidated Income Before Tax Consolidated Provision for Tax Income Taxes (Payable) Receivable Totals NCI Share Controlling Share NCI Controlling Retained Earnings Totals Income Distribution Schedules (80,000) - A A A - CY - B - F F B Balances Balances T T S Internally Generated Net (Income) or Loss Before Tax (100,000) Beginning Inventory Profit (25,000) Ending Inventory Profit 35,000 Gain on Asset in Income Realized Gain on Asset Sale - Current Year Amortizations Gain/Loss on Bond Retirement Interest Adjustment on Bonds Adjusted (Income) or Loss Before Taxes 6,250 0 0 (83,750) P Internally Generated Net Income Gain on Acquisition of Business Beginning Inventory Profit Ending Inventory Profit Gain on Asset in Income Realized Gain on Asset Sale Internally Generated Net Income Before Tax Provision for Tax Internally Generated Net Income After Tax Controlling Share of Subsidiary Income net of tax Controlling Income (150,000) (4,000) (154,000) 46,200 (107,800) (46,900) (154,700) Tax Schedule Adjusted Subsidiary Income NCI Share of Asset Adjustment Taxable Income Tax Income After Tax P Current Year Trial Balance S 205,000 380,000 150,000 120,000 1,115,000 900,000 (440,000) 1,100,000 (150,000) (150,000) (500,000) (700,000) (800,000) (900,000) (600,000) (400,000) 350,000 200,000 25,000 20,000 75,000 80,000 (80,000) Balances Balances Subsidiary % 0.50 0.50 Total 18,750 - Sold by Subsidiary Subsidiary Subsidiary % Profit 50,000 0.50 25,000 70,000 0.50 35,000 100,000 - P Period Cash/Payable Interest 0 0 1 2 3 4 5 6 7 8 9 - Investment in Bonds at End of Period Carrying Value at End of Period Balance - - 0 0 Interest Expense Eliminated Interest Revenue Eliminated Loss or RE Adjustment at Beginning of Period 0 0 0 0 0 Eliminations Debit Credit Key Non Consolidated Net Control Income Interest Controlling Retained Earnings Consolidate d Balance Sheet 585,000 0 0 0 0 0 8,000 0 0 0 0 0 0 0 93750 0 0 0 0 0 0 0 0 0 0 0 0 0 400,000 560,000 2,500 5,000 0 0 0 0 (35000) 0 IA EI EI B (960000) (75000) 0 (80000) 0 0 0 0 0 (20000) 0 0 EL D CV CY B D F F D F F A 0 0 0 0 0 0 0 (18750) 0 0 235,000 - - 1,980,000 (582,000) D F F A - D A D A D A 75,000 - (150,000) - 0 D 0 T 0 D 0 0 0 0 0 D A B D A (18750) D 0 A 0 B - (100,000) (151,250) (800,000) 10,000 20,000 16,000 - 0 0 0 D A CV 0 - B CY (854,000) - 100,000 (100,000) (25,000) A IS BI BI 0 (4,000) 0 0 0 0 0 A F F A F F A (900,000) 460,000 35,000 6,250 80000 0 0 71700 0 1,408,200 0 0 A A - A - B 0 CY 0 D 0 B 0T (71700) T (1,408,200) 41,000 - 6,250 155,000 (237,750) 71,700 (71,700) (166,050) 11,350 (154,700) (11,350) (154,700) (262,600) (262,600) (1,008,700) (1,008,700) Balances Controlling (67,000) NCI Total (16,750) (83,750) (1,250) (67,000) 20,100 (18,000) 5,400 (46,900) (11,350) (58,250) Name of Company Being Acquired Name of Acquiring Company Date of Acquisition Assets Cash Accounts Receivable Inventory Johnson Company Acquisitions Inc January 1, 2015 Date of Acquisition Johnson Company Book Market Life 28,000 40,000 28,000 40,000 10,000 60,000 (20,000) 30,000 (10,000) 50,000 80,000 20 50,000 5 15,000 30,000 40,000 5 8 Investment in Subsidiary Intercompany Bond Investment Land Buildings Accumulated Depreciation Equipment Accumulated Depreciation Patents Brand Name Copyrights Goodwill 15 Total Assets Current Tax (Liability) Asset Liabilities Accounts Payable 153,000 318,000 (5,000) (5,000) Bonds Payable (20,000) (20,000) Total Liabilities Equity Acquired Company Common Stock Paid-in Capital in Excess of Par Retained Earnings Equity Acquiring Company Common Stock Paid-in Capital in Excess of Par Retained Earnings Total Equity Total Liabilities and Equity Net Assets at Market of Acquired Co. Dividends Declared Acquired Company Dividends Declared Acquiring Company Sales (25,000) (25,000) (1,000) (59,000) (68,000) (128,000) (153,000) 293,000 Cost of Goods Sold Depreciation Expense of Buildings Equipment Amortization Expense of Patents Brand Name Copyrights Other Expenses Interest Expense Gain on Sale of Assets Interest Revenue Subsidiary Income Total Balances Purchase Price Cash Number of shares exchanged Par value of a share of stock Market value of a share of stock Market value of stock exchanged Total purchase price 5,888 1 50 294,400 294,400 Ownership Interest enter as .7 for 70% 0.80 Goodwill Applicable to NCI Implied Value of NCI Interest Estimated Value of NCI interest if not the implied proportional amount--Enter amount or 0 73,600.00 - Method of Accounting for Investment--Enter Capital C for Cost or Capital E for Equity E Years since Acquisition 3.00 Intercompany Merchandise Information Current Year Sales Unpaid Account Balance, at year end Beginning Inventory Ending Inventory Subsidiary Parent Sales Parent % Sales 20,000 30,000 2,000 3,000 3,000 0.30 4,000 4,000 0.25 2,000 Intercompany Fixed Asset Sales By Parent By Sub Type of Fixed Asset--Enter in Columns B or C Enter 1 for Enter 2 for Enter 3 for Profit Amount Life of Asset--leave blank for land Land Buildings Equipment Year of