SCh03 - Student Name: Instructor Class: McGraw-Hill/Irwin...

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Student Name: Instructor Class: McGraw-Hill/Irwin Problem 03-24 Part a. Michael Company and Aaron Company - Fair Value allocation and Annual Amortization Aaron fair value $470,000 Book value of subsidiary (360,000) Excess fair over book value $110,000 Correct! Annual Assigned to specific accounts Life Excess based on fair market value: (years) Amortizations Royalty agreements $60,000 6 $10,000 Trademark 50,000 10 5,000 Total $110,000 $15,000 Correct! Correct! -Conversion to initial value method for years prior to 2013 Aaron retained earnings, 1/1/13 $490,000 Retained earnings at date of purchase (230,000) Increase since date of purchase $260,000 Excess amortization expenses (60,000) Conversion to equity method for years $200,000 prior to 2013 Correct!
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Student Name: Instructor Class: McGraw-Hill/Irwin Problem 03-24 Part a. Consolidated Worksheet MICHAEL COMPANY AND CONSOLIDATED SUBSIDIARY Consolidation Worksheet For Year Ending December 31, 2013 Michael Aaron Consolidation Entries Consolidated Accounts Company Company Debit Credit Totals Revenues $(610,000) $(370,000) $(980,000) Correct! Cost of goods sold 270,000 140,000 410,000 Correct! Amortization expense 115,000 80,000 [E] 15,000 210,000 Correct! Dividend income (5,000) - [ I ] 5,000 - Correct! Net income $(230,000) $(150,000) $(360,000) Correct! Retained earnings, 1/1 $(880,000) [C] 200,000 $(1,080,000) Correct! (490,000) [S] 490,000 - Correct! Net income (230,000) (150,000) (360,000) Correct! Dividends paid 90,000 5,000 [ I ] 5,000 90,000 Correct! Retained earnings, 12/31 $(1,020,000) $(635,000) $(1,350,000) Correct! Cash $110,000 $15,000 $125,000 Correct! Receivables 380,000 220,000 600,000 Correct! Inventory 560,000 280,000 840,000 Correct! Investment in Aaron Co. 470,000 - [C] 200,000 [S] 620,000 - Correct! [A] 50,000 Copyrights 460,000 340,000 800,000 Correct! Royalty agreements 920,000 380,000 [A] 20,000 [E] 10,000 1,310,000 Correct! Trademark - - [A] 30,000 [E] 5,000 25,000 Correct! Total assets $2,900,000 $1,235,000 $3,700,000 Correct! Liabilities $(780,000) $(470,000) $(1,250,000) Correct! Preferred stock (300,000) - (300,000) Correct! Common stock (500,000) (100,000) [S] 100,000 (500,000) Correct! Additional paid-in capital (300,000) (30,000) [S] 30,000 (300,000) Correct! Retained earnings, 12/31 (1,020,000) (635,000) (1,350,000) Correct! Total liabilities and equity $(2,900,000) $(1,235,000) $(3,700,000) Correct! Parentheses indicate a credit balance.
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Student Name: Instructor Class: McGraw-Hill/Irwin Problem 03-24 Part b. Equity method - What account balances would be altered on Michael's financial statements? New Account Balance Equity in Earnings of Aaron $135,000 Correct! Retained earnings, 1/1/13 1,080,000 Correct! Investment in Aaron
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This note was uploaded on 05/11/2011 for the course ACCT 5140 taught by Professor Wilnoor during the Spring '11 term at UCLA.

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SCh03 - Student Name: Instructor Class: McGraw-Hill/Irwin...

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