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Tyler Company acquired all of Jasmine Company’s outstanding stock on January 1, 2016, for $274,700 in...

Tyler Company acquired all of Jasmine Company’s outstanding stock on January 1, 2016, for $274,700 in cash. Jasmine had a book value of only $204,900 on that date. However, equipment (having an eight-year remaining life) was undervalued by $71,200 on Jasmine’s financial records. A building with a 20-year remaining life was overvalued by $15,400. Subsequent to the acquisition, Jasmine reported the following:

Net Income Dividends Declared
2016 $ 73,800 $ 10,000
2017 74,500 40,000
2018 39,000 20,000


In accounting for this investment, Tyler has used the equity method. Selected accounts taken from the financial records of these two companies as of December 31, 2018, follow:

Tyler Company Jasmine Company
Revenues—operating $ (430,000 ) $ (195,000 )
Expenses 215,000 96,500
Equipment (net) 462,000 97,500
Buildings (net) 340,000 93,600
Common stock (290,000 ) (64,500 )
Retained earnings, 12/31/18 (446,000 ) (225,000 )

Determine the following account balances as of December 31, 2018:

A. Investment in Jasmine Company

B. Equity in Subsidiary Earnings

C. Consolidated Net Income

D. Consolidated Equipment (net)

E. Consolidated Buildings (net)

F. Consolidated Goodwill (net)

G. Consolidated Common Stock

H. Consolidated Retained Earnings 12/31/18

Solutions

Expert Solution

Part A

Schedule 1: Acquisition-Date Fair Value Allocation and Amortization

Jasmines acquisition-date fair value........ .$274700

Book value of Jasmine....... . (204900)

Fair value in excess of book value...... 69800

Excess fair value assigned to specific

accounts based on individual fair values .... Remaining life... Annual excess amortization

Equipment............ $71200................. 8 yrs................ $8900

Buildings (overvalued).....(15400)....... 20 yrs............. (770)

Goodwill.......... ... $14000........... indefinite................. 0

Total amortization......................... .......... ................$8130

Investment in Jasmine Company12/31/18:

Jasmines acquisition-date fair value........ $274700

2016 Increase in book value of subsidiary.... 63800

2016 Excess amortizations.......................... (8130)

2017 Increase in book value of subsidiary.... 34500

2017 Excess amortizations................... ....... (8130)

2018 Increase in book value of subsidiary.... 19000

2018 Excess amortizations....... . ............. ........ (8130)

Investment in Jasmine Company 12/31/18..... $367,610

Part B : Equity in subsidiary earnings:

Income accrual................... .... .. . $39,000

Excess amortizations......... .... .. .. (8130)

Equity in subsidiary earnings....... $30870

Part C: Consolidated net income:

Consolidated revenues (add book values).... $625,000

Consolidated expenses (add book values).... (311,500)

Excess amortization expenses...................... (8130)

Consolidated net income................................305370

d. Consolidated equipment:

Book values added together...................... $559500

Acquisition-date fair value allocation .........71200

Excess depreciation ($8130 × 3)............... (24390)

Consolidated equipment........................... $463910

Part E: Consolidated buildings:

Book values added together................... $433600

Acquisition-date fair value allocation..... (15400)

Excess depreciation ($770 × 3) ................2310

Consolidated buildings............................. $420510

Part F. Allocation of excess fair value to goodwill $14000

g. Consolidated common stock $290,000

h. Consolidated retained earnings $446,000

  

ekkarill92 answered 2 years ago
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