ON JANUARY 1 2004 THE PANTHER COMPANY ACQUIRED ALL OF THE STOCK OF THE BRONCO CO

Question

ON JANUARY 1 2004 THE PANTHER COMPANY ACQUIRED ALL OF THE STOCK OF THE BRONCO COMPANY AT BOOK VALUE. NEITHER PANTHER NOR BRONCO COMPANIES PAY DIVIDENDS AND PANTHER ACCOUNTS FOR ITS OWNERSHIP OF BRONCO USING THE INITIAL VALUE METHOD. ON JANUARY 1, 2011 PANTHER COMPANY ISSUED $1,000,000 10 YEAR 8% BONDS FOR $930,000. PANTHER USES STRAIGHT LINE AMORTIZATION ON JANUARY 1, 2014 BRONCO COMPANY ACQUIRED ½ OF THE PANTHER BONDS IN THE OPEN MARKET PAYING $521,000 BRONCO ALSO USES STRAIGHT LINE AMORTIZATION E) PREPARE THE NECESSARY WORKSHEET ENTRIES FOR 2014 AND 2015 F) IN 2014 PANTHER REPORTED UNCONSOLIDATED INCOME OF $800,000 AND BRONCO REPORTED INCOME OF $100,000 WHAT WAS CONSOLIDATED INCOME IN 2014? G) IN 2015, PANTHER REPORTED UNSOLIDATED INCOME OF $800,000 AND BRONCO REPORTED INCOME OF $100,000 WHAT WAS CONSOLIDATED INCOME IN 2015? H) USING THE INFORMATION FROM F AND G; IF PANTHER HAD RETAINED EARNINGS OF $2,300,000 ON JANUARY 1, 2014 WHAT WAS THEIR UNCONSOLIDATED AND CONSOLIDATED RETAINED EARNINGS ON 12/31/14 AND 12/31/15?

Explanation / Answer

Amortize amt. in the books of Panther is = 1000000-930000=70000/10years = $7000 each year

out of that on 01.04.2014 bronco aquired half bonds so

(a) Consolidated income in 2014 = $800000+$100000-3500-40000 =856500

(b) Consolidated income in 2015 =  $800000+$100000-3500-40000 =856500

(c) Unconsolidated retained Earnings of Panther = in 2014 = 2300000+800000-7000-80000=3013000

in 2015 =   2300000+800000-7000-80000=3013000

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