Chapter 9 Problems

Chapter 9 Problems - Chapter 9 Problems Problem 5 Cost of...

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Chapter 9 Problems Problem 5 Cost of 70% of Simon 910,000 Implied value of 100% of Simon 1,300,000 Book value of Simon Common stock 550,000 Retained earnings Jan. 1 400,000 Net income to April 1 (¼ × 200,000) 50,000 1,000,000 Purchase discrepancy 300,000 Allocated: FV – BV –0– Balance – broadcast rights 300,000 Cost of 60% of Fraser 600,000 Implied value of 100% of Fraser 1,000,000 Book value of Fraser Common stock 300,000 Retained earnings Jan. 1 300,000 Net income to April 1 (¼ × 150,000) 37,500 637,500 Purchase discrepancy 362,500 Allocated FV – BV –0– Balance – broadcast rights 362,500 Closing inventory profits Before Tax After tax 40% tax Simon selling 32,000 12,800 19,200 Princeton selling 18,000 7,200 10,800
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(a) Princeton Corp. Calculation of Consolidated Net Income for the Year Ended December 31, Year 7 Income of Princeton 100,000 Less: Dividends from Simon (70% × 30,000) 21,000 Closing inventory profit after tax 10,800 31,800 68,200 Income of Simon (¾ × 200,000) 150,000 Less: Broadcast rights amortization – see part (c) 22,500 Dividend from Fraser (60% × 70,000) 42,000 Closing inventory profit after tax 19,200 83,700 66,300 Income of Fraser (¾ × 150,000) 112,500 Less: Broadcast rights amortization – see part (c) 27,188 85,312 Simon’s share 60% 51,187 117,487 Princeton’s share 70% 82,241 Consolidated net income 150,441
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(b) Calculation of noncontrolling interest Dec. 31, Year 7 Fraser shareholders' equity – Dec. 31 680,000 Unamortized broadcast rights – Fraser (see part c) 335,312 1,015,312 Noncontrolling interest’s share 40% 406,125 Simon shareholders' equity – Dec. 31 1,120,000 Retained earnings Fraser – Dec. 31 380,000 Acquisition 337,500 Increase 42,500 Less: Broadcast rights amortization 27,188 15,312 60% 9,187 1,129,187 Unamortized broadcast rights – Simon (see part c) 277,500 1,406,687 Less: Closing inventory profit after tax 19,200 1,387,487 Noncontrolling interest’s share 30% 416,246 Noncontrolling interest 822,371 (c) Calculation of consolidated broadcast rights Dec. 31, Year 7 Broadcast rights – Simon 300,000 Less: amortization – Year 7 (300,000 ÷ 10 × ¾) 22,500 277,500 Broadcast rights – Fraser 362,500 Less: amortization – Year 7 (362,500 ÷ 10 × ¾) 27,188 335,312 612,812
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Problem 6 Cost of 80% (800 ÷ 1000) of SET 56,000 Implied value of 100% 70,000 Shareholders' equity Total Preferred Common Preferred stock 40,000 42,000 1 (2,000) Common stock 20,000 20,000 Retained earnings 30,000 8,000 2 22,000 90,000 50,000 ) 40,000 Purchase discrepancy (all allocated to patents) 30,000 Patent amortization – Year 5 (six year life) (5,000) Unamortized patent, December 31, Year 5
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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 9 Problems - Chapter 9 Problems Problem 5 Cost of...

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