2.Prepare all the eliminations and adjustments that would be made on the 2015 co
ID: 2589410 • Letter: 2
Question
2.Prepare all the eliminations and adjustments that would be made on the 2015 consolidated worksheet.
pany on NMd used by the parent, Mast Curpul ise 3 (1O 2) Equity method, first year, eliminations, statements. Parker ures an 80% interest in Sargent Company for $300,000 in cash on January 1, Company acqui when Sargent Company has the following balance sheet: Liabilities and Equity Assets $ 50,000 100,000 150,000 $300,000 $100,000 Current liabilities Current assets Depreciable fixed assets (net) Common stock ($10 par). Retained earnings . 200,000 $300,000 Total liabilities and equity olal assets The excess of the price paid over book value is attributable to the fixed assets, which have a fair value of $250,000, and to goodwill. The fixed assets have a 10-year remaining life. Parker Company uses the simple equity method to record its investment in Sargent Company The following trial balances of the two companies are prepared on December 31, 2015 Parker 10,000 400,000 Sargent 130,000 200,000 Current Assets Depreciable Fixed Assets Accumulated Depreciation .. Investment in Sargent Company Current Liabilities Common Stock ($10 par] Retained Earnings, January 1, 2015 Sales Expenses Subsidiary Income.. (106,000)(20,000) 316,000 (60,000(40,000 (300,000(100,000 (200,000(150,000 75,000 (150,000 (100,000) 110,000 (20,000 5,000 0 Totals 0 1. Prepare a determination and distribution of excess schedule (a value analysis is not needed) for the investment. epare all worksheet. the eliminations and adjustments that would be made on the 2015 consolidated e the 2015 consolidated income statement and its related income distribution schedules. . Prepare the 2015 statement of retained earnings. 5. Prepare the 2015 consolidated balance sheet. Exercise a OExplanation / Answer
Acquisition date 1-Jan-15 Consideration $ 300,000 (in cash) 1 Capital Profit: $ Retained earnings bal on 1.1.2015 150,000 Less: Share of non controlling int (20%) 30,000 Share of Parker 120,000 2 Cost of control account: Value of investments: Par value of common stock in Sargent 80,000 (100000*80%) Share of capital profit 120,000 Total 200,000 Purchase consideration: (PC) 300,000 Excess of PC over value of investments 100,000 (This is value assigned to Fixed assets having FV of 250000) 3 Fair value of Fixed Assets 250,000 Less: Current book value 200,000 Excess value of Fixed assets 50,000 Let us recalculate the capital profit & cost of control account: 3 Capital Profit: (revised) $ Retained earnings bal on 1.1.2015 150,000 Add: Addition value of Fixed assets 50000 Total 200,000 Less: Share of non controlling int (20%) 40,000 Share of Parker 160,000 (2 lacs-0.4 lacs) Cost of control account: Value of investments: Par value of common stock in Sargent 80,000 (100000*80%) Share of capital profit 160,000 Total 240,000 Purchase consideration: (PC) 300,000 Therefore, Goodwill 60,000 Consolidated Balance sheet working: Particulars Parker $ Sargent $ Addition (Deletion) Consolidated $ Current Assets 10,000 130,000 140,000 Depreciable Fixed Assets 400,000 200,000 50,000 650,000 Accumulated depreciation (106,000) (20,000) (5,000) (131,000) addl depn=50000/10 years=5000 Current liabilities (60,000) (40,000) (100,000) Common stock (300,000) (300,000) Retained earnings on 1.1.2015 (200,000) (200,000) Current year profit (40,000) (12,000) (4,000) (56,000) Good will 60,000 Non controlling interest (63,000) - Investment account balance: $ Investment in subsdiary account 300,000 Add: Share of Income(25k*80%) 20,000 Less: dividend received(5k*80%) (4,000) Balance of investment account 316,000 Revenue profit for consolidated balance sheet: Parker Sargent Sales (150,000) (100,000) Expenses 110,000 75,000 Addl depreciation 5,000 Net income (40,000) (20,000) Less: Dividend declared 5,000 Pf after dividend (40,000) (15,000) Less: Share of Non controlling int (3,000) Share of Parker (40,000) (12,000) Statement of retained earnings: Op balance of RE 200000 Add: Current year profit: 52000 Add: Dividend received 4000 Closing balance 256000 Non controlling interest:(in sergant) $ Share capital 20000 Share of capital profit 40000 Share of revenue profit 3000 63000 Consolidated Balance sheet: (for dec 2015) (000s) $ Assets: Current Assets 140 Fixed Assets (600+50) 650 Accum depn (106+20+5) (131) Good will 60 Total 719 Liability & Equity: Common stock 300 Retained earnings 256 Non controlling Interest 63 Current liability (60+40) 100 Total 719
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