Chapter03_XL - Student Name: Class: Problem 03-24 Part a....

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Unformatted text preview: Student Name: Class: Problem 03-24 Part a. Michael Company and Aaron Company- Fair Value allocation and Annual Amortization Aaron fair value Book value of subsidiary Excess fair over book value Annual Assigned to specific accounts Life Excess based on fair market value: (years) Amortizations Royalty agreements Trademark Total-Conversion to initial value method for years prior to 2013 Aaron retained earnings, 1/1/13 Retained earnings at date of purchase Increase since date of purchase Excess amortization expenses Conversion to equity method for years prior to 2013 Student Name: Class: Problem 03-24 Part a. Consolidated Worksheet MICHAEL COMPANY AND CONSOLIDATED SUBSIDIARY Consolidation Worksheet For Year Ending December 31, 2013 Michael Aaron Consolidation Entries Consolidated Accounts Company Company Debit Credit Totals Income Statement Revenues $(610,000) $(370,000) Cost of goods sold 270,000 140,000 Amortization expense 115,000 80,000 Dividend income (5,000)- Net income $(230,000) $(150,000) Statement of Retained Earnings Retained earnings, 1/1 $(880,000) $(490,000) Net income (230,000) (150,000) Dividends paid 90,000 5,000 Retained earnings, 12/31 $(1,020,000) $(635,000) Balance Sheet Cash $110,000 $15,000 Receivables 380,000 220,000 Inventory 560,000 280,000 Investment in Aaron Co. 470,000 - Copyrights 460,000 340,000 Royalty agreements 920,000 380,000 Trademark- - Total assets $2,900,000 $1,235,000 Liabilities (780,000) (470,000) Preferred stock (300,000)- Common stock (500,000) (100,000) Additional paid-in capital (300,000) (30,000) Retained earnings, 12/31 (1,020,000) (635,000) Total liabilities and equity $(2,900,000) $(1,235,000) Parentheses indicate a credit balance. Student Name: Class: Problem 03-24 Part b. Equity method - What account balances would be altered on Michael's financial statements? New Account Balance Part c. Equity method - What changes would be necessary in the consolidation entries in the December 31, 2013 Consolidation Worksheet? Part d. Equity method - What changes would be created in the consolidation figures to be reported by this combination. Given Data P03-24: Aaron Company outstanding common stock 100% acquired by Michael Company Michael Company's $1 par common stock issued 20,000 for acquisition - number of shares Fair market value of Michael stock - per share 23.50 Aaron' reported retained earnings at date of purchase 230,000 Book value for Aaron at date of purchase 360,000 Aaron's royalty agreements undervalued by 60,000 Remaining life of Aaron's royalty agreements - years 6 Fair value of Aaron's trademark $50,000 Remaining life of Aaron's trademark - years 10 Michael Aaron Company Company 12/31/2013 12/31/2013 Revenues $(610,000) $(370,000) Cost of goods sold 270,000 140,000 Amortization expense 115,000 80,000 Dividend income (5,000)- Net income $(230,000) $(150,000) Retained earnings, 1/1/13 (880,000) (490,000) Net income (230,000) (150,000) Dividends paid 90,000 5,000 Retained earnings, 12/31/13 $(1,020,000)...
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Chapter03_XL - Student Name: Class: Problem 03-24 Part a....

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