Question
In: Accounting
Consolidation on date of acquisition - Equity method with noncontrolling interest and AAP Assume that a...
Consolidation on date of acquisition - Equity method with
noncontrolling interest and AAP
Assume that a parent company acquires an 80% interest in its
subsidiary for a purchase price of $3,724,800. The excess of the
total fair value of the controlling and noncontrolling interests
over the book value of the subsidiary’s Stockholders’ Equity is
assigned to a building (in PPE, net) that the parent believes is
worth $100,000 more than its book value, an: unrecorded Patent that
the parent valued at $200,000, and Goodwill of $300,000, 80% of
which is allocated to the parent. The parent and the subsidiary
report the balance sheets on the acquisition date in b. below:
a. Prepare the consolidation entries on the acquisition date.
Debit Credit
Common Stock ??? ----
APIC ??? ----
Retained Earnings ??? ----
Equity Investment ----- ???
Non controlling Interest ----- ???
PPE, Net ??? ----
Patent ??? ----
Goodwill ??? ----
Equity Investment ----- ???
Non controlling Interest ----- ???
Solutions
Expert Solution
| $ | ||||
| 80% stake acquired for $ | 3,724,800 | |||
| Value of 100% holding | 4,656,000 | |||
| Value of Non controlling int (20%) | 931,200 | |||
| Break up of excess Value paid (over book value) | ||||
| $ | ||||
| PPE (Building) | 100,000 | |||
| Unrecorded Patents | 200,000 | |||
| Good will | 300,000 | |||
| Total excess valuation | 600,000 | |||
| Acquisition value of 100% stake | 4,656,000 | |||
| Less: Excess valuation as above | 600,000 | |||
| Book Value of subsidiary on acquisition date | 4,056,000 | |||
| Journal entry in the books of subsidiary: | Debit $ | Credit $ | ||
| $ | $ | |||
| 1 | Investment in Subsidiary | 3724800 | ||
| Bank | 3724800 | |||
| (being entry for acquistion of 80% stake in subsdiary) | ||||
| entry for Consolidation & elimination of investment: | ||||
| 2 | Plant & Equipment net & other assets | 4,156,000 | ||
| Patent | 200,000 | |||
| Goodwill | 300,000 | |||
| Equity Investment (in subsidiary) | 3,724,800 | |||
| Liabilities | - | |||
| Non controlling interest | 931,200 | |||
| (entry for incorporating all the assets & liabilities of subsidiary, at fair value. | ||||
| Goodwill recognised as Cost of investment is more than the value acquired. | ||||
| Noncontrolling interest is recognised) | ||||
| - Building included in PPE is the balancing figure, as information not specifically given. | ||||
ekkarill92 answered 2 years agoRelated Solutions
Consolidation on date of acquisition - Equity method with noncontrolling interest and AAP Assume that a...
Consolidation on date of acquisition - Equity method with
noncontrolling interest and AAP
Assume that a parent company acquires an 70% interest in its
subsidiary for a purchase price of $1,078,000. The excess of the
total fair value of the controlling and noncontrolling interests
over the book value of the subsidiary’s Stockholders’ Equity is
assigned to a building (in PPE, net) that is worth $100,000 more
than its book value, an unrecorded patent that the parent valued at
$200,000, and...
Consolidation on date of acquisition - Equity method with noncontrolling interest and AAP Assume that a...
Consolidation on date of acquisition -
Equity method with noncontrolling interest and AAP
Assume that a parent company acquires an 80% interest in its
subsidiary for a purchase price of $620,800. The excess of the
total fair value of the controlling and noncontrolling interests
over the book value of the subsidiary's Stockholders' Equity is
assigned to a building (in PPE, net) that the parent believes is
worth $50,000 more than its book value, an: unrecorded Patent that
the parent valued...
Consolidation subsequent to date of acquisition—Equity method with noncontrolling interest, AAP, and upstream intercompany inventory sale...
Consolidation subsequent to date of acquisition—Equity
method with noncontrolling interest, AAP, and upstream intercompany
inventory sale
Assume that, on January 1, 2010, a parent company acquired a 75%
interest in its subsidiary. The total fair value of the controlling
and noncontrolling interests was $550,000 over the book value of
the subsidiary’s Stockholders’ Equity on the acquisition date. The
parent assigned the excess to the following [A] assets:
[A] Asset
Initial Fair Value
Useful Life
Patent
$200,000
10 years
Goodwill
350,000...
Consolidation several years subsequent to date of acquisition—Equity method Assume that a parent company acquired a...