Sale (Assume Beginning of Year) Intercompany Bond Information Maturity Value Face Interest Rate (Enter .08 for 8%,.075 for 7.5%) Original Years to Maturity Year Bond Issued (Assume January Issuance) Issue Rate Year Bond Purchased (Assume January Purchase)) Purchase Rate Face Value Purchased Method of Amortization (Enter capital S for Straight-line and capital E for Effective Interest in Column B.) E Issue Price Purchase Price If the bonds were repurchased during the current year enter 1. If the bonds were repurchased in a previous year enter 2. Month Interest Paid January =1, December=12) Consolidated Tax Rate (enter .3 for 30%) 20000 0.1 10 2014 0.1 2016 0.1 20000 20000 20000 2 12 0.30 3 4,000 4 3 5,000 5 2 3 Current Year Trial Balance Acquisitions Inc Johnson Company 163,400 46,000 95,000 123,400 46,000 60,000 413,600 20,000 60,000 200,000 (60,000) 60,000 (32,000) 10,000 60,000 (21,000) 30,000 (14,000) 12,000 (2,400) (40,000) (6,400) (120,000) (20,000) (1,000) (59,000) (168,000) (21,000) (199,000) (485,000) 10,000 20,000 (320,000) (200,000) 180,000 95,000 10,000 7,000 1,000 4,000 3,000 44,000 8,000 38,000 2,000 (5,000) (2,000) (45,600) Balances Balances Subsidiary % 0.25 0.30 Name of Company Being Acquired Name of Acquiring Company Date of Acquisition Assets Cash Accounts Receivable Inventory Johnson Company Acquisitions Inc January 1, 2015 Date of Acquisition Johnson Company Book Market Life 28,000 40,000 28,000 40,000 10,000 60,000 (20,000) 30,000 (10,000) 50,000 80,000 20 50,000 5 15,000 30,000 40,000 5 8 Total Assets Current Tax (Liability) Asset Deferred Tax (Liability) Asset Liabilities Accounts Payable 153,000 318,000 (5,000) (5,000) Bonds Payable (20,000) (20,000) Total Liabilities Equity Acquired Company Common Stock Paid-in Capital in Excess of Par Retained Earnings Equity Acquiring Company Common Stock Paid-in Capital in Excess of Par Retained Earnings Total Equity Total Liabilities and Equity Net Assets at Market of Acquired Co. Dividends Declared Acquired Company Dividends Declared Acquiring Company (25,000) (25,000) Investment in Subsidiary Intercompany Bond Investment Land Buildings Accumulated Depreciation Equipment Accumulated Depreciation Patents Brand Name Copyrights Goodwill (1,000) (59,000) (68,000) (128,000) (153,000) 293,000 Sales Cost of Goods Sold Depreciation Expense of Buildings Equipment Amortization Expense of Patents Brand Name Copyrights Other Expenses Interest Expense Gain on Sale of Assets Interest Revenue Provision for Income Taxes Subsidiary Income Total Balances Purchase Price Cash Number of shares exchanged Par value of a share of stock Market value of a share of stock Market value of stock exchanged Total purchase price 5,888 1 50 294,400 294,400 Ownership Interest enter as .7 for 70% 0.80 Goodwill Applicable to NCI Implied Value of NCI Interest Estimated Value of NCI interest if not the implied proportional amount--Enter amount or 0 Method of Accounting for Investment--Enter Capital C for Cost or Capital E for Equity Years since Acquisition 73,600.00 - E 3.00 Intercompany Merchandise Information Current Year Sales Unpaid Account Balance, at year end Beginning Inventory Ending Inventory Subsidiary Parent Sales Parent % Sales 20,000 30,000 2,000 3,000 3,000 0.30 4,000 4,000 0.25 2,000 Intercompany Fixed Asset Sales By Parent By Sub Type of Fixed Asset--Enter in Columns B or C Enter 1 for Enter 2 for Enter 3 for Profit Amount Life of Asset--leave blank for land Year of Sale (Assume Beginning of Year) Land Buildings Equipment Intercompany Bond Information Maturity Value Face Interest Rate (Enter .08 for 8%,.075 for 7.5%) Original Years to Maturity Separate Tax Information Corporate Tax Rate (Enter .3 for 30%) Tax Rate on Subsidiary Dividends (Enter .2 for 20% 3 5,000 5 3 20000 0.1 10 Year Bond Issued (Assume January Issuance) Issue Rate Year Bond Purchased (Assume January Purchase)) Purchase Rate Face Value Purchased Method of Amortization (Enter capital S for Straight-line and capital E for Effective Interest in Column B.) E Issue Price Purchase Price If the bonds were repurchased during the current year enter 1. If the bonds were repurchased in a previous year enter 2. Month Interest Paid January =1, December=12) 3 4,000 4 2 2014 0.1 2016 0.1 20000 20000 20000 2 12 0.3 0.2 Value Analysis Company Fair Value Fair Value of Net Assets Excluding Goodwill Goodwill Gain on Acquisition Company Fair Value 368,000 293,000 75,000 - Parent Price NCI Value 294,400 73,600 234,400 58,600 60,000 15,000 Determination and Distribution of Excess Schedule Implied Company Value Parent Price NCI Value Fair Value of Company Less Book Value of Interest Acquired Common Stock Paid-in Capital in Excess of Par Retained Earnings Total Equity 368,000 294,400 73,600 0.80 (102,400) 192,000 0.20 (25,600) 48,000 (1,000) (59,000) (68,000) (128,000) Interest Acquired Book Value Excess of Fair Value over Book Value Elimination Entry Common Stock Paid-in Capital in Excess of Par Retained Earnings Investment