ACT4491 Problems CH04

ACT4491 Problems CH04 - Problem 4-11 Step 1: Prepare Value...

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Problem 4-11 Peanut acquired 80% of Salt on Jan. 1, x1 for 200,000. Step 1: Prepare Value Analysis Value Analysis Company Implied FV Parent CGE NCI Value Company Fair Value Fair Value, Net assets Goodwill
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Problem 4-11 Peanut acquired 80% of Salt on Jan. 1, x1 for 200,000. Step 1: Prepare Value Analysis Value Analysis Company Implied FV Parent CGE NCI Value Company Fair Value Fair Value, Net assets Goodwill Parent CGE 200,000 Divide by Percentage Purchased 80% Implied Fair Value 250,000 Implied Fair Value 250,000 Multiply by NCI Percentage 20% NCI Value 50,000
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Problem 4-11 Step 1: Prepare Value Analysis Value Analysis Company Implied FV Parent CGE NCI Value Company Fair Value 250,000 200,000 50,000 Fair Value, Net assets Goodwill Fair Value Net Assets: Book Value 200,000 Excess of FV over BV: Inventory 12,500 Equipment 25,000 37,500 237,500 From problem statement: Salt had total owners’ equity of 200,000. From problem statement: Inventory 12,500 greater than cost; equipment 25,000 more than book value.
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Problem 4-11 Step 1: Prepare Value Analysis Value Analysis Company Implied FV Parent CGE NCI Value Company Fair Value 250,000 200,000 50,000 Fair Value, Net assets 237,500 190,000 47,500 Goodwill Value Analysis Company Implied FV Parent CGE NCI Value Company Fair Value 250,000 200,000 50,000 Fair Value, Net assets 237,500 190,000 47,500 Goodwill 12,500 10,000 2,500 Parent's share Fair Value Net Assets Fair Value of Net Assets 237,500 Multiply by Parent's Ownership 80% Parent's Share FV of NA 190,000 NCI Share Fair Value Net Assets Fair Value of Net Assets 237,500 Multiply by NCI Ownership 20% NCI Share FV NA 47,500
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Problem 4-11 Step 2: Determination and Distribution Schedule Determination and Distribution Schedule Company Implied FV Parent Share NCI Value 100% 80% 20% Price Paid for Investment 250,000 200,000 50,000 200,000 160,000 40,000 50,000 40,000 10,000 From Problem Statement Price paid x share percentage Book value x share percentage
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Problem 4-11 Step 2: Determination and Distribution Schedule Determination and Distribution Schedule Company Implied FV Parent Share NCI Value 100% 80% 20% Price Paid for Investment 250,000 200,000 50,000 Less Share of Book Value 200,000 160,000 40,000 Excess of cost over book value 50,000 40,000 10,000 Adjustments Key Periods Amount Inventory 12,500 D1 12,500 Equipment 25,000 D2 4 6,250 Goodwill 12,500 D3 50,000 Amortization
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Problem 4-11 Step 2: Adjustments Inventory Profit Deferrals Amount % Profit Amount % Profit In Beginning Inventory 0 0 20,000 50% 10,000 In Ending Inventory 0 0 10,000 50% 5,000 Parent Sub
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Problem 4-11 Step 2: Adjustments Fixed Asset Profit Deferral Original Profit 15,000 Remaining Life 5 Annual Deferral 3,000 Deferral Schedule Beginning Balance 15,000 Year 1 3,000 Balance, year 1 12,000 Year 2 3,000 Balance, year 2 9,000
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Problem 4-11 Step 2: Adjustments Unrealized profit, ending inventory 105,000 Amortization, equipment 6,250 Realized profit, inventory 10,000 Adjusted income 103,750 NCI Share 20% Controlling Share 20,750 Internally generated net income 100,000 80% of Sub adjusted income 83,000 Realized gain 3,000 Controlling interest 186,000 Income Distribution-Sub Income Distribution-Parent Inventory Profit Deferrals Amount % Profit Amount % Profit In Beginning Inventory 0 0 20,000 50% 10,000 In Ending Inventory 0 0 10,000 50% 5,000 Parent Sub Determination and Distribution Schedule Company Implied FV Parent Share NCI Value 100% 80% 20% Price Paid for Investment 250,000 200,000 50,000 Less Share of Book Value 200,000 160,000 40,000 Excess of cost over book value
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This note was uploaded on 03/30/2011 for the course ACT 4491 taught by Professor Magrath during the Spring '11 term at Troy.

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ACT4491 Problems CH04 - Problem 4-11 Step 1: Prepare Value...

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