Consolidation several years subsequent to date of
acquisition—Equity method
Assume that a parent company acquired a subsidiary on January 1,
2014. The purchase price was $785,000 in excess of the subsidiary’s
book value of Stockholders’ Equity on the acquisition date, and
that excess was assigned to the following [A] assets:
[A]
Asset
Original
Amount
Original
Useful
Life
Property, plant and equipment (PPE), net
$140,000
16
years
Patent
245,000
7
years
License
105,000
10
years
Goodwill
295,000
Indefinite
$785,000
The [A]...
Consolidation several years subsequent to date of acquisition—Equity method Assume that a parent company acquired a...
Consolidation several years subsequent to date of
acquisition—Equity method
Assume that a parent company acquired a subsidiary on January 1,
2014. The purchase price was $765,000 in excess of the subsidiary’s
book value of Stockholders’ Equity on the acquisition date, and
that excess was assigned to the following [A] assets:
[A]
Asset
Original
Amount
Original
Useful
Life
Property, plant and equipment (PPE), net
$140,000
16
years
Patent
245,000
7
years
License
105,000
10
years
Goodwill
275,000
Indefinite
$765,000
The [A]...
Preparing a consolidated income statement—Equity method with noncontrolling interest and AAP A parent company purchased a...
Preparing a consolidated income statement—Equity method with
noncontrolling interest and AAP A parent company purchased a 65%
controlling interest in its subsidiary several years ago. The
aggregate fair value of the controlling and noncontrolling interest
was $750,000 in excess of the subsidiary’s Stockholders’ Equity on
the acquisition date. This excess was assigned to a building that
was estimated to be undervalued by $450,000 and to an unrecorded
patent valued at $300,000. The building asset is being depreciated
over a 20-year...
Consolidation several years subsequent to date of acquisition—Equity method Assume a parent company acquired a subsidiary...
Consolidation several years subsequent to date of
acquisition—Equity method
Assume a parent company acquired a subsidiary on January 1, 2017.
The purchase price was $820,000 in excess of the subsidiary’s book
value of Stockholders’ Equity on the acquisition date, and that
excess was assigned to the following [A] assets:
[A] Asset
Original
Amount
Original
Useful
Life
Property, plant and equipment (PPE), net
$240,000
12
years
Patent
240,000
8
years
License
160,000
10
years
Goodwill
180,000
Indefinite
$820,000
The [A] assets...
Preparing a consolidated income statement—Equity method with noncontrolling interest, AAP and upstream and downstream intercompany inventory...
Preparing a consolidated income statement—Equity method with
noncontrolling interest, AAP and upstream and downstream
intercompany inventory profits A parent company purchased a 70%
controlling interest in its subsidiary several years ago. The
aggregate fair value of the controlling and noncontrolling interest
was $700,000 in excess of the subsidiary’s Stockholders’ Equity on
the acquisition date. This excess was assigned to a building that
was estimated to be undervalued by $400,000 and to an unrecorded
patent valued at $300,000. The building asset...
Preparing a consolidated income statement—Equity method with noncontrolling interest, AAP and upstream and downstream intercompany inventory...
Preparing a consolidated income statement—Equity method
with noncontrolling interest, AAP and upstream and downstream
intercompany inventory profits
A parent company purchased a 70% controlling interest in its
subsidiary several years ago. The aggregate fair value of the
controlling and noncontrolling interest was $700,000 in excess of
the subsidiary’s Stockholders’ Equity on the acquisition date. This
excess was assigned to a building that was estimated to be
undervalued by $400,000 and to an unrecorded patent valued at
$300,000. The building asset...
Consolidation at the end of the first year subsequent to date of acquisition—Equity method (purchase price...
Consolidation at the end of the first year subsequent to date of
acquisition—Equity method (purchase price equals book value) Assume
that a parent company acquires its subsidiary on January 1, 2016,
by exchanging 40,000 shares of its $1 par value Common Stock, with
a market value on the acquisition date of $28 per share, for all of
the outstanding voting shares of the acquiree. You have been
charged with preparing the consolidation of these two companies at
the end of...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- 3) You are rolling a 12 sided die 8 times. a) What is the size for...
- explain the difference between quantitative and qualitative research strategies. Provide an example of a crime based...
- use postorder and inorder tree traversals to make preorder traversal. #!/usr/bin/env python3 # encoding: UTF-8 """Turning...
- 1. Write an if-else statement to describe an object. Print "Balloon" if isBalloon is true and...
- An investor is considering purchasing a Treasury bond with a 20 year maturity, an 8% coupon...
- Write a program that copies the contents of one file to a destination file. This program...
- how to conduct a marketing mix for 3d crest white strips
ADVERTISEMENT