3rd meet of advanced accounting PDF

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NADIAH FAJRIATI041911333186AKL 1 Week 3E 3.Pop Corporation acquired an 80 percent interest in Son Corporation on January 2, 2016, for $1,400,000. On this date the capital stock and retained earnings of the two companies were as follows (in thousands):The assets and liabilities of Son were stated at ...

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NADIAH FAJRIATI 041911333186 AKL 1 Week 3 E 3.8 Pop Corporation acquired an 80 percent interest in Son Corporation on January 2, 2016, for $1,400,000. On this date the capital stock and retained earnings of the two companies were as follows (in thousands):

The assets and liabilities of Son were stated at fair values equal to book values when Pop acquired its 80 percent interest. Pop uses the equity method to account for its investment in Son. Net income and dividends for 2016 for the affiliated companies were as follows (in thousands):

Calculate the amounts at which the following items should appear in the consolidated balance sheet on December 31, 2016. 1. Capital stock Capital stock yang dilaporkan dalam neraca konsolidasian pada 31 Desember 2016 adalah sebesar $3,600 atau senilai capital stock Pop Corporation (parents company).

2. Goodwill Investment cost at January 2, 2016 (80% interest) Implied total fair value of Son ($1,400 / 80%) Book value of Son’s net identifiable assets - liabilities Excess of cost over fair value considered as goodwill

$1,400 $1,750 ( 1,200) $ 550

3. Consolidated retained earnings Pop’s retained earnings at January 2, 2016 Add : net income of Pop Corp. Less : dividends declared by Pop Consolidated retained earnings December 31

$1,600 600 ( 360) $1,840

4. Noncontrolling interest Capital stock and retained earnings of Son at January 2 Add : Son’s net income Less : dividends declared by Son

$1,200 180 ( 100)

Son’s stockholders’ equity Noncontrolling interest percentage Noncontrolling interest at book value Add: 20% Goodwill Noncontrolling interest December 31 5. Dividends payable Dividends payable to stockholders of Pop Dividends payable to noncontrolling stockholders ($50 x 20%) Dividends payable to stockholders outside the consolidated entity

$1,280 20% $ 256 110 $ 366

$ 180 10 $ 190

E 3.10 Comparative income statements of Pop Corporation and Son Corporation for the year ended December 31, 2018, are as follows (in thousands):

1. Son is a 90 percent–owned subsidiary of Pop, acquired by Pop for $1,620,000 on January 1, 2016, when Son’s stockholders’ equity at book value was $1,400,000. 2. The excess of the cost of Pop’s investment in Son over book value acquired was allocated $60,000 to undervalued inventories that were sold in 2016, $40,000 to undervalued equipment with a four-year remaining useful life, and the remainder to goodwill. Prepare a consolidated income statement for Pop Corporation and Subsidiary for the year ended December 31, 2018. Pop Corporation and Subsidiary Consolidated Income Statement For the year ended December 31, 2018 (in thousands) Sales Cost of Goods Sold Gross profit Less : operating expenses Consolidated net income Less : Noncontrolling interest share Controlling interest share

$ 4,200 ( 2,200) $ 2,000 ( 1,110) $ 890 29 $ 861

Supporting computations Investment cost at January 1, 2016 (90% interest) Implied total fair value of Son ($1,620 / 90%) Book value of Son’s net identifiable assets - liabilities Excess of cost over fair value considered as goodwill Excess allocated to : Inventories (sold in 2016) Equipment ( 4 years remaining useful life) Goodwill Excess of fair value over book value Uoperating expenses : Combined operating expenses of Pop and Son Add : depreciation on excess allocated to equipment ($40 / 4 years) Consolidated operating exxpenses

$1,620 $1,800 ( 1,400) $ 400

$

60 40 300 $ 400

$1,100 10 $1,110

P 3.2 Pop Corporation acquired 70 percent of the outstanding common stock of Son Corporation on January 1, 2016, for $350,000 cash. Immediately after this acquisition the balance sheet information for the two companies was as follows (in thousands):

1. Prepare a schedule to assign the difference between the fair value of the investment in Son and the book value of the interest to identifiable and unidentifiable net assets. Cost of investment in Son $350 Implied fair value of Son ($350 / 70%) 500 Book value of Son Corp ( 220) Excess fair value over book value $280 Excess allocated to : Inventories

$ 40

Land Buildings – net Equipment – net Other liabilities Goodwill Excess of fair value over book value

20 40 ( 20) 20 180 $ 280

2. Prepare a consolidated balance sheet for Pop Corporation and Subsidiary at January 1, 2016. Pop Corporation and Subsidiary Consolidated Balance Sheet At January 1, 2016 Assets Cash Receivables – net Inventories Land Buildings – net Equipment – net Goodwill Total assets Liabilities and Equity Accounts payable Other liabilities Capital stock, $20 par Retained earnings Noncontrolling interest* Total liabilities and stockholders’ equity * 30% of implied fair value of Son Corp ($500) = $150

$ 110 220 240 320 400 220 180 $1,690 $ 340 100 1,000 100 150 $1,690...