Copy of Chp 3 Problems Student Template

7/22/2019 Copy of Chp 3 Problems Student Template

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Student Name:Class:

Part c. only

Consolidation Entries Consolidated

Accounts Patrick O'Brien Debit Credit Totals

(1,125,000)$ (520,000)$300,000 228,00075,000 70,00025,000 -

(210,000) -(935,000)$ (222,000)$

(700,000)$ (250,000)$Net income (935,000) (222,000)Dividends paid 142,000 80,000

(1,493,000)$ (392,000)$

Cash 185,000$ 105,000$Receivables 225,000 56,000Inventory 175,000 135,000

680,000 -

474,000 60,000- -

925,000 272,000- -

2,664,000$ 628,000$

Liabilities (771,000)$ (136,000)$Common stock (400,000) (100,000)

Retained earnings (1,493,000) (392,000)Total liabilities and equity (2,664,000)$ (628,000)$

225,000 56,000(3,932,000) (964,000)

Parentheses indicate a credit balance.

RevenuesCost of goods sold

Problem 03-26

PATRICK COMPANY AND CONSOLIDATED SUBSIDIARY

Consolidation Worksheet

For Year Ending December 31

Total assets

Depreciation expense

Retained earnings, 1/1


Investment in O'Brien

Net income

TrademarksCustomer relationships

Amortization expenseIncome of O'Brien

Equipment (net)Goodwill


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100%

550,000$350,000$

O'Brien assets unrecorded or differences in valuation:

Book Fair Values Values

60,000$ 160,000$- 75,000

342,000 312,000

230,000$

360,000$60,000$

650,000$

10

Patrick O'Brien(1,125,000)$ (520,000)$

300,000 228,000

75,000 70,00025,000 -

(210,000) -(935,000)$ (222,000)$

(700,000)$ (250,000)$(935,000) (222,000)142,000 80,000

(1,493,000)$ (392,000)$

185,000$ 105,000$225,000 56,000175,000 135,000680,000 -

474,000 60,000- -925,000 272,000

- -2,664,000$ 628,000$

(771,000)$ (136,000)$(400,000) (100,000)

(1,493,000) (392,000)(2,664,000)$ (628,000)$

Equipment (10-year life

O'Brien's royalty agreements undervalued byBook value for O'Brien at date of purchase

Total assets

Year-end Financial Statements


Customer relationshipsEquipment (net)

Trademarks

Goodwill

Net incomeDividends paid

Retained earnings, 12/31Total liabilities and equity

Fair value of O'Brien's trademarkRemaining life of O'Brien's royalty agreements - years

LiabilitiesCommon stock

CashReceivablesInventoryInvestment in O'Brien


Income from O'BrienNet income


Remaining life of O'Brien's trademark - years


Amortization expense

O'Brien's reported retained earnings at date of purchase

Carrying amount of O'Brien's net assets

Given Data P03-26:

PATRICK CORPORATION

O'Brian Company outstanding common stockacquired by Patrick Corporation

Cash paid by Patrick Corporation

Customer relationships (5-year life)Trademarks (indefinite life)


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Student Name:

Class:

Part a. Michael Company and Aaron Company

- Fair Value allocation and Annual Amortization

Life(years)

-Conversion to initial value method for years prior to 2013

TotalTrademark

Aaron fair value

Royalty agreementsbased on fair market value:

Assigned to specific accounts

Excess fair over book valueBook value of subsidiary

Increase since date of purchaseRetained earnings at date of purchaseAaron retained earnings, 1/1/13

prior to 2013

Conversion to equity method for years

Problem 03-27

Excess amortization expenses

AnnualExcess

Amortizations


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Student Name:

Class:

Problem 03-27

Part a. Consolidated Worksheet

Consolidation Entries ConsolidatedAccounts Michael Aaron Debit Credit Totals

(610,000) (370,000)

270,000 140,000115,000 80,000

(5,000) -(230,000) (150,000)

(880,000)(490,000)

(230,000) (150,000)90,000 5,000(1,020,000) (635,000)

110,000 15,000

380,000 220,000560,000 280,000470,000 -

460,000 340,000

920,000 380,000- -

2,900,000 1,235,000

(780,000) (470,000)(300,000) -(500,000) (100,000)(300,000) (30,000)

(1,020,000) (635,000)(2,900,000) (1,235,000) - Try again!

Cost of goods sold

Revenues

For Year Ending December 31, 2013Consolidation Worksheet

Total liabilities and equityRetained earnings, 12/31

Additional paid-in capitalCommon stockPreferred stockLiabilities


Investment in Aaron Co.InventoryReceivables

Cash

Retained earnings, 12/31Dividends paidNet income

MICHAEL COMPANY AND CONSOLIDATED SUBSIDIARY

Total assetsTrademarkRoyalty agreements

Copyrights


Net incomeDividend incomeAmortization expense


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Student Name:

Class:

Problem 03-27

Part b. Equity method - What account balances would be alteredon Michael's financial statements?

