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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 C om pan y Pa rent N CI Im plied Price Value Valu e Ana lysis S chedule Fair Value (8 0% ) (20% ) C om pany fair value .......................................... \$ 337 ,500* \$2 70,000 \$67,50 0 Fair value of net assets excluding goodwill ...... 235,000 ** 1 88,000 47,00 0 G oodw ill ........................................................... \$102,500 \$ 82,000 \$20,50 0 *\$270,000/80% **\$ 195 ,000 eq uity + \$40,00 0 asset adjustm e nts
Problem 3-6 C om p an y Parent N CI Im plie d Price Valu e Valu e Analysis S che dule Fair Valu e (8 0% ) (2 0% ) C om pany fair va lue .......................................... \$ 337,500* \$270,00 0 \$67,50 0 F air value of n et assets e xclu din g goodwill ...... 235,000 ** 188,00 0 47,00 0 G oodw ill ........................................................... \$102,500 \$ 82,00 0 \$20,50 0 *\$2 70,000/80% **\$195,000 eq uity + \$ 40,00 0 asse t adjustm e nts D eterm ina tion and Distribution of E xce ss S ched ule C om p any Pa rent N C I Im plied P rice Va lu e Fair V alu e (80 % ) (20% ) Fair value of subsidiary ............. \$337,500 \$270,000 \$ 6 7,500 Less bo ok value of in te re st a cquired: Co m m on stock (\$10 par) ...... \$100,000 Paid-in capital in exce ss of par 120 ,0 00 Re tained ea rn ing s ................ (25 ,000 ) T otal eq uity ..................... \$195,000 \$195,000 \$19 5,000 In terest a cquired ................... 80% 20% B ook value ................................ \$156,000 \$ 3 9,000 E xcess of fair value over bo ok valu e ..................................... \$142,500 \$114,000 \$ 2 8,500

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Problem 3-6 D eterm ina tio n an d Distrib ution o f E xce ss S ched ule C om p an y Parent N C I Im plied P rice Va lu e Fair V alu e (80% ) (20% ) F air value of subsidia ry ............. \$ 337,500 \$27 0,000 \$ 67,500 Less bo ok value of interest a cquired: Co m m on stock (\$10 par) ...... \$ 100,0 00 Paid-in cap ital in excess of par 120,000 Re ta ined ea rning s ................ (25,000 ) T ota l equity ..................... \$ 195,000 \$19 5,000 \$195,000 Intere st acquired ................... 80% 20% B ook va lue ................................ \$15 6,000 \$ 39,000 E xcess of fair va lue over bo ok value ..................................... \$ 142,500 \$11 4,000 \$ 28,500 Ad justm ent of id en tifiable accou nts: W orksheet Am ortization A djustm ent Key Life per Y ear B uildings ................................... \$ 40,000 debit D1 10 \$4,000 G oodw ill .................................... 102,500 debit D2 Total ..................................... \$142,500 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
Problem 3-6 P resco tt C om p any a nd Su bsid iary S andin C o m pa ny W ork shee t for Con solid ated Fin ancia l Statem e nts F or Y ear E nded D ec em b er 31, 20X2 Pres cott Sand in D ebit Credit Cu rrent Assets 1 80,00 0 11 5,000 L and 1 50,00 0 7 5,000 Bu ild in gs 5 90,00 0 35 0,000 Accu m ulated Dep reciatio n— Buildings (2 65,00 0) (18 2,000 ) Inve stm ent in Sand in Co m pan y 2 94,00 0 2 0,000 C Y1 Goo dwill L ia bilities (1 75,00 0) (13 3,000 ) Co m m on Stock (\$1 0 par)— Prescott (2 00,00 0) Re ta in ed Earning s, Jan . 1, 2 0X2— (5 03,00 0) Co m m on Stock (\$1 0 par)— San din (10 0,000 ) Pa id -In Cap ital in Excess of Par— (12 0,000 ) Re ta in ed Earning s, Jan . 1, 2 0X2— 1 5,000 Sa le s (3 60,00 0) (12 0,000 ) Co st o f G ood s Sold 1 79,00 0 5 0,000 Exp enses 1 20,00 0 4 5,000 Su bsid ia ry Inco m e (20,00 0) CY1 20,00 0 Divide nds De clared 10,00 0 5,000 Total - - 20,00 0 2 0,000 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
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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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