in Subsidiary Key EL EL EL (102,400) EL 800 47,200 54,400 Adjustment to Identifiable Accounts Inventory Debit (Credit) - Land Buildings Equipment Patents Brand Name Copyrights Goodwill Bonds Payable Investment in Subsidiary Gain Taken to Acquiring Co. RE/Income Acquired Company RE Check Amortization Schedule Account Adjustment 40,000 40,000 30,000 15,000 40,000 75,000 (192,000) (48,000) - Annual Amount Inventory Buildings Equipment Key D D D D D D D D D D D D D D D Life 20 5 5 8 - Current Year Prior Years 2,000 2,000 4000 6,000 6,000 12000 3,000 3,000 6000 5,000 5,000 10000 16,000 32000 Patents Brand Name Copyrights Total Amortization Entry Cost of Goods Sold Depreciation Expense of Debit (Credit) Key A A Buildings Equipment 2,000 A 6,000 A Amortization Expense of Patents Brand Name Copyrights Interest Expense Acquired Company RE Acquiring Company RE Inventory Accumulated Depreciation Accumulated Depreciation 3,000 5,000 Patents Brand Name Copyrights Total 6,400 25,600 (6,000) (18,000) (9,000) (15,000) - A A A A A A A A A A A A A A A Method Adjustment Schedule Is Adjustment Necessary? Adjustment to Investment Account Adjustment to Retained Earnings Account Debit (Credit) NO Key Date Alignment Schedule Adjustment to Subsidiary Income Account Adjustment to Subsidiary Dividend Account Adjustment to Investment Account under Equity Method Debit (Credit) Key 34,720 CY (8,000) CY - CV - CV (26,720) CY Intercompany Inventory Profit Deferral and Intercompany Sales and Receivables. Beginning Inventory Ending Inventory Current Year Sales Year End Unpaid Account Balances Parent Sold by Parent Parent % Profit 3,000 0.30 900 4,000 0.25 1,000 20,000 2,000 Elimination Entries Debit (Credit) Eliminate Intercompany Merchandise Sales Sales 50,000 KEY IS Cost of Goods Sold Eliminate Intercompany unpaid trade balance at year end Accounts Payable Accounts Receivable (50,000) IS 5,000 IA (5,000) IA Eliminate Profit made by parent on merchandise in subsidiary's beginning inventory Retained Earnings-Parent Cost of Goods Sold 900 BI (900) BI Eliminate Profit made by parent on merchandise in subsidiary's ending inventory Cost of Goods Sold Inventory 1,000 EI (1,000) EI Eliminate Profit made by subsidiary on merchandise in parents' beginning inventory Retained Earnings-Parent Retained Earnings-Subsidiary Cost of Goods Sold 800 BI 200 BI (1,000) BI Eliminate Profit made by subsidiary on merchandise in parents' ending inventory Cost of Goods Sold Inventory 600 EI (600) EI Intercompany Fixed Asset Profit Deferral Original Profit Life of Asset Annual Depreciation Adjustment Realized in Prior Years Balance at Start of Year Realized in Current Year Sale by Parent 4,000 4 1,000 1,000 3,000 1,000 Sale by Sub 5,000 5 1,000 5,000 1,000 Elimination Entry Retained Earnings Parent Gain on Sale of Asset Retained Earnings Parent Retained Earnings Subsidiary Gain on Sale of Asset Accumulated Depreciation Accumulated Depreciation Depreciation Expense Depreciation Expense Equipment Equipment Check Debit (Credit) Key F F F F F F F F F F F 3,000 5,000 2,000 1,000 (1,000) (1,000) (4,000) (5,000) - Intercompany Bond Eliminations Amortization Table For Johnson Company Period (First line is January 1- year of issuance. Second line is December 31- year of issuance.) Cash/Payable 2014 2014 2,000 2015 2,000 2016 2,000 2017 2,000 2018 2,000 2019 2,000 2020 2,000 2021 2,000 2022 2,000 2023 2,000 Elimination Entries Debit (Credit) Bonds Payable Interest 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 Key 20,000 B 2,000 B - B B Interest Revenue Loss (Gain) on Bond Retirement (Premium) Discount on Bonds Payable Retained Earnings Parent - B Retained Earnings Subsidiary - B Interest Expense Intercompany Bond Investment Check Balance 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 Proof: Loss Remaining at Year End Loss Amortized During the Year (2,000) B (20,000) B Balances Interest Payable Interest Receivable 2,000 B (2,000) B Consolidated Worksheet Trial Balance Acquisitions Inc Eliminations Johnson Company Key Cash Accounts Receivable Inventory Investment in Subsidiary 161,000 46,000 95,000 123,400 46,000 60,000 402,720 CV CY Intercompany Bond Investment Land 20,000 60,000 10,000 Buildings 200,000 60,000 Accumulated Depreciation (60,000) Equipment 60,000 Accumulated Depreciation (32,000) Patents - Brand Name Copyrights - Goodwill Deferred Tax (Liability) Asset Accounts Payable Bonds Payable Common Stock Paid-in Capital in Excess of Par Retained Earnings (7,603) (40,000) (120,000) - - - - D (21,000) A F F 30,000 D (14,000) A F F - D - A 12,000 D A - D A - D - T (6,400) IA - B (20,000) D B - D A B - D A (1,000) EL (59,000) EL (168,000) EL A BI F B Common Stock Paid-in Capital in Excess of Par Retained Earnings (21,000) (199,000) (479,000) A CV BI BI F F B Dividends Declared Acquired Company Dividends Declared Acquiring Company Sales Cost of Goods Sold 20,000 (320,000) 180,000 10,000 (200,000) IS 95,000 A EI EI Depreciation Expense of Buildings