NewAccount Balance

Part c. Equity method - What changes would be necessary in theconsolidation entries in the December 31, 2013Consolidation Worksheet?

Part d. Equity method - What changes would be created in theconsolidation figures to be reported by this combination.


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100%

20,000$

23.50$230,000$360,000$

60,000$6

50,000$

10

Michael Aaron

Company Company

12/31/2013 12/31/2013(610,000)$ (370,000)$270,000 140,000115,000 80,000

(5,000) -(230,000)$ (150,000)$

(880,000)$ (490,000)$(230,000) (150,000)

90,000 5,000(1,020,000)$ (635,000)$

110,000$ 15,000$380,000 220,000

560,000 280,000470,000 -460,000 340,000920,000 380,000

2,900,000$ 1,235,000$

(780,000)$ (470,000)$(300,000) -(500,000) (100,000)(300,000) (30,000)

(1,020,000) (635,000)

(2,900,000)$ (1,235,000)$

Cash

Cost of goods soldRevenues

Net incomeDividend incomeAmortization expense

CopyrightsInvestment in Aaron Company

Michael Company's $1 par common stock issued

acquired by Michael Company

Retained earnings, 12/31/13Dividends paidNet income

Retained earnings, 1/1/13

Inventory

Receivables

Aaron Company outstanding common stock

Total liabilities and equity

Retained earnings, 12/31/13Additional paid-in capitalCommon stockPreferred StockLiabilities

Total assetsRoyalty agreements

MICHAEL COMPANY

Given Data P03-27:

Remaining life of Aaron's trademark - years

Fair value of Aaron's trademarkRemaining life of Aaron's royalty agreements - yearsAaron's royalty agreements undervalued byBook value for Aaron at date of purchaseAaron' reported retained earnings at date of purchaseFair market value of Michael stock - per share

for acquisition - number of shares


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Student Name:Class:

a. How was $135,000 Equity in Income of Small balance computed?

Life ExcessFair value allocations (years) Amortizations

b. Totals to be reported by business combination for year ending December 31, 2013

Account Name Balance ExplanationRevenues

Net income

Equity in Income of Small


Cost of goods sold

Current assets


Dividends paid


Buildings

Land

Investment in Small

Problem 03-28

TotalGoodwill

EquipmentLand


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Student Name:Class:

Problem 03-28

Equipment

Total assets

Goodwill


Common stock

Liabilities

Total liabilities & equity


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100%

90,000$50,000$60,000$

10,000$

Giant Small12/31/2013 12/31/2013

(1,175,000)$ (360,000)$550,000 90,000172,000 130,000

(135,000) -(588,000)$ (140,000)$

(1,417,000)$ (620,000)$

(588,000) (140,000)

310,000 110,000(1,695,000)$ (650,000)$

398,000$ 318,000$

995,000 -440,000 165,000304,000 419,000648,000 286,000

- -2,785,000$ 1,188,000$

(840,000)$ (368,000)$

(250,000) (170,000)(1,695,000) (650,000)(2,785,000)$ (1,188,000)$

Revenues

Retained earnings, 12/31/13Dividends paid

Net income


Net incomeEquity in income of SmallDepreciation expenseCost of goods sold

Total assetsGoodwillEquipment (net)Buildings (net)LandInvestment in Small

Current assets

Total liabilities and equityRetained earningsCommon stock

Liabilities

Given Data P03-28:

Amount Small owes Giant on December 31, 2013

Portion of unallocated fair value price allocated to goodwillPortion of fair value price applied to equipment with 10-year lifePortion of fair value price applied to undervalued land

Small outstanding common stock purchased by Giant


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Mergaronite Hill12/31/2013 12/31/2013

(600,000)$ (250,000)$280,000 100,000

120,000 50,000Not given NA(900,000) (600,000)130,000 40,000200,000 690,000300,000 90,000500,000 140,000200,000 250,000

(400,000) (310,000)(300,000) (40,000)

(50,000) (160,000)

7,000100$

20,000$30,000$

60,000$10

5100,000$

20

Given Data P03-30:

Revenues

Remaining life of Hill's customer list - yearsAppraised value of Hill's customer listRemaining life of equipment - yearsRemaining life of buildings - yearsHill's equipment undervalued by

Hill's buildings overvalued byHill's land undervalued byFair market value of Mergaronite stock - per share

for acquisition of Hill - number of shares

Current assetsDividends paidRetained earnings, 1/1/13

Mergaronite's $10 par common stock issued


Cost of goods sold

Additional paid-in capitalCommon stockLiabilities

Equipment (net)Buildings (net)Land

Investment income


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100%1,090,000$

950,000$240,000$

6

Peterson Santiago,Corp. Inc.

