Part A Equipment 180,000 Difference between Implied and Book Value 180,000
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Transcript of Part A Equipment 180,000 Difference between Implied and Book Value 180,000
Computation and Allocation of Difference ScheduleParent Non- Entire
Share Controlling ValueShare
Purchase price and implied value $585,000 195,000 780,000 *Less: Book value of equity acquired 450,000 150,000 600,000
Difference (IV&BV) 135,000 45,000 180,000Equipment ($705,000 – $525,000) (135,000) (45,000) (180,000)
Balance - 0 - - 0 - - 0 -
Part A Equipment 180,000 Difference between Implied and Book Value 180,000
Depreciation Expense ($180,000/10) 18,000 Accumulated Depreciation 18,000
Part B Allocated to Equipment = 180000 ÷10/15 = 270,000Allocated to Accumulated Depreciation = 270,000 * 5/15= 90,000
Equipment 270,000 Accumulated Depreciation 90,000 Difference (IV&BV) 180,000
Depreciation Expense ($180,000/10) 18,000
Accumulated Depreciation 18,000
Part B Computation and Allocation of Difference Schedule
Parent Non- Entire
Share Controlling Value
Share
Purchase price and implied value $525,000 131,250 656,250 *
Less: Book value of equity acquired 480,000 120,000 600,000
Difference between implied and book value 45,000 11,250 56,250
Inventory (16,000) (4,000) (20,000)
Marketable Securities (20,000) (5,000) (25,000)
Plant and Equipment (24,000) (6,000) (30,000)
Balance (excess of FV over implied value) (15,000) (3,750) (18,750)
Gain 15,000
Increase Noncontrolling interest to fair value of assets 3,750
Total allocated bargain 18,750
Balance -0- -0- -0-
Exercise 5-3 Part A Investment in Saddler Corporation 525,000
Cash 525,000
Computation and Allocation of Difference Schedule
Parent Non- Entire
Share Controlling Value
Share
Purchase price and implied value $260,000 65,000 325,000 *
Less: Book value of equity acquired 270,000 67,500 337,500
Difference between implied and book value (10,000) (2,500) (12,500)
Inventory (4,000) (1,000) (5,000)
Current Assets (4,000) (1,000) (5,000)
Equipment (net) (40,000) (10,000) (50,000)
Balance (excess of FV over implied value) (58,000) (14,500) (72,500)
Gain 58,000
Increase Noncontrolling interest to fair value of assets 14,500
Total allocated bargain 72,500
Balance -0- -0- -0-
Part B(1) Common Stock 207,000
Beginning Retained Earnings- 130,500 Difference (IV&BV)
12,500 Investment in Salem Company
260,000 Noncontrolling interest
65,000
(2) Difference (IV&BV) 12,500 Inventory 5,000 Current Assets 5,000 Equipment (net) 50,000
Gain on acquisition 58,000 Noncontrolling interest 14,500
Computation and Allocation of Difference Schedule
Parent Non- Entire
Share Controlling Value
Share
Purchase price and implied value $2,000,000 500,000 2,500,000 *
Less: Book value of equity acquired 1,760,000440,000 2,200,000
Difference between (IV&BV) 240,000 60,000 300,000
Land ($100,000 – $ 80,000) (16,000) (4,000) (20,000)
Premium on Bonds Payablea 31,941 7,985 39,926
Balance 255,941 63,985 319,926
Goodwill (255,941) (63,985) (319,926)
Balance -0- -0- -0-
aPresent Value on 1/1/2010 of 10% Bonds PayableDiscounted at 8% over 5 periodsPrincipal ($500,000 * 0.68058) $340,290 Interest ($50,000 * 3.99271) 199,636 Fair value of bond $539,926 Face value of bond 500,000Bond premium 39,926
Land 20,000Goodwill 319,926
Unamortized Premium on Bonds Payable 39,926 Difference between (IV&BV) 300,000
Unamortized Premium on Bonds Payable 6,806
Interest Expense ($50,000 – ($539,926 * 0.08)) 6,806
a Effective Interest (($539,926 * 0.08) $(43,194)Nominal Interest (0.10 * $500,000) 50,000 Difference $6806
Exercise 5-10
Part A Computation and Allocation of Difference Schedule
Parent Non- EntireShare Controlling Value
SharePurchase price and implied value $3,500,000 388,889 3,888,889 *Less: Book value of equity acquired 3,150,000 350,000 3,500,000Difference between (IV&BV) 350,000 38,889 388,889Land ($200,000 - $ 120,000) (72,000) (8,000) (80,000)Premium on Bonds Payablea 56,867 6,319 63,186Balance 334,867 37,208 372,075Goodwill (334,867) (37,208) (372,075)Balance -0- -0- -0-
a Present Value on 1/2/2007 of 9% Bonds PayableDiscounted at 6% for 5 periodsPrincipal ($500,000 *0.74726) $373,630 Interest ($45,000 * 4.21236) 189,556 Fair value of bond $563,186 Face value of bond 500,000Premium on bond payable 63,186
