1.
Consolidation Entries with Differential.
On June 10, 20X8, Game Corporation acquired 60 percent of Amber Company’s common stock. The fair value of the noncontrolling interest was $32,800 on that date. Summarized balance sheet data for the two companies immediately after the stock purchase are as follows:
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Required:
a)
Give the consolidation entries required to prepare a consolidated balance sheet immediately after the purchase of Amber Company shares.
b)
Explain how consolidation entries differ from other types of journal entries recorded in the normal course of business.
Assignment #3 Workout Questions 1. Consolidation Entries with Differential. On June 10, 20X8, Game Corporation acquired 60 percent of Amber Company’s common stock. The fair value of the noncontrolling interest was $32,800 on that date. Summarized balance sheet data for the two companies immediately after the stock purchase are as follows: Required: a) Give the consolidation entries required to prepare a consolidated balance sheet immediately after the purchase of Amber Company shares. b) Explain how consolidation entries differ from other types of journal entries recorded in the normal course of business. 2. Computation of Consolidated Balances Slim Corporation’s balance sheet at January 1, 20X7, reflected the following balances: Ford Corporation entered into an active acquisition program and acquired 80 percent of Slim’s common stock on January 2, 20X7, for $470,000. The fair value of the noncontrolling interest at that date was determined to be $117,500. A careful review of the fair value of Slim’s assets and liabilities indicated the following: Goodwill is assigned proportionately to Ford and the noncontrolling shareholders. Required Compute the appropriate amount related to Slim to be included in the consolidated balance sheet immediately following the acquisition for each of the following items: a) Inventory. b) Land. c) Buildings and Equipment (net). d) Goodwill. e) Investment in Slim Corporation. f) Noncontrolling Interest. 3. Balance Sheet Worksheet Power Company owns 90 percent of Pleasantdale Dairy’s stock. The balance sheets of the two companies immediately after the Pleasantdale acquisition showed the following amounts: The fair value of the noncontrolling interest at the date of acquisition was determined to be $30,000. The full amount of the increase over book value is assigned to land held by Pleasantdale. At the date of acquisition, Pleasantdale owed Power $8,000 plus $900 accrued interest. Pleasantdale had recorded the accrued interest, but Power had not. Required a. Prepare and complete a consolidated balance sheet worksheet. 4. Majority-Owned Subsidiary Acquired at Higher than Book Value Zenith Corporation acquired 70 percent of Down Corporation’s common stock on December 31, 20X4, for $102,200. The fair value of the noncontrolling interest at that date was determined to be $43,800. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition: At the date of the business combination, the book values of Down’s assets and liabilities approximated fair value except for inventory, which had a fair value of $81,000, and buildings and equipment, which had a fair value of $185,000. At December 31, 20X4, Zenith reported accounts payable of $12,500 to Down, which reported an equal amount in its accounts receivable. Required a) Give the consolidation entry or entries needed to prepare a consolidated balance sheet immediately following the business combination. b) Prepare a consolidated balance sheet worksheet. c) Prepare a consolidated balance sheet in good form. 5. Cost versus Equity Reporting Roller Corporation purchased 100 percent ownership of Steam Company on January 1, 20X5, for $270,000. On that date, the book value of Steam’s reported net assets was $200,000. The excess over book value paid is attributable to depreciable assets with a remaining useful life of 10 years. Net income and dividend payments of Steam in the following periods were Required Prepare journal entries on Roller Corporation’s books relating to its investment in Steam Company for each of the three years, assuming it accounts for the investment using ( a ) the cost method and ( b ) the equity method. 6. Worksheet for Wholly Owned Subsidiary Gold Enterprises acquired 100 percent of Premium Builders’ stock on December 31, 20X4. Balance sheet data for Gold and Premium on January 1, 20X5, are as follows: At the date of the business combination, Premium’s cash and receivables had a fair value of $28,000, inventory had a fair value of $357,000, and buildings and equipment had a fair value of $92,000. Required a . Give all consolidation entries needed to prepare a consolidated balance sheet on January 1, 20X5. b . Complete a consolidated balance sheet worksheet. c . Prepare a consolidated balance sheet in good form. 7. Balance Sheet Worksheet Blank Corporation acquired 100 percent of Faith Corporation’s common stock on December 31, 20X2, for $150,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition: 8. Consolidation with Noncontrolling Interest Temple Corporation acquired 75 percent of Dynamic Corporation’s voting common stock on December 31, 20X4, for $390,000. At the date of combination, Dynamic reported the following: At December 31, 20X4, the book values of Dynamic’s net assets and liabilities approximated their fair values, except for buildings, which had a fair value of $80,000 more than book value, and inventories, which had a fair value of $36,000 more than book value. The fair value of the noncontrolling interest was determined to be $130,000 at that date. Required Temple Corporation wishes to prepare a consolidated balance sheet immediately following the business combination. Give the consolidation entry or entries needed to prepare a consolidated balance sheet at December 31, 20X4. 9. Comprehensive Problem: Consolidation in Subsequent Period Thompson Company spent $240,000 to acquire all of Lake Corporation’s stock on January 1, 20X2. On December 31, 20X4, the trial balances of the two companies were as follows: Lake Corporation reported retained earnings of $100,000 at the date of acquisition. The difference between the acquisition price and underlying book value is assigned to buildings and equipment with a remaining economic life of 10 years from the date of acquisition. Lake’s accumulated depreciation on the acquisition date was $25,000. At December 31, 20X4, Lake owed Thompson $2,500. Required a. Give all journal entries recorded by Thompson with regard to its investment in Lake during20X4. b. Give all consolidation entries required on December 31, 20X4, to prepare consolidated financial statements. c. . Prepare a three-part consolidation worksheet as of December 31, 20X4.