Question

In: Accounting

The parent company, Briar Rose paid 2,990,000 for 100% interest in Mulan Co on Jan 1...

The parent company, Briar Rose paid 2,990,000 for 100% interest in Mulan Co on Jan 1 2016, following financial data was collected at date of aquisition.

Briar Mulan
cash 3151000 73600
Accounts Receivable 823400 154100
Inventory 1288000 391000
Prepaids 103500 34500
Land 1426000 460000
Building 4991000 1552500
accum depreciation-building (3137200) (172500)
Equipment 8280000 4140000
accum depreciation-equipment (4968000) (828000)
copy right + trademark-net 2047000 -
total assets 14004700 5805200
Accounts Payable (1437500) (322000)
Unearned Rev (310500) -
Long Term Debt (6394000) (3450000)
Common stock 1288000 207000
Additional Paid in Capital (2530000) (713000)
Retained Earnings (2044700) (1113200)
total liabilities and equity (14004700) (5805200)

As part of aquisition process Briar Rose contracted KPMG to do third party analysis of Mulan as date of aquisition, results below:

fair value
Accounts Receivable 154100
Inventory 391000
Prepaids 34500
Land 575000
building, net 1442100
equip, net 3450000
Accounts Payable 322000
Long Term Debt (3415500)
Customer list 310,550
Copy Right 188600

depreciation/amortization methods and useful lives

building- straight line depreciation, 27 years

equip- straight line depreciation, 15 years

other intangible- straight line amortization, 10 years

Patent and Copy right- straight line amortization, 8 years

Long-Term Debt- straight line amortization, 3 years

Required:

1) Prepare allocation schedule including depreciation/amortization for Briar's investment in Mulan as of Jan 1, 2016.

2) Prepare consolidatoin entries (S,A,I,D,E) for Briar for year end Dec 31, 2016

3) Prepare consolidation entried (S,A,I,D,E) for Briar for year end Dec 31, 2017

4) Disregard 2 and 3. Assume Briar used the inital value method instead of equity method. Prepare consolidation entries (S,A,I,E,*C) for Briar year end Dec 31 2016 using intital value method.

Solutions

Expert Solution

Consolidation entry using Fair Values
Net Identifiable Assets                             66,19,450.00
Goodwill (Balancing Figure)                               1,08,050.00
To Consideration Payable    29,90,000.00
To Identifiable Liabilities   37,37,500.00
Asset Name Book Value Accumulated Depriciation Net Value Fair Value
Building                                         15,52,500.00                               1,72,500.00 13,80,000.00 14,42,100.00
Equipment                                         41,40,000.00                               8,28,000.00 33,12,000.00 34,50,000.00
Consolidation entry using Book Values
Net Identifiable Assets                             58,05,200.00
Goodwill (Balancing Figure)                               9,56,800.00
To Consideration Payable    29,90,000.00
To Identifiable Liabilities   37,72,000.00
Entry for the Year ended December 2016
Depriciation on Building                             16,26,951.85
Depriciation on Equipments                             40,02,000.00
Amortisation on Customer List                                     31,055.00
Amortisation on Copy Right                               4,44,475.00
Building   16,26,951.85
Equipment   40,02,000.00
Customer List          31,055.00
Copy Right       4,44,475.00
Long Term Debt                             55,46,833.33
Bank   55,46,833.33
Entry for the Year ended December 2017
Depriciation on Building                             16,26,951.85
Depriciation on Equipments                             40,02,000.00
Amortisation on Customer List                                     31,055.00
Amortisation on Copy Right                               4,44,475.00
Building   16,26,951.85
Equipment   40,02,000.00
Customer List          31,055.00
Copy Right       4,44,475.00
Long Term Debt                             55,46,833.33
Bank   55,46,833.33

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