In: Accounting
Reporting of Equity in Consolidation Paris Cosmetics purchased all of the of the ordinary shares of All Mineral Company for Cash on January 1, 2019. The separate balance sheets of the two corporations before consolidation appeared as follows (not necessarily in order):
During purchase negotiations, Paris Cosmetics determined the appraised value of All Minerals Patents were €20,000 and their inventory was 19,500; and all of the remaining assets and liabilities were appraised at values approximating their book values.
Paris Cosmetics |
All Minerals |
Consolidating Adjustments |
Consolidated |
|
Investment in All Minerals |
700,000 |
------ |
||
PPE, net |
1,150,000 |
500,000 |
||
Inventory |
740,000 |
21,500 |
||
Accounts Payable |
400,000 |
125,000 |
||
Share Capital-- Ordinary |
1,400,000 |
300,000 |
||
Accounts Receivable |
165,000 |
95,000 |
||
Patents |
20,000 |
15,000 |
||
Cash |
? |
? |
||
Note Payable |
500,000 |
35,000 |
||
Goodwill |
------ |
----- |
||
Retained earnings |
600,000 |
240,000 |
During purchase negotiations, Paris Cosmetics determined the appraised value of All Minerals Patents were €20,000 and their inventory was 19,500; and all of the remaining assets and liabilities were appraised at values approximating their book values.
Consolidated Balance Sheet | ||||
Particulars | Paris Cosmetics | All Minerals | Consolidating Adjustments | Consolidated |
Assets | ||||
Investment in All Minerals | 700000 | -700000 | 0 | |
PPE, net | 1150000 | 500000 | 0 | 1650000 |
Inventory | 740000 | 21500 | -2000 | 759500 |
Goodwill | 157000 | 157000 | ||
Accounts Receivable | 165000 | 95000 | 0 | 260000 |
Patents | 20000 | 15000 | 5000 | 40000 |
Cash | 125000 | 68500 | 0 | 193500 |
Total Assets | 2900000 | 700000 | -540000 | 3060000 |
Liabilities | ||||
Note Payable | 500000 | 35000 | 0 | 535000 |
Accounts Payable | 400000 | 125000 | 0 | 525000 |
Retained earnings | 600000 | 240000 | -240000 | 600000 |
Share Capital-- Ordinary | 1400000 | 300000 | -300000 | 1400000 |
Total Liabilities | 2900000 | 700000 | -540000 | 3060000 |
Note: Cash is balancing figure
Calculation of Goodwill
Add: | ||
PPE, net | 500000 | |
Inventory | 19500 | |
Accounts Receivable | 95000 | |
Patents | 20000 | |
Cash | 68500 | |
Less: | ||
Note Payable | -35000 | |
Accounts Payable | -125000 | |
Net Worth (A) | 543000 | |
Consideration Paid (B) | 700000 | |
Goodwill (B-A) | 157000 | |