Problem 3-6

Problem 3-6 - Problem 3-6 C om p an y V alu e Ana lysis S...

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Problem 3-6 Equity = common stock, paid-in-capital, retained earnings Com pany Parent NCI Im plied Price Value Value Analysis Schedule Fair Value (80% ) (20% ) Com pany fair value . ......................................... $337,500* $270,000 $67,500 Fair value of net assets excluding goodwill . ..... 235,000 ** 188,000 47,000 G oodwill. .......................................................... $102,500 $ 82,000 $20,500 *$270,000/80% **$195,000 equity + $40,000 asset adjustm ents
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Problem 3-6 Com pany Parent NCI Im plied Price Value Value Analysis Schedule Fair Value (80%) (20% ) C om pany fair value . ......................................... $337,500* $270,000 $67,500 Fair value of net assets excluding goodwill . ..... 235,000 ** 188,000 47,000 G oodwill. .......................................................... $102,500 $ 82,000 $20,500 *$270,000/80% **$195,000 equity + $40,000 asset adjustm ents Determ ination and Distribution of Excess Schedule Fair Value (80% ) (20% ) Fair value of subsidiary . ............ $337,500 $270,000 $ 67,500 Less book value of interest acquired: Com m on stock ($10 par) . $100,000 Paid-in capital in excess of par 120,000 Retained earnings . ............... (25,000 ) Total equity . .................... $195,000 $195,000 $195,000 Interest acquired. .................. 80% 20% Book value . ............................... $156,000 $ 39,000 Excess of fair value over book value. .................................... $142,500 $114,000 $ 28,500
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Problem 3-6 Determ ination and Distribution of Excess Schedule C om pany Parent NCI Implied Price Value Fair Value (80%) (20% ) Fair value of subsidiary . ............ $337,500 $270,000 $ 67,500 Less book value of interest acquired: Com m on stock ($10 par) . ..... $100,000 Paid-in capital in excess of par 120,000 Retained earnings . ............... (25,000 ) Total equity . .................... $195,000 $195,000 $195,000 Interest acquired. .................. 80% 20% Book value . ............................... $156,000 $ 39,000 Excess of fair value over book value. .................................... $142,500 $114,000 $ 28,500 Adjustment of identifiable accounts: W orksheet Am ortization Adjustment Key Life per Year Buildings . .................................. $ 40,000 debit D1 10 $4,000 G oodwill. ................................... 102,500 debit D2 Total . Recall: This is the amount that will be recorded as “Investment” This is the amount that will be “eliminated” from the investment account and sub equity (distribution entry) This is the amount that will be eliminated from sub equity and from NCI These two amounts “make up” the total “excess” of fair value over book value of the sub TOTAL adjustment (distribution) Will be tested for impairment at the end of each period Will be amortized over remaining useful life
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Problem 3-6 P resco tt C om p any a nd Su bsid iary S andin Co m pa ny W ork shee t for Con solid ated Fin ancia l Statem e nts F or Y ear E nded Dec em b er 31, 20X2 Pres cott Sand in D ebit Credit Current Assets 1 80,00 0 11 5,000 Land 1 50,00 0 7 5,000 Buildings 5 90,00 0 35 0,000 Accum ulated Depreciation— Buildings (2 65,00 0) (18 2,000 ) Investm ent in Sandin Com pany 2 94,00 0 2 0,000 CY1 Goodwill Liabilities (1 75,00 0) (13 3,000 ) Com m on Stock ($10 par)— Prescott (2 00,00 0) Retained Earnings, Jan. 1, 20X2— (5 03,00 0) Com m on Stock ($10 par)— Sandin (10 0,000 ) Paid-In Capital in Excess of Par— (12 0,000 ) 1 5,000 Sales (3 60,00 0) Cost of G oods Sold 1 79,00 0 5 0,000 Expenses 1 20,00 0 4 5,000 Subsidiary Incom e (20,00 0) CY1 20,00 0 Dividends Declared 10,00 0 5,000 Total - - 20,00 0 Trial Balan ce Elim in ations and Adjus tm ents
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Problem 3-6 P resco tt C om p any a nd Su bsid iary S andin Co m pa ny W ork shee t for Con solid ated Fin ancia l Statem e nts F or Y ear E nded Dec em b er 31, 20X2 Pres cott Sand in D ebit Credit Current Assets 1 80,00 0 11 5,000 L and 1 50,00 0 7 5,000 Build ings 5 90,00 0 35 0,000 Accu mulated Depreciation— Buildings (2 65,00 0) (18 2,000 ) Investm ent in Sandin Com pany 2 94,00 0 CY2 4,00 0 2 0,000 CY1 Goodwill L iabilities (1 75,00 0) (13 3,000 ) Com mon Stock ($1 0 par)— Prescott (2 00,00 0) Reta ined Earnings, Jan . 1, 20X2— (5 03,00 0)
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This note was uploaded on 03/02/2011 for the course ACT 4491 taught by Professor Magrath during the Spring '11 term at Troy.

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Problem 3-6 - Problem 3-6 C om p an y V alu e Ana lysis S...

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