(535,000)$ (495,000)$170,000 155,000

(100,000) -125,000 140,000

(160,000) -

(500,000)$ (200,000)$

(1,500,000)$ (650,000)$(500,000) (200,000)

200,000 50,000(1,800,000)$ (800,000)$

190,000$ 300,000$1,300,000 -

100,000 200,000

300,000 400,000610,000 300,000

2,500,000$ 1,200,000$

(165,000)$ (100,000)$(535,000) (300,000)

(1,800,000) (800,000)(2,500,000)$ (1,200,000)$


Total assetsEquipment

Statement of Retained Earnings

Balance Sheet

Retained earnings, 1/1Net income


PETERSON CORPORATION

Estimated remaining life in years

December 31, 2013Financial Statements

Income Statement

Investment in SantiagoTrademarks

LiabilitiesCommon stock


Depreciation and amortizationEquity earnings from Santiago

Net income

Dividends paid

Gain on bargain purchase

Given Data P03-31:

Santiago outstanding voting stock purchased by PetersonFair value consideration paid to SantiagoSantiago book value at acquisition date

Patented technology

Patented technology account undervalued


Current assets


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Student Name:Class:

Problem 03-32

Investment in WolfpackInitial Value Method:d.

Retained earnings - WolfpackCommon stock - Wolfpack

Retained earnings - Branson

GoodwillRoyalty agreements

Investment in Wolfpack

Royalty agreements

Amortization expense

Dividends paidDividend income

Investment in Wolfpack


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Student Name:Class:

Problem 03-34

b. Equity in subsidiary earnings

Equity in subsidiary earnings

Excess amortizationsIncome accrual

Book values added together

d. Consolidated equipment

Consolidated net incomeExcess amortization expenses

Excess depreciation

Consolidated revenues

Allocation of purchase price

c. Consolidated net income

Allocation of acquisition-date fair valueBook values added together

e. Consolidated buildings

Consolidated equipment

h. Consolidated retained earnings

g. Consolidated common stock

Allocation of excess fair value to goodwill

f. Consolidated goodwill

Consolidated buildings

Consolidated expenses

Excess depreciation


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Student Name:Class:

a. Picante 1/1/12 Investment in Salsa account balance

Part b. Consolidated Worksheet

12/31/13 12/31/13

Accounts Picante Salsa Consolidated

(3,500,000) (1,000,000)

1,600,000 630,000

540,000 160,000

(203,000)

(1,563,000) (210,000)

(3,000,000) (800,000)

(1,563,000) (210,000)

200,000 25,000

(4,363,000) (985,000)

228,000 50,000

840,000 155,000

900,000 580,0002,042,000

3,500,000 700,000

5,000,000 1,700,000

290,000

12,800,000 3,185,000

(193,000) (400,000)

(3,094,000) (800,000)

(5,150,000)

(1,000,000)

(4,363,000) (985,000)

(12,800,000) (3,185,000)

PICANTE AND SUBSIDIARY SALSA

Problem 03-35

Investment balance 12/31/13Amortization 2013Dividends paid in 2013Income 2013

Amortization 2012In-process R&D write-off in 2012

Common stock - Salsa

Common stock - Picante

For Year Ending December 31, 2013

Consolidated Worksheet




Land

Increase in Salsa's RE to 1/1/13Consideration transferred 1/1/12

Inventory

Accounts receivable

Long-term debt

Accounts payable

Total assets

Goodwill

Equipment (net)

Investment in Salsa

Cash

Retained earnings 12/31/13

Deprecation expense

Dividends paid

Net income

Retained earnings 1/1/13

Net income

Subsidiary income

Adjustments

Cost of goods sold

Sales


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100%

120,000,000$500,000$

50,000,000$

10110,000,000$

1/1 12/31215,000$ 109,000$525,000 897,000

40,000,000 60,000,000

15,000,000 20,000,00020,750,000 19,000,000

(490,000) (650,000)(6,000,000) (6,250,000)

Prine, Inc Lydia Co.(18,000,000)$ (12,000,000)$10,350,000 11,800,000

(150,000) N/A

300,000 80,000(52,000,000) (2,000,000)

260,000 109,000210,000 897,000

120,070,000 N/A350,000 14,014,000365,000 45,000,000

136,000,000 17,500,000(755,000) (650,000)

(22,000,000) (7,250,000)(175,000,000) (67,500,000)

Retained earnings 1/1Dividends paid

Equity in Lydia earningsOperating expenses

Cash

Current liabilities

Movie libraryBroadcast licensesInvestment in LydiaReceivables (net)

Common stockLong-term debtCurrent liabilitiesEquipment (net)

Cash

Given Data P03-36:

Lydia common stock purchased by Prine

Lydia's equipment life remaining in years

Lydia's equipment undervalued by:Fair value paid in cash and stock

Revenues

Balances at December 31:

Long-term debt

Lydia's goodwill at acquisition

Equipment (10-year life)Broadcast licenses (indefinite life)

Movie library (25-year life)Receivables (net)

Fair values of reporting unit through first year: Fair Values

Lydia reporting unit reduced fair value at 12/31

Copy of Chp 3 Problems Student Template

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