Question

Plaza, Inc., acquires 80 percent of the outstanding common stock of Stanford Corporation on January 1, 2018, in exchange for $1,007,100 cash. At the acquisition date, Stanford’s total fair value, including the noncontrolling interest, was assessed at $1,258,875. Also at the acquisition date, Stanford's book value was $533,800.

Several individual items on Stanford’s financial records had fair values that differed from their book values as follows:

	Book Value				Fair Value
Tradenames (indefinite life)	$	272,600			$	405,100
Property and equipment (net, 8-year remaining life)		225,600				244,800
Patent (14-year remaining life)		130,400				161,200

For internal reporting purposes, Plaza, Inc., employs the equity method to account for this investment. The following account balances are for the year ending December 31, 2018, for both companies.

	Plaza				Stanford
Revenues	$	(829,600	)		$	(681,100	)
Cost of goods sold		458,600				300,000
Depreciation expense		194,400				28,200
Amortization expense						21,300
Equity in income of Stanford		(261,600	)			0
Net income	$	(438,200	)		$	(331,600	)
Retained earnings, 1/1/18	$	(966,500	)		$	(401,300	)
Net income		(438,200	)			(331,600	)
Dividends declared		227,400				24,000
Retained earnings, 12/31/18	$	(1,177,300	)		$	(708,900	)
Current assets	$	652,000			$	327,300
Investment in Stanford		1,249,500				0
Tradenames		182,000				272,600
Property and equipment (net)		781,100				197,400
Patents		0				109,100
Total assets	$	2,864,600			$	906,400
Accounts payable	$	(107,700	)		$	(65,000	)
Common stock		(227,500	)			(118,000	)
Additional paid-in capital		(1,352,100	)			(14,500	)
Retained earnings (above)		(1,177,300	)			(708,900	)
Total liabilities and equities	$	(2,864,600	)		$	(906,400	)

At year-end, there were no intra-entity receivables or payables.

Prepare a worksheet to consolidate the financial statements of Plaza, Inc. and its subsidiary Stanford. (For accounts where multiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet. Amounts in the Debit and Credit columns should be entered as positive. Negative amounts for the Noncontrolling Interest and Consolidated Totals columns should be entered with a minus sign.)

PLAZA CORPORATION AND STANFORD CORPORATION Consolidation Worksheet For Year Ending December 31, 2018 Consolidation Entries Noncontrolling Consolidated Accounts Plaza Stanford Debit Credit Interest Totals Revenues $(829,600) $(681,100) Cost of goods sold 458,600 300,000 Depreciation expense 194,400 28,200 Amortization expense 0 21,300 Equity in income of Stanford (261,600) 0 Net income $(438,200) $(331,600) Consolidated net income NCI share of CNI Plaza share of CNI Retained earnings, 1/1 $(966,500) $(401,300) Net income (438,200) (331,600) Dividends declared 227,400 24,000 Retained earnings, 12/31 $(1,177,300) $(708,900) Current assets $652,000 $327,300 Investment in Stanford 1,249,500 0 Tradenames 182,000 272,600 Property and equipment (net) 781,100 197,400 Patents 0 109,100 Goodwill Total assets $2,864,600 $906,400 Accounts payable (107,700) (65,000) Common stock (227,500) (118,000) Additional paid-in capital (1,352,100) (14,500) Noncontrolling interest Retained earnings, 12/31 (1,177,300) (708,900) Total liabilities and equities $(2,864,600) $(906,400)

Answer 1

Answer :

PLAZA CORPORATION AND STANFORD CORPORATION
Consolidation Worksheet
For Year Ending December 31, 2018
Accounts	Plaza	Stanford	Consolidation Entries Debit	Consolidation Entries Credit	Non controlling Interest	Consolidated Totals
Revenues	($829,600)	($681,100)				$1,510,700
Cost of goods sold	$458,600	$300,000				-$758,600
Depreciation expense	$194,400	$28,200	2,400			-$225,000
Amortization expense	$0	$21,300	2,200			-$23,500
Equity in income of Stanford	($261,600)	$0	261,600			$0
Net income	($438,200)	($331,600)
Consolidated net income						$503,600
NCI share of CNI					-65,400	-$65,400
Plaza share of CNI						$438,200
Retained earnings, 1/1	($966,500)	($401,300)	401,300			$966,500
Net income	($438,200)	($331,600)				$438,200
Dividends declared	$227,400	$24,000		19,200	4,800	-$227,400
Retained earnings, 12/31	($1,177,300)	($708,900)				$1,177,300
Current assets	$652,000	$327,300				$979,300
Investment in Stanford	$1,249,500	$0	19,200	1,268,700		$0
Tradenames	$182,000	$272,600	132,500			$587,100
Property and equipment (net)	$781,100	$197,400	19,200	2,400		$995,300
Patents	$0	$109,100	30,800	2,200		$137,700
Goodwill			542,575			$542,575
Total assets	$2,864,600	$906,400				$3,241,975
Accounts payable	($107,700)	($65,000)				$172,700
Common stock	($227,500)	($118,000)	118,000			$227,500
Additional paid-in capital	($1,352,100)	($14,500)	14,500			$1,352,100
Noncontrolling interest				251,775	-251,775	$312,375
Retained earnings, 12/31	($1,177,300)	($708,900)				$1,177,300
Total liabilities and equities	($2,864,600)	($906,400)	1,544,275	1,544,275		$3,241,975

Note : Calculation of Goodwill :

Particulars	Amount
Common stock as on date of acquisition	118,000
Additional paid-in capital as on date of acquisition	14,500
Retained earnings as on date of acquisition	401,300
Undervaluation of Tradenames	132,500
Undervaluation of Property and equipment	19,200
Undervaluation of Patent	30,800
Total Fair Value	716,300
Less : 100% of Consideration (1,007,100 / 80%)	1,258,875
Goodwill	542,575