The consolidated balance sheet of Treecreeper Corporation and Ants Farm, its 90%
ID: 2427701 • Letter: T
Question
The consolidated balance sheet of Treecreeper Corporation and Ants Farm, its 90% owned subsidiary, as of December 31, 2005, contains the following accounts and balances: Treecreeper Corporation and Subsidiary Consolidated Balance Sheet at December 31, 2005 Balances Cash $ 19,000 Accounts receivable-net 70,000 Inventories 110,000 Other current assets 85,000 Plant assets-net 290,000 Goodwill from consolidation 39,000 $ 613,000 Accounts payable $ 73,000 Other liabilities 70,000 Capital stock 350,000 Retained earnings 80,000 Minority interest 40,000 $ 613,000 Treecreeper Corporation acquired its 90% interest in Ants Farm on January 1, 2005, when Ants Farm had $150,000 of Capital Stock and $70,000 of Retained Earnings. Ants Farm’s net assets had fair values equal to their book values when Treecreeper acquired its interest. No changes have occurred in the amount of outstanding stock since the date of the business combination. Treecreeper uses the equity method of accounting for its investment. Required: Determine the following amounts: 1 The balance of Treecreeper's Capital Stock and Retained Earnings accounts at December 31, 2005. 2 Cost of Treecreeper's purchase of Ants Farm on January 1, 2005. 3 Ants Farms’s stockholders' equity on December 31, 2005. 4 Treecreeper’s Investment in Ants Farm account balance at December 31, 2005. Exercise 5 Zoo Inc paid $268,000 to purchase 80% of the outstanding stock of Bird Corporation, on December 31, 2005. The following year-end information was available just before the purchase: Zoo Bird Book Value Bird Book Value Fair Value Cash $ 378,000 $ 40,000 $ 40,000 Accounts Receivable 130,000 76,000 76,000 Inventory 240,000 50,000 55,000 Land 220,000 80,000 55,000 Plant and equipment-net 660,000 200,000 215,000 $ 1,628,000 $ 446,000 $ Accounts Payable $ 440,000 $ 11,000 $ 11,000 Bonds Payable 468,000 100,000 95,000 Capital stock, $10 par value 200,000 Capital stock, $15 par value 225,000 Additional paid-in capital 200,000 80,000 Retained earnings 320,000 30,000 $ 1,628,000 $ 446,000 Required: 1 Prepare Zoo’s consolidated balance sheet on December 31, 2005. The consolidated balance sheet of Treecreeper Corporation and Ants Farm, its 90% owned subsidiary, as of December 31, 2005, contains the following accounts and balances: Treecreeper Corporation and Subsidiary Consolidated Balance Sheet at December 31, 2005 Balances Cash $ 19,000 Accounts receivable-net 70,000 Inventories 110,000 Other current assets 85,000 Plant assets-net 290,000 Goodwill from consolidation 39,000 $ 613,000 Accounts payable $ 73,000 Other liabilities 70,000 Capital stock 350,000 Retained earnings 80,000 Minority interest 40,000 $ 613,000 Treecreeper Corporation acquired its 90% interest in Ants Farm on January 1, 2005, when Ants Farm had $150,000 of Capital Stock and $70,000 of Retained Earnings. Ants Farm’s net assets had fair values equal to their book values when Treecreeper acquired its interest. No changes have occurred in the amount of outstanding stock since the date of the business combination. Treecreeper uses the equity method of accounting for its investment. Required: Determine the following amounts: 1 The balance of Treecreeper's Capital Stock and Retained Earnings accounts at December 31, 2005. 2 Cost of Treecreeper's purchase of Ants Farm on January 1, 2005. 3 Ants Farms’s stockholders' equity on December 31, 2005. 4 Treecreeper’s Investment in Ants Farm account balance at December 31, 2005. Exercise 5 Zoo Inc paid $268,000 to purchase 80% of the outstanding stock of Bird Corporation, on December 31, 2005. The following year-end information was available just before the purchase: Zoo Bird Book Value Bird Book Value Fair Value Cash $ 378,000 $ 40,000 $ 40,000 Accounts Receivable 130,000 76,000 76,000 Inventory 240,000 50,000 55,000 Land 220,000 80,000 55,000 Plant and equipment-net 660,000 200,000 215,000 $ 1,628,000 $ 446,000 $ Accounts Payable $ 440,000 $ 11,000 $ 11,000 Bonds Payable 468,000 100,000 95,000 Capital stock, $10 par value 200,000 Capital stock, $15 par value 225,000 Additional paid-in capital 200,000 80,000 Retained earnings 320,000 30,000 $ 1,628,000 $ 446,000 Required: 1 Prepare Zoo’s consolidated balance sheet on December 31, 2005.Explanation / Answer
Answer:1 On the consolidated balance sheet, the balance in the Capital Stock and Retained Earnings accounts will be those of the parent, so the Capital Stock balance is $350,000, and the Retained Earnings balance is $80,000.
Answer:2
(Ant Farm’s equity on January 1, 2005)x(90%) = ($220,000)x(90%) $ 198,000
Original goodwill = 39,000
Original acquisition cost = $ 237,000
Answer:3 Ant Farm’s stockholders’ equity = (minority interest) divided by (minority interest percentage) =($40,000/10%) $ 400,000
Answer:4
Treecreeper’s book value in 90% of Ants Farm at December 31, 2005
= ($400,000 (from above)) x 90% $ 360,000
Plus: goodwill (from balance sheet) 39,000
Balance in Investment account at December 31, 2005 $ 399,000
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