Question

Power Company owns 90 percent of Pleasantdale Dairy’s stock. The balance sheets of the two companies immediately after the Pleasantdale acquisition showed the following amounts:

	Power Company		Pleasantdale Dairy
Assets
Cash & Receivables	$	142,000	$	72,000
Inventory		214,000		92,000
Land		90,000		60,000
Buildings & Equipment (net)		409,000		231,000
Investment in Pleasantdale Stock		281,700
Total Assets	$	1,136,700	$	455,000
Liabilities & Stockholders’ Equity
Current Payables	$	75,000	$	22,000
Long-Term Liabilities		307,700		140,000
Common Stock		382,000		76,000
Retained Earnings		372,000		217,000
Total Liabilities & Stockholders’ Equity	$	1,136,700	$	455,000

The fair value of the noncontrolling interest at the date of acquisition was determined to be $31,300. The full amount of the increase over book value is assigned to land held by Pleasantdale. At the date of acquisition, Pleasantdale owed Power $10,000 plus $900 accrued interest. Pleasantdale had recorded the accrued interest, but Power had not.

  

Required:

Prepare a consolidated balance sheet worksheet. (Values in the first two columns (the "parent" and "subsidiary" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Consolidation Entries" columns should be entered as positive values. For accounts where multiple adjusting 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.) WER COMPANY AND SUBSIDIARY Consolidated Balance Sheet Worksheet Consolidation Entries Pleasantdale Power Co. Dairy DR CR Consolidated Assets Cash and receivables Inventory Land Buildings and equipment (net) Investment in Pleasantdale Dairy Total Assets Liabilities & Equity Current payables Long-term liabilities Common stock Retained earnings NCI in NA of Pleasantdale Dairy Total Liabilities & Equity

Answer 1

Computation of Book Value At Acquisition				Allocation of Differential in Fair Value & Book Value
Common Stock & Retained Earning Balance ($217000+76000)		$293,000.00		Investment shown as per Power Co.		$281,700.00
				Book Value of Investment		$263,700.00
Non Controlling Interest (10%*293000)		$29,300.00		Difference on a/c of Power due to Land		$18,000.00
Power Co. (90%*293000)		$263,700.00		Difference On a/c of NCI due to Land ($1800/90%)*10%		$2,000.00
							Consolidated Balance Sheet
	Power Co.	Pleasantdale Dairy		Elimination Entries		Consolidated
				DR	CR
Balance Sheet
Cash and Receivables	$142,900	$72,000			$1,900	$213,000
Inventory	$214,000	$92,000				$306,000
Land	$90,000	$60,000		$20,000		$170,000
Buildings & Equipment (net)	$409,000	$231,000				$640,000
Investment in Pleasantdale Dairy	$281,700				$263,700	$0
					$18,000
Total Assets	$1,137,600	$455,000		$20,000	$283,600	$1,329,000
Current Payables	$75,000	$22,000		$1,900		$95,100
Long-Term Liabilities	$307,700	$140,000				$447,700
Common Stock	$382,000	$76,000		$76,000		$382,000
Retained Earnings	$372,900	$217,000		$217,000		$372,900
NCI in NA of Pleasantdale Dairy					$29,300
Increase in Fair Value of NCI by					$2,000	$31,300
Total Liabilities & Equity	$1,137,600	$455,000		$294,900	$32,300	$1,329,000