Equipment Amortization Expense of Patents Brand Name Copyrights Other Expenses Interest Expense Subsidiary Income Interest Revenue Gain on Sale of Assets Gain on Acquisition of Business Loss (Gain) on Bond Retirement Total Consolidated Income Before Tax Consolidated Provision for Tax Income Taxes (Payable) Receivable Totals/Net Income After Tax NCI Share Controlling Share of Net Income NCI Controlling Retained Earnings Totals 10,000 1,000 A 7,000 4,000 A 44,000 8,000 3,000 38,000 2,000 A (34,720) (2,000) - A A A - CY - B (5,000) F F B 397 Balances T T Income Distribution Schedules Internally Generated Net (Income) or Loss Before Tax Beginning Inventory Profit Ending Inventory Profit Gain on Asset in Income Realized Gain on Asset Sale Current Year Amortizations Gain/Loss on Bond Retirement Interest Adjustment on Bonds Adjusted (Income) or Loss Before Taxes Internally Generated Net Income Gain on Acquisition of Business Beginning Inventory Profit Ending Inventory Profit Gain on Asset in Income Realized Gain on Asset Sale Internally Generated Net Income Before Tax Provision for Tax Internally Generated Net Income After Tax Controlling Share of Subsidiary Income net of tax Controlling Income Johnson Company (62,000) (1,000) 600 5,000 (1,000) 16,000 0 0 (42,400) Acquisitions Inc (73,000) (900) 1,000 (1,000) (73,900) (73,900) (33,920) (107,820) Tax Schedule Adjusted Subsidiary Income NCI Share of Asset Adjustment Taxable Income Tax Income After Tax Current Year Trial Balance Acquisitions Inc Johnson Company 161,000 46,000 95,000 123,400 46,000 60,000 402,720 20,000 60,000 200,000 (60,000) 60,000 (32,000) 10,000 60,000 (21,000) 30,000 (14,000) 12,000 (22,380) (7,603) (18,600) (40,000) (6,400) (120,000) (20,000) (1,000) (59,000) (168,000) (21,000) (199,000) (479,000) 10,000 20,000 (320,000) 180,000 10,000 7,000 (200,000) 95,000 1,000 4,000 3,000 44,000 8,000 (2,000) 23,983 (34,720) Balances 38,000 2,000 (5,000) 18,600 Balances Subsidiary % 0.25 0.30 Total 6,000 18,000 9,000 15,000 - Subsidi Sold by Subsidiary ary Subsidiary % Profit 4,000 0.25 1,000 2,000 0.30 600 30,000 3,000 Acquisitions Inc Period Cash/Payable Interest 0 2014 Purchase Date 2016 2017 2018 2019 2020 2021 2022 2023 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 Investment in Bonds at End of Period Carrying Value at End of Period 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 Balance 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 Interest Expense Eliminated Interest Revenue Eliminated Loss or RE Adjustment at Beginning of Period 0 2,000 2,000 0 0 Eliminations Debit Credit Key Non Consolidated Net Control Income Interest Controlling Consolidate Retained d Balance Earnings Sheet 0 0 40000 40000 0 0 0 30000 0 2000 1000 0 0 15000 0 40000 0 75000 0 5,000 2000 0 20000 0 0 0 0 0 800 47,200 134,400 6,400 200 0 284,400 87,000 153,400 (5000) (1000) (600) (2000) IA EI EI B (182400) (192000) 0 (26720) (20000) 0 0 0 0 0 0 (6000) EL D CV CY B D F F D F F A 0 (4000) (5000) (18000) D F F A 111,000 0 0 0 (9000) 0 (15000) D A D A D A 18,000 (2,000) 1,600 110,000 300,000 (87,000) (61,000) 25,000 75,000 (7,603) (41,400) 2,000 (120,000) 0 D 0 T 0 D 0 0 0 0 0 D A B D A (48000) D 0 A - (200) (11,800) (75,000) 0 0 B (21,000) (199,000) 25,600 900 800 3,000 - 0 0 0 D A CV (448,700) 0 B (8,000) CY 2,000 20,000 50,000 (50,000) (900) (1,000) A IS BI BI 0 0 0 0 (1,000) (1,000) 0 A F F A F F A (470,000) 224,700 1,000 600 2,000 6,000 3,000 5,000 34720 2000 5,000 0 0 0 598620 0 0 A A - A (2,000) B 0 CY 0 D 0 B 0T 0 T -598620 13,000 15,000 6,000 5,000 82,000 8,000 (116,300) 0 (116,300) 8,480 (107,820) (8,480) (107,820) (93,480) (536,520) (93,480) (536,520) (1,603) Controlling (33,920) NCI Total (8,480) (42,400) (3,200) (33,920) 0 (33,920) (11,680) 0 (8,480) (42,400) Name of Company Being Acquired Name of Acquiring Company Date of Acquisition Assets Cash Accounts Receivable Inventory Johnson Company Acquisitions Inc January 1, 2015 Date of Acquisition Johnson Company Book Market Life 28,000 40,000 28,000 40,000 10,000 60,000 (20,000) 30,000 (10,000) 50,000 80,000 20 50,000 5 15,000 30,000 40,000 5 8 Total Assets Current Tax (Liability) Asset Deferred Tax (Liability) Asset Liabilities Accounts Payable 153,000 318,000 (5,000) (5,000) Bonds Payable (20,000) (20,000) Total Liabilities Equity Acquired Company Common Stock Paid-in Capital in Excess of Par Retained Earnings Equity Acquiring Company Common Stock Paid-in Capital in Excess of Par Retained Earnings Total Equity Total Liabilities and Equity Net Assets at Market of Acquired Co. Dividends Declared Acquired Company Dividends Declared Acquiring Company (25,000) (25,000) Investment in Subsidiary Intercompany Bond Investment Land Buildings Accumulated Depreciation Equipment Accumulated Depreciation Patents Brand Name Copyrights Goodwill (1,000) (59,000) (68,000) (128,000) (153,000) 293,000 Sales Cost of Goods Sold Depreciation Expense of Buildings Equipment Amortization Expense of Patents Brand Name Copyrights Other