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for posting-chap 5 prob 14

for posting-chap 5 prob 14 - Problem 14 Cost of 80...

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Problem 14 Cost of 80% investment 272,000 Implied value of 100% investment 340,000 Book value of Bach’s net assets = Book value of Bach’s shareholders’ equity Common shares 200,000 Retained earnings 30,000 230,000 Acquisition differential 110,000 Allocated: FV – BV Inventory (50,000 – 20,000) 30,000 Land (45,000 – 25,000) 20,000 Equipment (78,000 – 60,000) 18,000 Misc. intangibles (42,000 0) 42,000 110,000 Goodwill 0 Acquisition differential Amortization Schedule Balance Amortization Balance Jan. 1 Dec. 31 Dec. 31 Dec. 31 Year 1 Years 1, 2, and 3 Year 4 Year 4 Inventory 30,000 30,000 Land 20,000 20,000 Equipment 18,000 3,600 1,200 13,200 Misc. intangibles 42,000 6,300 2,100 33,600 110,000 39,900 3,300 66,800 Calculation of consolidated net income attributable to Albeniz’s shareholders Year 4 Net income Albeniz 29,700 Less: Dividends from Bach (8,000 × 80%) 6,400 23,300 Net income Bach 17,500 Less: Purchase discrep. amort. 3,300 14,200 80% 11,360 34,660
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Calculation of consolidated retained earnings Dec. 31, Year 4 Retained earnings Albeniz 170,000 Retained earnings Bach 163,500 Acquisition retained earnings 30,000 Increase since acquisition 133,500 Less: purch. discrep. Amortization(39,900 + 3,300) 43,200 90,300 80% 72,240 242,240 Calculation of non-controlling interest Dec. 31, Year 4 Bach Common shares 200,000 Retained earnings
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