1. Raylord Co. acquired 100% of Gand Inc. on January 5, 2013. During 2013,
Raylord sold goods to Gand for $150,000 that cost Raylord
$112,500. Gand still owned 40% of the goods at the end of the
year. Cost of goods sold was $675,000 for Raylord and $400,000 for
Gand. What was consolidated cost of goods sold? 940,000
2. Riley Co. owned all of the voting common stock of Parker. On January
2, 2013 Riley sold equipment to Parker for $125,000. The equipment
had cost Riley $140,000. At the time of the sale, the balance in
accumulated depreciation was $40,000. The equipment had a remaining
useful life of five years and no salvage value.
For the consolidated balance sheets at December 31, 2013 and December 31,
2014, at would amount would the equipment (net) be included?
2013:
$ 80,000 and 2014: $60,000
3. Assume the following facts relating to an 80% owned subsidiary
company:
BOY Stockholders’ Equity
BOY AAP assets
Net income of subsidiary (not including [A] asset depreciation
and amortization)
AAP assets depreciation and amortization expense
Dividends declared and paid to noncontrolling shareholders
$600,000
50,000
125,000
20,000
2,500
What is the amount reported as noncontrolling equity at the end of the
year? 148,500
4. Taylor Co. owns 70% of the voting common stock of Meehan
Corp. During 2014, Meehan had revenues of $1,250,000 and expenses of
$1,000,000. The amortization of excess cost allocations totaled $30,000
in 2014. The non-controlling interest's share of the earnings of Meehan
Corp. is calculated to be 66,000
5. On April 1, 2014, Narrow Company sold equipment to its wholly owned
subsidiary, Thatch Corporation. At the time of the transfer, the asset
had a cost of $240,000 and accumulated depreciation of $90,000. The
selling price was $204,000. The two companies agreed on a ten-year
estimated remaining life.
Thatch's profit numbers were $300,000, $360,000 and $390,000 for 2014,
2015, and 2016, respectively. Narrow received dividends from Thatch of
$120,000, $150,000 and 180,000 for 2014, 2015, and 2016, respectively.
a)
What was the amount of the credit to depreciation expense on the 2014
consolidation worksheet? 4,050
b) What was the amount of the credit to depreciation expense on the 2015
consolidation worksheet? 5,400
c) What was the balance in Equity Income for 2014? 250,050
d) What was the balance in Equity Income for 2015? 365,400
6. On January 1, 2014, Woody Company acquires 80% of the outstanding
common stock of Buzz, for a purchase price of $785,000. It was
determined that the fair market value of the noncontrolling interest in
the subsidiary is $190,000. The book value of the Buzz’s stockholders’
equity on the date of acquisition is $500,000 and its fair market value of
identifiable tangible and intangible assets is $900,000. The excess fair
market value over book value is allocated $200,000 to equipment with a
remaining useful life of 10 years, and $200,000 to a patent with a
remaining useful life of 8 years.
a) The journal entry (on Woody’s books) to recognize the acquisition
date AAP assets and allocate the ownership interest in those assets to
the parent and noncontrolling interests (entry A) includes:
Noncontrolling interest, credit, $90,000
(how to get this?)
b) What is the acquisition accounting premium (AAP)?475,000
c) Determine the total goodwill to be recognized at acquisition
date.75,000
d) What portion of the AAP should be assigned to noncontrolling
interest?90,000
7. Assume that during the year ended December 31, 2014, Buzz reports net
income of $210,000 and pays dividends of $21,000. Determine the
December 31, 2014 ending balance in Woody Company’s equity
investment account. (Hint: Do not overlook the effect of amortization
AAP assets).
900,200
8. Assume that during the year ended December 31, 2014, Buzz reports net
income of $210,000 and pays dividends of $21,000. Determine the
December 31, 2014 ending balance in Woody Company’s equity
investment account. (Hint: Do not overlook the effect of amortization
AAP assets). Determine the December 31, 2014 amount of the
noncontrolling interest.
218,800
9. On January 1, 2014, Kramer Corp. paid $510,000 to acquire Caldwell
Co. Kramer used the equity method to account for the investment. The
following information is available for the assets, liabilities, and stockholders’
equity accounts of Caldwell:
Current assets
Land
Building (twenty-five year life)
Equipment ( ten year life)
Current liabilities
Long-term liabilities
Common stock
Additional paid-in capital
Retained earnings
Book Value
$75,000
45,000
150,000
337,500
15,000
75,000
142,500
240,000
137,500
Fair Value
$75,000
107,500
167,500
322,500
15,000
75,000
Caldwell earned net income for 2014 of $78,750 and paid dividends of
$30,000 during the year.
a) What is AAP amortization for 2014? 800 credit
b) For 2014, what is the balance in Equity Income on Kramer’s
books?79,550
c) What is the balance in Equity Investment at the end of 2014?559,550
d) The 2014 consolidation entry to reverse Kramer’s recognition of
Caldwell’s income would include a credit to Equity Investment
for:79,550
e) If Kramer had income from its own operations of $277,500 in 2014, what
would be consolidated net income? 357,050
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