Expenses Interest Expense Gain on Sale of Intercompany Asset Interest Revenue Provision for Income Taxes Subsidiary Income Total Balances Purchase Price Cash Number of shares exchanged Par value of a share of stock Market value of a share of stock Market value of stock exchanged Total purchase price 5,888 1 50 294,400 294,400 Ownership Interest enter as .7 for 70% 0.80 Goodwill Applicable to NCI Implied Value of NCI Interest Estimated Value of NCI interest if not the implied proportional amount--Enter amount or 0 Method of Accounting for Investment--Enter Capital C for Cost or Capital E for Equity Years since Acquisition 73,600.00 - E 3.00 Intercompany Merchandise Information Current Year Sales Unpaid Account Balance, at year end Beginning Inventory Ending Inventory Subsidiary Parent Sales Parent % Sales 20,000 30,000 2,000 3,000 3,000 0.30 4,000 4,000 0.25 2,000 Intercompany Fixed Asset Sales By Parent By Sub Type of Fixed Asset--Enter in Columns B or C Enter 1 for Enter 2 for Enter 3 for Profit Amount Life of Asset--leave blank for land Year of Sale (Assume Beginning of Year) Land Buildings Equipment Intercompany Bond Information Maturity Value Face Interest Rate (Enter .08 for 8%,.075 for 7.5%) Original Years to Maturity Separate Tax Information Corporate Tax Rate (Enter .3 for 30%) Tax Rate on Subsidiary Dividends (Enter .2 for 20% 3 5,000 5 3 Parent Price 294,400 234,400 60,000 NCI Value 73,600 58,600 15,000 Parent Price NCI Value 20000 0.1 10 Year Bond Issued (Assume January Issuance) Issue Rate Year Bond Purchased (Assume January Purchase)) Purchase Rate Face Value Purchased Method of Amortization (Enter capital S for Straight-line and capital E for Effective Interest in Column B.) E Issue Price Purchase Price If the bonds were repurchased during the current year enter 1. If the bonds were repurchased in a previous year enter 2. Month Interest Paid January =1, December=12) 3 4,000 4 2 2014 0.1 2016 0.1 20000 20000 20000 2 12 0.3 0.2 Value Analysis Company Fair Value Fair Value of Net Assets Excluding Goodwill Goodwill Gain on Acquisition Company Fair Value 368,000 293,000 75,000 - Determination and Distribution of Excess Schedule Implied Company Value Fair Value of Company Less Book Value of Interest Acquired Common Stock Paid-in Capital in Excess of Par Retained Earnings Total Equity 368,000 294,400 73,600 0.80 (102,400) 192,000 0.20 (25,600) 48,000 (1,000) (59,000) (68,000) (128,000) Interest Acquired Book Value Excess of Fair Value over Book Value Elimination Entry Common Stock Paid-in Capital in Excess of Par Retained Earnings Investment in Subsidiary Key EL EL EL (102,400) EL 800 47,200 54,400 Adjustment to Identifiable Accounts Inventory Debit (Credit) - Land Buildings Equipment Patents Brand Name Copyrights Goodwill Bonds Payable Investment in Subsidiary Gain Taken to Acquiring Co. RE/Income Acquired Company RE Check Amortization Schedule Account Adjustment 40,000 40,000 30,000 15,000 40,000 75,000 (192,000) (48,000) - Annual Amount Inventory Buildings Equipment Key D D D D D D D D D D D D D D D Life 20 5 5 8 - Current Year Prior Years 2,000 2,000 4000 6,000 6,000 12000 3,000 3,000 6000 5,000 5,000 10000 16,000 32000 Patents Brand Name Copyrights Total Amortization Entry Cost of Goods Sold Depreciation Expense of Debit (Credit) Key A A Buildings Equipment 2,000 A 6,000 A Amortization Expense of Patents Brand Name Copyrights Interest Expense Acquired Company RE Acquiring Company RE Inventory Accumulated Depreciation Accumulated Depreciation 3,000 5,000 Patents Brand Name Copyrights Total 6,400 25,600 (6,000) (18,000) (9,000) (15,000) - A A A A A A A A A A A A A A A Method Adjustment Schedule Is Adjustment Necessary? Adjustment to Investment Account Adjustment to Retained Earnings Account Debit (Credit) NO Key Date Alignment Schedule Adjustment to Subsidiary Income Account Adjustment to Subsidiary Dividend Account Adjustment to Investment Account under Equity Method Debit (Credit) Key 34,720 CY (8,000) CY - CV - CV (26,720) CY Intercompany Inventory Profit Deferral and Intercompany Sales and Receivables. Beginning Inventory Ending Inventory Current Year Sales Year End Unpaid Account Balances Parent Sold by Parent Parent % Profit 3,000 0.30 900 4,000 0.25 1,000 20,000 2,000 Elimination Entries Debit (Credit) Eliminate Intercompany Merchandise Sales Sales 50,000 KEY IS Cost of Goods Sold Eliminate Intercompany unpaid trade balance at year end Accounts Payable Accounts Receivable (50,000) IS 5,000 IA (5,000) IA Eliminate Profit made by parent on merchandise in subsidiary's beginning inventory Retained Earnings-Parent Cost of Goods Sold 900 BI (900) BI Eliminate Profit made by parent on merchandise in subsidiary's ending inventory Cost of Goods Sold Inventory 1,000 EI (1,000) EI Eliminate Profit made by subsidiary on merchandise in parents' beginning inventory Retained Earnings-Parent Retained Earnings-Subsidiary Cost of Goods Sold 800 BI 200 BI (1,000) BI Eliminate Profit made by subsidiary on