Case3 S2012 Sol - CASE 3 Cost of 50 of Big Sky $540,000...

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Unformatted text preview: CASE 3: Cost of 50% of Big Sky $540,000 Implied cost of 100 of Big Sky 900,000 Big Sky's Equity 570 000 Acquisition differential m Allocation: Equipment 35,000 Goodwill $295,000 Date Cash Paid Int. exp. Dis. Amrt. Carrying Value 1-Jan-05 - - - $96,110 31-Dec-05 $3,000 $8,650 $550 96,760 31-Dec-05 3,000 3,708 708 97,459 31-Dec-07 3,000 3,772 772 93,241 31-Dec-08 8,000 8,842 842 99,083 31-Dec-09 3,000 8,917 917 100,000 Date Cash Paid Int. Rev. Dis. Amrt. Carrying Value 1-Jan-07 - - - $95,025 31-Dec-07 3,000 $9,503 $1,503 96,529 31-Dec-08 3,000 9,653 1,653 93,132 31-Dec-09 3,000 9,318 1,818 100,000 flight Jan 1, 2007: Gain on bond retirement: Gain Carrying value $97,459 For Reacquisition cost 95 025 Group Gain on bond retirement m Gain for Face value $100,000 Purchasing Cost of investment 95,026 Firm (Galaxy) Gain £5374 Loss for Carrying value $97,459 Issuing Face value 100 000 Firm (Big Sky) Loss m Consolidated net income for 2007: Net income, parent (Galaxy) $280,000 Add: after-tax bond gain allocated to Galaxy 2,984 Less: after-tax interest elimination loss 902 282,033 Net income, Sub (Big Sky) $108,000 Less: amortization (equipment) (7,000) Less: after-tax gain on sale of a truck (45,000) Less: after-tax bond loss allocated to Big Sky (1,519) Add: after-tax gain realized by depreciation 9,000 Add: after-tax interest elimination gain 463 53,945 53 945 Consolidated net income for 2007 027 Noncontroliing interest in consolidated net income 63,945 Galaxy's share of consolidated net income 3391343 Non-controlling interest in the Big Sky's equity: 2007 Common $350,000 R. Eamings 413,000 Add: unamortized acquisition differential 315,000 Less: after-tax gain on sales of a truck (45,000) Less: after-tax bond loss allocated to Big Sky (1,519) Add: after tax gain realized by depreciation 9,000 Add: after tax interest elimination gain 453 $1,045,945 Non-controlling interest 40% Non-controlling interest in Big Sky's equity iiiifiii Consolidated net income for 2003: Net income, parent (Galaxy) $315,000 Less: after-tax interest elimination loss 992 314,003 Net income, Sub (Big Sky) $120,000 Less: amortization (equipment) (7,000) Add: after-tax gain realized by depreciation 9,000 Add: after-tax interest elimination gain 505 122,505 122,505 Consolidated net income for 2003 35 513 Noncontrolling interest in consolidated net income 49,002 Galaxy's share of consolidated net income 387,511 Consolidated retained earnings, Jan 1, 2003: Retained eanu‘ngs, Jan 1, 2003: Galaxy $805,000 Add: after-tax bond gain allocated to Galaxy 2,934 Less: after-tax interest elimination loss 902 807,033 Retained earnings, Jan 1, 2003: Big Sky $413,000 Less: retained earnings on the acquisition date (220,000! Change in retained earning since acquisition 198,000 Less: cumulative amortization (equipment) (14,000) Less: after-tax gain on sale of a truck (45,000) Less: after-tax bond loss allocated to Big Sky (1,519) Add: after-tax gain realized by depreciation. 9,000 Add: after-tax interest elimination gain 463 146,945 Parent's share 50% 33 167 Consolidated retained earnings, Jan 1, 2003: Consolidated retained earnings, 2003: Consolidated retained earnings, Jan 1,2003: Consolidated net income, 2003 r .mm .I:..:.:l.....l.. —l— §395,249 $395,249 337,511 I'm nnru...
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