In: Accounting
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 at $100,000, and Goodwill of $150,000, 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.
Consolidation Worksheet | |||
---|---|---|---|
Description | Debit | Credit | |
[E] | Common stock | Answer | Answer |
APIC | Answer | Answer | |
AnswerPPE, netPatentGoodwillEquity investmentCommon stockAPICRetained earningsNoncontrolling interest | Answer | Answer | |
Equity investment | Answer | Answer | |
AnswerPPE, netPatentGoodwillEquity investmentCommon stockAPICRetained earningsNoncontrolling interest | Answer | Answer | |
[A] | PPE, net | Answer | Answer |
Patent | Answer | Answer | |
AnswerPPE, netPatentGoodwillEquity investmentCommon stockAPICRetained earningsNoncontrolling interest | Answer | Answer | |
Equity investment | Answer | Answer | |
AnswerPPE, netPatentGoodwillEquity investmentCommon stockAPICRetained earningsNoncontrolling interest | Answer | Answer |
b. Prepare the consolidation spreadsheet on the acquisition date.
Elimination Entries | |||||||
---|---|---|---|---|---|---|---|
Parent | Subsidiary | Dr | Cr | Consolidated | |||
Cash | $460,378 | $107,576 | Answer | ||||
Accounts receivable | 362,880 | 165,648 | Answer | ||||
Inventory | 549,990 | 212,772 | Answer | ||||
Equity investment | 620,800 | Answer |
[E] |
Answer | |||
Answer | [A] | ||||||
Patent | [A] | Answer | Answer | ||||
Goodwill | [A] | Answer | Answer | ||||
PPE, net | 2,645,622 | 393,652 | [A] | Answer | Answer | ||
Total Assets | $4,639,670 | $879,648 | Answer | ||||
Current liabilities | $407,390 | $165,648 | Answer | ||||
Long-term liabilities | 2,000,000 | 238,000 | Answer | ||||
Common stock | 463,523 | 47,600 | [E] | Answer | Answer | ||
APIC | 344,453 | 59,500 | [E] | Answer | Answer | ||
Noncontrolling interest | Answer |
[E] |
Answer | ||||
Answer | [A] | ||||||
Retained earnings | 1,424,304 | 368,900 | [E] | Answer | Answer | ||
Total Liabilities and Equity | $4,639,670 | $879,648 | Answer | Answer | Answer |