merchandise in parents' ending inventory Cost of Goods Sold Inventory 600 EI (600) EI Intercompany Fixed Asset Profit Deferral Original Profit Life of Asset Annual Depreciation Adjustment Realized in Prior Years Balance at Start of Year Realized in Current Year Sale by Parent 4,000 4 1,000 1,000 3,000 1,000 Sale by Sub 5,000 5 1,000 5,000 1,000 Elimination Entry Retained Earnings Parent Gain on Sale of Asset Retained Earnings Parent Retained Earnings Subsidiary Gain on Sale of Asset Accumulated Depreciation Accumulated Depreciation Depreciation Expense Depreciation Expense Equipment Equipment Check Debit (Credit) Key F F F F F F F F F F F 3,000 5,000 2,000 1,000 (1,000) (1,000) (4,000) (5,000) - Intercompany Bond Eliminations Amortization Table For Johnson Company Period (First line is January 1- year of issuance. Second line is December 31- year of issuance.) Cash/Payable 2014 2014 2,000 2015 2,000 2016 2,000 2017 2,000 2018 2,000 2019 2,000 2020 2,000 2021 2,000 2022 2,000 2023 2,000 Elimination Entries Debit (Credit) Bonds Payable Interest Revenue Loss (Gain) on Bond Retirement (Premium) Discount on Bonds Payable Interest 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 Key 20,000 B 2,000 B - B B Retained Earnings Parent - B Retained Earnings Subsidiary - B Interest Expense Intercompany Bond Investment Check Proof: Loss Remaining at Year End Loss Amortized During the Year (2,000) B (20,000) B Balances 0 0 Deferred Tax Asset/Deferred Tax Liability Adjustment Retained Earnings Adjustments Subsidiary Transactions Amortization of Excess--Owner's % Balance 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 - B B Acquisitions Inc Johnson Company 25,600 25,600 Profit by Subsidiary on Intercompany Inventory Sales Profit by Subsidiary on Intercompany Fixed Asset Sales Parents Share of Subsidiary Profit on Intercompany Inventory Sale Parent's Share of Subsidiary Profit on Intercompany Fixed Asset Sales Total Adjustments to Subsidiary Retained Earnings First Tax Net Income After Tax Second Tax Total Tax 200 200 - - 800 800 - - 26,600 7,980 18,620 1,109 9,089 26,400 7,920 18,480 1,109 9,029 200 60 140 60 Parent Transactions Parent's Profit on Intercompany Inventory Sales Parent's Profit on Intercompany Fixed Asset Sales 3,000 Total Adjustments to Parent's Retained Earnings First Tax Total Retained Earnings Tax Adjustment 3,900 1,170 10,259 1,170 10,199 60 12,800 (1,000) 600 12,800 -800 480 (200) 120 (1,000) -800 (200) 900 Adjustments to Current Year's Income Subsidiary Transactions Amortization of Excess Subsidiary Profit in Beginning Inventory Subsidiary Profit in Ending Inventory Subsidiary Profit in Fixed Asset Sales-Depreciation Adjustment Subsidiary Current Year Gain on Fixed Asset Sales Total Subsidiary Adjustment to Current Year First Tax Net After Tax Second Tax Total Tax Parent Transactions Parent's Profit in Beginning Inventory Parent's Profit in Ending Inventory Parent's Profit in Fixed Asset Sale--Depreciation Adjustment Parent's Current Year Gain on Fixed Asset Sales Total Parent Adjustments First Tax Total Adjustment to Tax Provision 5,000 16,400 4,920 11,480 659 5,579 4000 15,680 4,704 10,976 659 5,363 1,000 720 216 504 216 (900) 1,000 (1,000) (900) (270) 5,309 (270) 5,093 216 Deferred Tax Liability Retained Earnings Parent Retained Earnings Subsidiary Provision for Tax Check 15,568 (10,199) (60) (5,309) - T T T T Consolidated Worksheet Trial Balance Eliminations Acquisitions Inc 161,000 46,000 95,000 Cash Accounts Receivable Inventory Investment in Subsidiary 402,720 Johnson Company Key 123,400 46,000 60,000 CV CY Intercompany Bond Investment Land 20,000 60,000 10,000 Buildings 200,000 60,000 Accumulated Depreciation (60,000) Equipment 60,000 Accumulated Depreciation (32,000) Patents - Brand Name Copyrights - Goodwill Deferred Tax (Liability) Asset Accounts Payable - (7,603) (40,000) - D (21,000) A F F 30,000 D (14,000) A F F - D - A 12,000 D A - D A - D - T (6,400) IA - B - Bonds Payable (120,000) - - - - Common Stock Paid-in Capital in Excess of Par Retained Earnings - Common Stock Paid-in Capital in Excess of Par Retained Earnings (21,000) (199,000) (479,000) Dividends Declared Acquired Company Dividends Declared Acquiring Company Sales Cost of Goods Sold 20,000 (320,000) 180,000 (20,000) D B - D A B - D A (1,000) EL (59,000) EL (168,000) EL A BI F B A CV BI BI F F B 10,000 (200,000) IS 95,000 A EI EI Depreciation Expense of Buildings Equipment Amortization Expense of Patents Brand Name Copyrights Other Expenses Interest Expense Subsidiary Income Interest Revenue Gain on Sale of Intercompany Asset 10,000 1,000 A 7,000 4,000 A 44,000 8,000 3,000 38,000 2,000 A (34,720) (2,000) - A A A - CY - B (5,000) F F Gain on Acquisition of Business Loss (Gain) on Bond Retirement Total Consolidated Income Before Tax Consolidated Provision for Tax Income Taxes (Payable) Receivable Totals/Net Income After Tax NCI Share Controlling Share of Net Income NCI Controlling Retained Earnings Totals Income