-Prepare the 2015 statement for retained earnings. -Prepare the 2015 consolidate

Question

-Prepare the 2015 statement for retained earnings.
-Prepare the 2015 consolidated balance sheet.

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 O

Explanation / Answer

1) Determination and distribution of excess schedule Fair Value Parent Price Minority Interest Fair value of Subsidiary=($316000*100/80) $     395,000.00 395000*80%=$316000 395000*20%=$79000 Less: Book Value of Interest acquired Common stock $     100,000.00 Retained Earnings $     150,000.00 Total Equity $     250,000.00 250000 250000 Interest Acquired 80% 20% Book Value 200000 50000 Excess of fair value over book value $     145,000.00 116000 29000 Adjustment of Identifiable Accounts Adjustment Life Amortization Fixed Assets($250000-$200000) $       50,000.00 10 $                      5,000.00 Goodwill $       95,000.00 Total $     145,000.00 2) Journal Entries Sarget Income $       20,000.00     To Investment in Sarget Co. $                     20,000.00 Investment in Sarget Co.(5000*80%) $         4,000.00    To Dividend Declared $                       4,000.00 Common Stock=($100000*80%) $       80,000.00 Retained Earnings($150000*80%) $     120,000.00      To Investment in Sarget Co. $                   200,000.00 Fixed Assets $       50,000.00 Goodwill $       95,000.00     To Investment in Sarget Co. $                   116,000.00     To Minority intt $                     29,000.00 Depreciation $         5,000.00    To Accumulation of Dep $                       5,000.00 Parker Company and Sarget Company Conslidated income Statement Sales $     250,000.00 Expenses($110000+75000+$5000) $     190,000.00 Consolidated Net Income $       60,000.00 Share of Minority=($20000*20%) $         4,000.00 Distributed to controlling intt= $       56,000.00 Sarget Company Income distribution Particular Amount Particular Amount Depreciation $         5,000.00 Internally generated income($100000-$75000) $                   25,000.00 Minority Intt=($20000*20%) $         4,000.00 Parent's Intt($20000*80% $       16,000.00 Parker Copany Income distribution Particular Amount Particular Amount Internally generated income($150000-$110000) $                   40,000.00 Share in Sarget's $                   16,000.00 Controlling Intt $                   56,000.00 Consolidated Retained Earning Statement Minority Intt Controlling Retained Earnings Retained Earnings 1/1/2015=($150000*20%) to Minority $       30,000.00 $                   200,000.00 Consolidated Net Income $         4,000.00 $                     56,000.00 Retained Earnings 31/12/2015 $       34,000.00 $                   256,000.00 Consolidated Balance Sheet Current Assets $                 140,000.00 Depreciable Fixed Assets($400000+$200000+$50000) $                   650,000.00 Less: Accumulated Depreciation $                (131,000.00) $                 519,000.00 Goodwill $                   95,000.00 Total Assets $                 754,000.00 Current Liabilities $                 100,000.00 Stock holder's Equity Common Stock $                   300,000.00 Retained Earnings $                   256,000.00 $                 556,000.00 Minority Intt=($100000*20%+$34000+29000) $                   83,000.00 $                 739,000.00

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