Chapter_3_day_2_solutions

Chapter_3_day_2_solutions - 17. (30 Minutes) (Consolidation...

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17. (30 Minutes) (Consolidation entries for two years. Parent uses equity method.) Fair Value Allocation and Annual Amortization: Acquisition fair value (consideration paid) . ............ $490,000 Book value (assets minus liabilities or total stockholders' equity) . ................................................................... (400,000 ) Excess fair value over book value . ........................... $90,000 Excess fair value assigned to specific accounts based on individual fair values Annual Excess Life Amortizations Land . .......................................... $10,000 -- -- Buildings . ................................ 40,000 4 yrs. $10,000 Equipment . ................................ (20,000 ) 5 yrs. (4,000) Total assigned to specific accounts . ...................... 30,000 Goodwill . ................................... 60,000 Indefinite -0- Total . ...................................... $90,000 $6,000 Consolidation Entries as of December 31, 2009 Entry S Common Stock—Abernethy. ................................. 250,000 Additional Paidin Capital . ................................... 50,000 Retained Earnings—1/1/09 . .................................. 100,000 Investment in Abernethy . ............................... 400,000 (To eliminate stockholders' equity accounts of subsidiary) Entry A Land . ....................................................................... 10,000 Buildings . ................................................................ 40,000 Goodwill . ................................................................ 60,000 Equipment . ....................................................... 20,000 Investment in Abernethy . ............................... 90,000 (To recognize allocations attributed to fair value of specific accounts at acquisition date with residual fair value recognized as goodwill).
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17. (continued) Entry I Equity in Subsidiary Earnings . ............................ 74,000 Investment in Abernethy . ............................... 74,000 (To eliminate $80,000 income accrual for 2009 less $6,000 amortization recorded by parent using equity method) Entry D Investment in Abernethy . ..................................... 10,000 Dividends Paid . ................................................ 10,000 (To eliminate intercompany dividend transfers) Entry E Depreciation expense. ........................................... 6,000 Equipment. .............................................................. 4,000 Buildings. .......................................................... 10,000 (To record 2009 amortization expense) Consolidation Entries as of December 31, 2010 Entry S Common Stock—Abernethy . ............................... 250,000 Additional Paidin Capital . .................................... 50,000 Retained Earnings—1/1/10. ................................... 170,000 Investment in Abernethy . ............................... 470,000 (To eliminate beginning stockholders' equity of subsidiary—the Retained Earnings account has been adjusted for 2009 income and
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Chapter_3_day_2_solutions - 17. (30 Minutes) (Consolidation...

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