Chapter 6 Problems-1

Chapter 6 Problems-1 - Chapter 6 Problems Problem 1 (a) Net...

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Unformatted text preview: Chapter 6 Problems Problem 1 (a) Net income Pill Year 1 (cost method) 25,000 Less: Dividends from Sill (85% 9,000) 7,650 17,350 Net income of Sill Year 1 40,000 Less: Goodwill impairment loss 1,500 38,500 85% 32,725 Consolidated net income Year 1 50,075 (b) Noncontrolling interest Year 1 [15% (40,000 1,500)] 5,775 (c) Investment in Sill Dec. 31, Year 1 (cost method) 238,000 Income from Sill 32,725 270,725 Less: Dividends from Sill 7,650 Investment in Sill Dec. 31, Year 1 - equity method 263,075 Problem 2 Cost of 75% investment 600,000 Implied cost of 100% investment 800,000 Small Common stock 400,000 Retained earnings 100,000 500,000 Purchase discrepancy Jan. 1, Year 1 300,000 Allocated: Inventory 40,000 Patents (70,000) (30,000) Balance goodwill 330,000 Balance Balance Jan. 1 Amortization Dec. 31 Year 1 Yr 1 & 2 Year 3 Year 3 Inventory 40,000 40,000 Patents (70,000) (28,000) (14,000) (28,000) Goodwill 330,000 19,300 310,700 300,000 12,000 5,300 282,700 PART A Year 1 Year 2 Year 3 Investment in Small 600,000 Cash 600,000 Cash 18,750 7,500 30,000 Dividend income 18,750 7,500 30,000 PART B (a) Goodwill 310,700 (b) Smalls common stock 400,000 Smalls retained earnings (100+80-25-35-10+100-40) 170,000 570,000 Unamortized purchase discrepancy 282,700 852,700 NCIs share (25%) 213,175 (c) Larges retained earnings 500,000 Smalls retained earnings (100+80-25-35-10) 110,000 Smalls retained earnings, date of acquisition 100,000 Change since acquisition 10,000 Less: cumulative amortization of purchase discrepancy 12,000 (2,000) Larges share (75%) (1,500) Consolidated retained earnings 498,500 (d) Larges net income 200,000 Less: dividends from Small (40,000 x75%) (30,000) 170,000 Smalls net income 100,000 Less: amortization of purchase discrepancy 5,300 94,700 Larges share (75%) 71,025 Consolidated net income 241,025 (e) NCI on income statement (94,700 x 25%) 23,675 Problem 3 Cost of 70% investment 84,000 Implied cost of 100% investment 120,000 Petite Common stock 35,000 Retained earnings 25,000 60,000 Purchase discrepancy Jan. 1, Year 2 60,000 Allocated: Inventory 10,000 Equipment 20,000 30,000 Balance - goodwill 30,000 Balance Balance Jan. 1 Amortization Dec. 31 Year 2 Yrs 2 to 5 Year 6 Year 6 Inventory 10,000 10,000 Equipment 20,000 8,000 2,000 10,000 Goodwill 30,000 2,000 28,000 60,000 18,000 4,000 38,000...
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This note was uploaded on 03/10/2010 for the course ACC ACC703 taught by Professor Taylor during the Spring '10 term at Ryerson.

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Chapter 6 Problems-1 - Chapter 6 Problems Problem 1 (a) Net...

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