Question

In: Accounting

(1) On January 1, 2018, Panorama Company acquired 80% of Scann Corporation for $6,400,000. At the...

(1) On January 1, 2018, Panorama Company acquired 80% of Scann Corporation for $6,400,000.

At the time of the acquisition, the book value of Scann's assets and liabilities was equal to the fair value except for equipment that was undervalued $80,000 with a four-year remaining useful life and inventories that were undervalued $20,000 and sold in 2018. Panorama separate net income in 2018 and 2019 was $1,100,000 and $1,150,000, respectively. Scann separate net income in 2018 and 2019 was $300,000 and $360,000, respectively. Dividend payments by Scann in 2018 and 2019 were $60,000 and $60,000, respectively

Required: Using equity method,

  1. Calculate Investment in Scann shown on Panorama's ledger at December 31, 2018 and 2019.
  2. Calculate Investment in Scann shown on the consolidated statements at December 31, 2018 and 2019.
  3. Calculate consolidated net income for 2018 and 2019.
  4. Calculate Noncontrolling interest balance on Panorama's ledger at December 31, 2018 and 2019.
  5. Calculate Noncontrolling interest balance on the consolidated statements at December 31, 2018 and 2019.

Solutions

Expert Solution

1.

Investment in S at December 31, 2018 = $6,400,000 x 80% + $300,000 x 80%
= $5,120,000 + $240,000
= $5,360,000

Investment in S at December 31, 2019 = $5,360,000 + $360,000 x 80%
= $5,360,000 + $288,000
= $5,648,000

2.

Investment in S on the consolidated statements at December 31, 2018 = $5,360,000 - $60,000
= $5,300,000

Investment in S on the consolidated statements at December 31, 2019 = $5,300,000 - $60,000
= $5,240,000

3.

Consolidated net income for 2018 = $1,100,000 + $300,000 x 80%
= $1,100,000 + $240,000
= $1,340,000

Consolidated net income for 2019 = $1,150,000 + $360,000 x 80%
= $1,150,000 + $288,000
= $1,438,000

4.

Noncontrolling interest balance on P's ledger at December 31, 2018 = $6,400,000 x 20% + $300,000 x 20% - $60,000 x 20%
= $1,280,000 + $60,000 - $12,000
= $1,328,000

Noncontrolling interest balance on P's ledger at December 31, 2019 = $1,328,000 + $360,000 x 20% - $60,000 x 20%
= $1,328,000 + $72,000 - $12,000
= $1,388,000

5.

Noncontrolling interest balance on the consolidated statements at December 31, 2018 = $1,328,000 - $80,000 - $20,000
= $1,228,000

Noncontrolling interest balance on the consolidated statements at December 31, 2019 = $1,388,000 - $100,000
= $1,288,000

ekkarill92 answered 1 year ago
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