Use the following information for the next 11 items voting common stock of Sun C
ID: 2341763 • Letter: U
Question
Use the following information for the next 11 items voting common stock of Sun Co. for $600,000 cash. On January 1, 2016, Paris Company acquired 80% of the The two companies had the following balance sheets on date of acquisition (Book values). Paris Sun $700,000 $175,000 Current Assets Equipment (Net) Total Assets Current Liabilities Common Stock Additional Paid-in Capital Retained Earnings Total Liabilities and Equity 1,520,000 2,220,000 $soo,000 00550,000 725,000 120,000 80,000 300,000 100,000 900,000 720,000 225,000 2,220,000725,000 On the date of acquisition, the fair values of Sun's assets and liabilities were equal to their book values except for equipment which had a fair value of $650,000. The equipment had a remaining useful life of 10 years and no salvage value. Any remaining excess is goodwill. Paris and Sun had the following information for 2016 and 2017. Paris Sun 2016 Net Income (Internally Generated) Dividends 2017 Net Income (Internally Generated) Dividends $170,000 30,000 $60,000 12,000 200,000 23,000 50,000 14,000Explanation / Answer
Answer:
Fair value of Assets and Liabilities of Sun on the date of acquisition:
Current Assets = $175,000
Equipment = $650,000
Total =$825,000
Less, Current liabilities = $120,000
Fair value = $825,000 - $120,000 = $705,000
Consideration transferred for 80% share = $600,000
Fair value of Non-Controlling Interest (NCI) = ($600,000/80%) * 20% =$150,000
Answer 27:
Correct answer is:
a: $12,000
Explanation:
Income attributed to the non-controlling interest in 2016 = Sun's Income in 2016 * 20% = $60,000 * 20% = $12,000
Hence option (a) is correct.
As calculated above, NCI's share of consolidated income = $12,000, as such options (b), (c), (d) and (e) are incorrect.
Answer 28:
Correct answer is:
d. None of these
Explanation:
NCI equity in 2016 = Beginning NCI equity Fair Value + NCI’s interest in subsidiary income of 2016 – NCI’s share of dividends of 2016
= $150,000 + 20% * $60,000 - 20% - $12,000 * 20% = $159,600
Hence option (d) is correct. As calculated above NCI Interest in consolidated balance for 2016 will be $159,600. Hence options (a), (b), (c) and (e) are incorrect.
Answer 29:
Correct answer is:
c. Debit Depreciation Expense -Equipment $20,000, Credit Accumulated Depreciation - Equipment $20,000
Explanation:
In consolidation worksheet for 2017, Depreciation expense (for two years) on excess of cost over book value [($100,000 / 10) * 2=) amounting to $20,000 has to recorded. Hence Option (c) is correct.
Option b is incorrect as amount of depreciation per year is $10,000 hence for consolidation worksheet for 2017, two years depreciation has to be recorded.
Option (a) and (d) are incorrect while calculating and recording depreciation on assets % shareholding and NCI are not factored.
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