Distribution Schedules Internally Generated Net (Income) or Loss Before Tax Beginning Inventory Profit Ending Inventory Profit Gain on Asset in Income Realized Gain on Asset Sale Current Year Amortizations Gain/Loss on Bond Retirement Interest Adjustment on Bonds Adjusted (Income) or Loss Before Taxes Internally Generated Net Income Gain on Acquisition of Business Beginning Inventory Profit Ending Inventory Profit Gain on Asset in Income Realized Gain on Asset Sale Internally Generated Net Income Before Tax Provision for Tax Internally Generated Net Income After Tax Controlling Share of Subsidiary Income net of tax Controlling Income B 397 Balances T T Johnson Company (62,000) (1,000) 600 5,000 (1,000) 16,000 0 0 (42,400) Acquisitions Inc (73,000) (900) 1,000 (1,000) (73,900) (73,900) (33,920) (107,820) Tax Schedule Adjusted Subsidiary Income NCI Share of Asset Adjustment Taxable Income Tax Income After Tax Current Year Trial Balance Acquisitions Inc Johnson Company 161,000 46,000 95,000 123,400 46,000 60,000 402,720 20,000 60,000 200,000 (60,000) 60,000 (32,000) 10,000 60,000 (21,000) 30,000 (14,000) 12,000 (22,380) (7,603) (18,600) (40,000) (6,400) (120,000) (20,000) (1,000) (59,000) (168,000) (21,000) (199,000) (479,000) 10,000 20,000 (320,000) 180,000 10,000 7,000 (200,000) 95,000 1,000 4,000 3,000 44,000 8,000 (2,000) 23,983 (34,720) Balances 38,000 2,000 (5,000) 18,600 Balances Subsidiary % 0.25 0.30 Total 6,000 18,000 9,000 15,000 - Subsidi Sold by Subsidiary ary Subsidiary % Profit 4,000 0.25 1,000 2,000 0.30 600 30,000 3,000 Acquisitions Inc Period 0 2014 Purchase Date 2016 2017 2018 2019 2020 2021 2022 2023 Investment in Bonds at End of Period Carrying Value at End of Period Interest Expense Eliminated Interest Revenue Eliminated Loss or RE Adjustment at Beginning of Period Johnson Company Cash/Payable Interest 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 20,000 20,000 0 2,000 2,000 0 0 Balance 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 Eliminations Debit Credit 0 0 40000 40000 0 0 0 30000 0 2000 1000 0 0 15000 0 40000 0 75000 0 5,000 0 Key Non Consolidated Net Control Income Interest Controlling Consolidate Retained d Balance Earnings Sheet 284,400 87,000 153,400 (5000) (1000) (600) 0 IA EI EI B (182400) (192000) 0 (26720) (20000) 0 0 0 0 0 0 (6000) EL D CV CY B D F F D F F A 0 (4000) (5000) (18000) D F F A 111,000 0 0 0 (9000) 0 (15000) D A D A D A 18,000 0 D 0 T 1,600 110,000 300,000 (87,000) (61,000) 25,000 75,000 (7,603) (41,400) - 0 20000 0 0 0 0 0 800 47,200 134,400 6,400 200 0 0 0 D 0 0 0 0 0 D A B D A (120,000) - (200) (11,800) (75,000) (48000) D 0 A 0 B (21,000) (199,000) 25,600 900 800 3,000 - 0 0 0 D A CV (448,700) 0 B (8,000) CY 2,000 20,000 50,000 (50,000) (900) (1,000) A IS BI BI 0 0 0 0 (1,000) (1,000) 0 A F F A F F A (470,000) 224,700 1,000 600 2,000 6,000 3,000 5,000 34720 2000 5,000 0 0 A A - A (2,000) B 0 CY 13,000 15,000 6,000 5,000 82,000 8,000 - 0 D 0 B 0 0 0 596620 0T 0 T -596620 (116,300) 0 (116,300) 8,480 (107,820) (8,480) (107,820) (93,480) (536,520) Controlling (33,920) NCI Total (8,480) (42,400) (3,200) (33,920) 0 (33,920) (11,680) 0 (8,480) (42,400) (93,480) (536,520) (1,603) Name of Company Being Acquired Name of Acquiring Company Date of Acquisition Assets Cash Accounts Receivable Inventory Johnson Company Acquisitions Inc January 1, 2015 Date of Acquisition Johnson Company Book Market Life 28,000 40,000 28,000 40,000 10,000 60,000 (20,000) 30,000 (10,000) 50,000 80,000 20 50,000 5 15,000 30,000 40,000 5 8 Total Assets Current Tax (Liability) Asset Deferred Tax (Liability) Asset Liabilities Accounts Payable 153,000 318,000 (5,000) (5,000) Bonds Payable (20,000) (20,000) Total Liabilities Equity Acquired Company Common Stock Paid-in Capital in Excess of Par Retained Earnings Equity Acquiring Company Common Stock Paid-in Capital in Excess of Par Retained Earnings Total Equity Total Liabilities and Equity Net Assets at Market of Acquired Co. Dividends Declared Acquired Company Dividends Declared Acquiring Company (25,000) (25,000) Investment in Subsidiary Intercompany Bond Investment Land Buildings Accumulated Depreciation Equipment Accumulated Depreciation Patents Brand Name Copyrights Goodwill (1,000) (59,000) (68,000) (128,000) (153,000) 293,000 Sales Cost of Goods Sold Depreciation Expense of Buildings Equipment Amortization Expense of Patents Brand Name Copyrights Other Expenses Interest Expense Gain on Sale of Intercompany Asset Interest Revenue Provision for Income Taxes Subsidiary Income Total Balances Purchase Price Cash Number of shares exchanged Par value of a share of stock Market value of a share of stock Market value of stock exchanged Total purchase price 5,888 1 50 294,400 294,400 Ownership Interest enter as .7 for 70% 0.80 Goodwill Applicable to NCI Implied Value of NCI Interest Estimated Value of NCI interest if not the implied proportional amount--Enter amount or 0 Method of Accounting for Investment--Enter Capital C for Cost or Capital