Ch5aBW - Prior to Acquisition 1 Jan 20x1 Sales Cost of Sales Oper Expenses Parent Sub Adjustments Equity in S Income Consolidated Net Inc NCI in

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Prior to Acquisition Parent Sub Adjustments Consolidated 1 Jan 20x1 Sales Cost of Sales Oper. Expenses Equity in S Income Consolidated Net Inc. NCI in Net Income Net Income/Loss Parent Ret. Earnings, beg. 8,000 1,900 Net Income/Loss Dividends Declared Ret. Earnings, end 8,000 1,900 Current Assets 6,000 1,400 Property, P, E, net 3,000 1,200 Common Stock 1,000 700 Ret. Earnings, end 8,000 1,900 9,000 9,000 2,600 2,600 AMIS 624 David E. Wallin copyright 2009 All Rights Reserved Chapter 5 a--1
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Setup: Parent paid $2,700 to obtain 90% of Sub. The remaining 10%, which is still actively traded, had a market value of $300 on the date of acquisition. There are no indentifiable intangibles acquired in the acquisition. (10 years remaining) on the Sub's books had a fair value of $1,600. No other assets or liabilities on Sub's books at acquisition were under- or over-valued. At the end of year one, Sub reported $400 in earnings. At end of year two, Sub reported a loss of $200. Acquisition: Acquisition: End Year One: Cash price paid 2,700 $ NCI at acquisition: Total CI NCI Fair value of NCI 300 Book value of Sub - $ Reported Net Inc. 400 $ Total Fair Value PP&E undervalued (10-yr) - Adjustments: Book value of Sub - PPE (400/10) Fair value in excess of book X 10% PP&E undervalued (10-yr) - Share of NI Total goodwill NCI goodwill - NCI in Net Assets - $ Adjustments Split: Goodwill to CI: NTC 100% 90% 10% Acquisition price Less CI share CI goodwill End Year Two: Total CI NCI Goodwill to NCI: Reported Net Inc. (200) $ Total goodwill Adjustments: Less: CI goodwill PPE (400/10) NCI goodwill Share of NI AMIS 624 David E. Wallin copyright 2009 All Rights Reserved Chapter 5 a--2
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At Acquisition Parent Sub Adjustments Consolidated 1 Jan 20x1 Sales Cost of Sales Oper. Expenses Equity in S Income Consolidated Net Inc. NCI in Net Income Net Income/Loss Parent Ret. Earnings, beg. 8,000 1,900 Net Income/Loss Dividends Declared Ret. Earnings, end 8,000 1,900 Current Assets 3,300 1,400 Property, P, E, net 3,000 1,200 Investment in S 2,700 NCI in Net Assets Common Stock 1,000 700 Ret. Earnings, end 8,000 1,900 9,000 9,000 2,600 2,600 AMIS 624 David E. Wallin copyright 2009 All Rights Reserved Chapter 5 a--3
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End Year One Parent Sub Adjustments Consolidated 31 Dec 20x1 Sales 7,500 2,000 Cost of Sales 1,000 1,500 Oper. Expenses 5,700 100 Equity in S Income 324 Consolidated Net Inc. 1,124 400 NCI in Net Income Net Income/Loss Parent 1,124 400 Ret. Earnings, beg. 8,000 1,900 Net Income/Loss 1,124 400 Dividends Declared 600 300 Ret. Earnings, end 8,524 2,000 Current Assets 4,170 1,620 Property, P, E, net 2,600 1,080 Investment in S 2,754 NCI in Net Assets Common Stock 1,000 700 Ret. Earnings, end 8,524 2,000 9,524 9,524 2,700 2,700 AMIS 624 David E. Wallin copyright 2009 All Rights Reserved Chapter 5 a--4
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End Year Two Parent Sub Adjustments Consolidated 31 Dec 20x2 Sales 8,200 1,600 Cost of Sales 1,100 1,650 Oper. Expenses 6,000 150
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This note was uploaded on 08/06/2011 for the course AMIS 624 taught by Professor Wallin during the Summer '11 term at Ohio State.

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Ch5aBW - Prior to Acquisition 1 Jan 20x1 Sales Cost of Sales Oper Expenses Parent Sub Adjustments Equity in S Income Consolidated Net Inc NCI in

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