Land 80,000 Goodwill 372,075
Unamortized Premium on Bonds Payable 63,186Difference between(IV&BV) 388,889
Unamortized Premium on Bonds Payable 11,209 Interest Expense 11,209a
a Effective Interest (0.06 *$563,186) $(33,791)Nominal Interest (0.09 * $500,000) 45,000 Difference 11,209
Exercise 5-11
Computation and Allocation of Difference ScheduleParent Non- EntireShare Controlling Value
SharePurchase price and implied value $2,276,000 569,000 2,845,000 *Less: Book value of equity acquired 2,000,000 500,000 2,500,000Difference (IV&BV) 276,000 69,000 345,000Inventory (36,000) (9,000) (45,000)Equipment (40,000) (10,000) (50,000)Balance 200,000 50,000 250,000Goodwill (200,000) (50,000) (250,000)Balance -0- -0- -0-
Part 1 – Cost Method
2010 (1) Dividend Income 16,000
Dividends Declared (0.80 ×$20,000) 16,000 To eliminate intercompany dividends
2) Beginning Retained Earnings 700,000 Capital Stock 1,800,000 Difference between Implied and Book Value 345,000
Investment in Sand Company 2,276,000Noncontrolling interest 569,000
(3) Cost of Goods Sold (Beginning Inventory) 45,000 Equipment (net) 50,000 Goodwill 250,000
Difference between (IV&BV) 345,000
(4) Depreciation Expense ($50,000/8) 6,250 Equipment (net) 6,250
2011(1) Investment in Sand Company ($80,000 ×0.80) 64,000
Beginning Retained Earnings 64,000To establish reciprocity/convert to equity method as of 1/1/2008
(2) Dividend Income ($30,000 * 0.80) 24,000 Dividends Declared 24,000
To eliminate intercompany dividends
(3) Beginning Retained Earnings ($700,000 + $100,000 – $20,000) 780,000 Capital Stock 1,800,000 Difference between Implied and Book Value 345,000
Investment in Sand Company ($2,276,000 + $64,000) 2,340,000NCI ($569,000 + 16000) 585,000
(4) Beginning Retained Earnings-Piper Company 36,000 Noncontrolling Interest 9,000Equipment (net) 50,000 Goodwill 250,000
Difference between Implied and Book Value 345,000
(5) Beginning Retained Earnings-Piper Company 5,000Noncontrolling Interest 1,250Depreciation Expense ($50,000/8) 6,250 Equipment (net) 12,500
2012(1) Investment in Sand Company ($200,000 *0.80) 160,000
Beginning Retained Earnings-Piper Company 160,000To establish reciprocity/convert to equity method as of 1/1/2009
(2) Dividend Income ($15,000 * 0.80) 12,000 Dividends Declared 12,000
To eliminate intercompany dividends
(3) Beginning Retained Earnings($780,000 + $150,000 – $30,000) 900,000 Common Stock- Sand Company 1,800,000 Difference between Implied and Book Value 345,000 Investment ($2,276,000 + $160,000) 2,436,000 NCI ($569,000 + ($900,000 – $700,000) x 0.20) 609,000To eliminate investment account and create noncontrolling interest account
(4) Beginning Retained Earnings-Piper Company 36,000Noncontrolling Interest 9,000Equipment (net) 50,000 Goodwill 250,000
Difference between (IV&BV) 345,000
(5) Beginning Retained Earnings-Piper Company 10,000Noncontrolling Interest 2,500Depreciation Expense ($50,000/8) 6,250
Equipment (net) 18,750
Computation and Allocation of Difference ScheduleParent Non- Entire
Share Controlling ValueShare
Purchase price and implied value $3,750,000 416,667 4,166,667 *Less: Book value of equity acquired 3,600,000 400,000 4,000,000Difference between (IV&BV) 150,000 16,667 166,667Inventory (90,000) (10,000) (100,000)Land (360,000) (40,000) (400,000)Balance (excess of FV over implied value) (300,000) (33,333) (333,333)Gain 300,000Increase NCI to fair value of assets 33,333Total allocated bargain 333,333Balance -0- -0- -0-
(1) Investment in Saxton Corporation 225,000 Beginning Retained Earnings-Palm Inc. 225,000
To establish reciprocity/convert to equity (0.90 *($1,250,000 – $1,000,000))
(2) Beginning Retained Earnings-Saxton Co.1/1/2012 1,250,000 Capital Stock- Saxton Co. 3,000,000 Difference between Implied and Book Value 166,667
Investment ($3,750,000 + $225,000) 3,975,000Noncontrolling Interest 441,667
To eliminate the investment amount and create noncontrolling interest account (3) Beginning Retained Earnings-Palm Inc. 90,000
Noncontrolling Interest 10,000Land 400,000
Difference between (IV&BV) 166,667 Gain on Acquisition 300,000Noncontrolling Interest 33,333
To allocate and depreciate the difference between implied and book value