E for Equity Years since Acquisition 73,600.00 - E 3.00 Intercompany Merchandise Information Current Year Sales Unpaid Account Balance, at year end Beginning Inventory Ending Inventory Subsidiary Parent Sales Parent % Sales 20,000 30,000 2,000 3,000 3,000 0.30 4,000 4,000 0.25 2,000 Intercompany Fixed Asset Sales By Parent By Sub Type of Fixed Asset--Enter in Columns B or C Enter 1 for Enter 2 for Enter 3 for Profit Amount Life of Asset--leave blank for land Year of Sale (Assume Beginning of Year) Land Buildings Equipment Intercompany Bond Information Maturity Value Face Interest Rate (Enter .08 for 8%,.075 for 7.5%) Original Years to Maturity Separate Tax Information Corporate Tax Rate (Enter .3 for 30%) Tax Rate on Subsidiary Dividends (Enter .2 for 20% 3 5,000 5 3 Parent Price 294,400 234,400 60,000 NCI Value 73,600 58,600 15,000 Parent Price NCI Value 20000 0.1 10 Year Bond Issued (Assume January Issuance) Issue Rate Year Bond Purchased (Assume January Purchase)) Purchase Rate Face Value Purchased Method of Amortization (Enter capital S for Straight-line and capital E for Effective Interest in Column B.) E Issue Price Purchase Price If the bonds were repurchased during the current year enter 1. If the bonds were repurchased in a previous year enter 2. Month Interest Paid January =1, December=12) 3 4,000 4 2 2014 0.1 2016 0.1 20000 20000 20000 2 12 0.3 0.2 Value Analysis Company Fair Value Fair Value of Net Assets Excluding Goodwill Goodwill Gain on Acquisition Company Fair Value 368,000 293,000 75,000 - Determination and Distribution of Excess Schedule Implied Company Value Fair Value of Company Less Book Value of Interest Acquired Common Stock Paid-in Capital in Excess of Par Retained Earnings Total Equity 368,000 294,400 73,600 0.80 (102,400) 192,000 0.20 (25,600) 48,000 (1,000) (59,000) (68,000) (128,000) Interest Acquired Book Value Excess of Fair Value over Book Value Elimination Entry Common Stock Paid-in Capital in Excess of Par Retained Earnings Investment in Subsidiary Key EL EL EL (102,400) EL 800 47,200 54,400 Adjustment to Identifiable Accounts Inventory Debit (Credit) - Land Buildings Equipment Patents Brand Name Copyrights Goodwill Bonds Payable Investment in Subsidiary Gain Taken to Acquiring Co. RE/Income Acquired Company RE Check Amortization Schedule Account Adjustment 40,000 40,000 30,000 15,000 40,000 75,000 (192,000) (48,000) - Annual Amount Inventory Buildings Equipment Key D D D D D D D D D D D D D D D Life 20 5 5 8 - Current Year Prior Years 2,000 2,000 4000 6,000 6,000 12000 3,000 3,000 6000 5,000 5,000 10000 16,000 32000 Patents Brand Name Copyrights Total Amortization Entry Cost of Goods Sold Depreciation Expense of Debit (Credit) Key A A Buildings Equipment 2,000 A 6,000 A Amortization Expense of Patents Brand Name Copyrights Interest Expense Acquired Company RE Acquiring Company RE Inventory Accumulated Depreciation Accumulated Depreciation 3,000 5,000 Patents Brand Name Copyrights Total 6,400 25,600 (6,000) (18,000) (9,000) (15,000) - A A A A A A A A A A A A A A A Method Adjustment Schedule Is Adjustment Necessary? Adjustment to Investment Account Adjustment to Retained Earnings Account Debit (Credit) NO Key Date Alignment Schedule Adjustment to Subsidiary Income Account Adjustment to Subsidiary Dividend Account Adjustment to Investment Account under Equity Method Debit (Credit) Key 34,720 CY (8,000) CY - CV - CV (26,720) CY Intercompany Inventory Profit Deferral and Intercompany Sales and Receivables. Beginning Inventory Ending Inventory Current Year Sales Year End Unpaid Account Balances Parent Sold by Parent Parent % Profit 3,000 0.30 900 4,000 0.25 1,000 20,000 2,000 Elimination Entries Debit (Credit) Eliminate Intercompany Merchandise Sales Sales 50,000 KEY IS Cost of Goods Sold Eliminate Intercompany unpaid trade balance at year end Accounts Payable Accounts Receivable (50,000) IS 5,000 IA (5,000) IA Eliminate Profit made by parent on merchandise in subsidiary's beginning inventory Retained Earnings-Parent Cost of Goods Sold 900 BI (900) BI Eliminate Profit made by parent on merchandise in subsidiary's ending inventory Cost of Goods Sold Inventory 1,000 EI (1,000) EI Eliminate Profit made by subsidiary on merchandise in parents' beginning inventory Retained Earnings-Parent Retained Earnings-Subsidiary Cost of Goods Sold 800 BI 200 BI (1,000) BI Eliminate Profit made by subsidiary on merchandise in parents' ending inventory Cost of Goods Sold Inventory 600 EI (600) EI Intercompany Fixed Asset Profit Deferral Original Profit Life of Asset Annual Depreciation Adjustment Realized in Prior Years Balance at Start of Year Realized in Current Year Sale by Parent 4,000 4 1,000 1,000 3,000 1,000 Sale by Sub 5,000 5 1,000 5,000 1,000 Elimination Entry Retained Earnings Parent Gain on Sale of Asset Retained Earnings Parent Retained Earnings Subsidiary Gain on Sale of Asset Accumulated Depreciation Accumulated Depreciation Depreciati...
Purchase answer to see full attachment