Question

Miller Company acquired an 80 percent interest in Taylor Company on January 1, 2016. Miller paid $896,000 in cash to the owners of Taylor to acquire these shares. In addition, the remaining 20 percent of Taylor shares continued to trade at a total value of $224,000 both before and after Miller’s acquisition.On January 1, 2016, Taylor reported a book value of $626,000 (Common Stock = $313,000; Additional Paid-In Capital = $93,900; Retained Earnings = $219,100). Several of Taylor’s buildings that had a remaining life of 20 years were undervalued by a total of $83,400.During the next three years, Taylor reports income and declares dividends as follows:YearNet IncomeDividends2016$73,100$10,500201794,50015,8002018105,30021,100Determine the appropriate answers for each of the following questions:A.What amount of excess depreciation expense should be recognized in the consolidated financial statements for the initial years following this acquisition?B.If a consolidated balance sheet is prepared as of January 1, 2016, what amount of goodwill should be recognized?C.If a consolidation worksheet is prepared as of January 1, 2016, what Entry S and Entry A should be included?D.On the separate financial records of the parent company, what amount of investment income would be reported for 2016 under each of the following accounting methods?The equity method.The partial equity method.The initial value method.E. On the parent company’s separate financial records, what would be the December 31, 2018, balance for the Investment in Taylor Company account under each of the following accounting methods?The equity method.The partial equity method.The initial value method.F. As of December 31, 2017, Miller’s Buildings account on its separate records has a balance of $844,000 and Taylor has a similar account with a $316,500 balance. What is the consolidated balance for the Buildings account?G. What is the balance of consolidated goodwill as of December 31, 2018?H.Assume that the parent company has been applying the equity method to this investment. On December 31, 2018, the separate financial statements for the two companies present the following information:Miller CompanyTaylor CompanyCommon stock$527,500$313,000Additional paid-in capital295,40093,900Retained earnings, 12/31/18654,100444,600a.What amount of excess depreciation expense should be recognized in the consolidated financial statements for the initial years following this acquisition?b. If a consolidated balance sheet is prepared as of January 1, 2016, what amount of goodwill should be recognized?a.Amount of excess depreciationb.Amount of goodwillIf a consolidation worksheet is prepared as of January 1, 2016, what Entry S and Entry A should be included?d. On the separate financial records of the parent company, what amount of investment income would be reported for 2016 under each of the following accounting methods?e. On the parent company’s separate financial records, what would be the December 31, 2018, balance for the Investment in Taylor Company account under each of the following accounting methods?Show lessd. Investment Incomee. Investment BalanceThe equity methodThe partial equity methodThe initial value methodf. As of December 31, 2017, Miller’s Buildings account on its separate records has a balance of $844,000 and Taylor has a similar account with a $316,500 balance. What is the consolidated balance for the Buildings account?g. What is the balance of consolidated goodwill as of December 31, 2018?f.Consolidated balanceg.Consolidated balanceAssume that the parent company has been applying the equity method to this investment. On December 31, 2018, the separate financial statements for the two companies present the following information:Miller CompanyTaylor Company Common stock$527,500$313,000 Additional paid-in capital295,40093,900 Retained earnings, 12/31/18654,100444,600

What will be the consolidated balance of each of these accounts?Show lessCommon stockAdditional paid-in capitalRetained earnings, 12/31/18

Answer 1

Answer :-

(A)

Fair value ALLOCATION and excess amortizations
Consideration transferred by the Miller	$896,000
Noncontrolling interest fair value	$224,000
Taylor's fair value	$1,120,000
Taylor's book value	($626,000)
Fair value in excess of book value	$494,000
Annual excess life amortizations
Excess fair value assigned to building	$83,400
Goodwill	$410,600
20 years indifinite of $83,400	$4,170
Total	$4,170.00

(B)

Amount of Good will
Consideration transferred by the Miller	$896,000
Noncontrolling interest fair value	$224,000
Taylor's fair value	$1,120,000
Taylor's book value	($626,000)
Fair value in excess of book value	$494,000
Annual excess life amortizations
Excess fair value assigned to building	$83,400
Goodwill	$410,600

(c)

Entry S,		Debit	Credit
	Common stockTaylor's	$313,000
	Additional paid in capital Taylor's	$93,900
	Retained earnings Taylor's	$219,100
	Investment in Taylor's Company with 80%		$500,800
	Noncontrolling interest in Taylor's with 20%		$125,200
Entry A
	Building	$83,400
	Goodwill	$410,600
	Investment in Talyor's company with 80%		$395,200
	Noncontrolling interest in Talyor's with 20%		$98,800

(D)

Income accural 80%	$58,480
Excess amortization expenses	($1,668)
Investment income	$56,812
(2) Partial equity method:
Income accural 80%	$58,480
(3) Initial value method :
Dividend received 80%	$8,400