Ch6+BW - Prior to Acquisition 1 Jan 20x1 Sales Cost of...

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Prior to Acquisition Parent Sub Adjustments Consolidated 1 Jan 20x1 Sales Cost of Sales Oper. Expenses Equity in S Income Net Income - - Ret. Earnings, beg. 8,000 1,900 9,900 Net Income/Loss - - Dividends Declared Ret. Earnings, end 8,000 1,900 - - 9,900 Current Assets 6,000 1,400 7,400 Property, P, E 4,000 1,500 5,500 Accumulated Depr. 1,000 300 1,300 Investment in S Common Stock 1,000 700 1,700 Ret. Earnings, end 8,000 1,900 - - 9,900 10,000 10,000 2,900 2,900 - - 12,900 12,900
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Setup (same as Section 3d): Parent paid $3,000 to obtain 100% of Sub. There are no indentifiable intangible acquired in the acquisition. 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: End Year One: End Year Two: Cash price paid 3,000 $ Total Total Book value of Sub 2,600 Reported Net Inc. 400 $ Reported Net Inc. (200) $ Fair value in excess of book 400 Adjustments: Adjustments: 400 PPE (400/10) (40) PPE (400/10) (40) Total goodwill - $ Equity in S NI 360 $ Equity in S NI (240) $
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At Acquisition Parent Sub Adjustments Consolidated 1 Jan 20x1 If we solve this like 3d, without a push-down, we get: Sales Cost of Sales Oper. Expenses Equity in S Income Net Income - - Ret. Earnings, beg. 8,000 1,900 1,900 j 8,000 Net Income/Loss - - Dividends Declared Ret. Earnings, end 8,000 1,900 1,900 - 8,000 Current Assets 3,000 1,400 4,400 Property, P, E 4,000 1,500 400 j 300 k 5,600 Accumulated Depr. 1,000 300 300 k 1,000 Investment in S 3,000 3,000 j Common Stock 1,000 700 700 j 1,000 Ret. Earnings, end 8,000 1,900 1,900 - 8,000 10,000 10,000 2,900 2,900 3,300 3,300 10,000 10,000
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End Year One Parent Sub Adjustments Consolidated 31 Dec 20x1 if we had not used push down Sales 7,500 2,000 9,500 Cost of Sales 1,000 1,500 2,500 Oper. Expenses 5,700 100 40 m 5,840 Equity in S Income 360 360 k Net Income 1,160 400 400 - 1,160 Ret. Earnings, beg. 8,000 1,900 1,900 j 8,000 Net Income/Loss 1,160 400 400 - 1,160 Dividends Declared 600 300 300 k 600 Ret. Earnings, end 8,560 2,000 2,300 300 8,560 Current Assets 3,900 1,620 5,520 Property, P, E 4,000 1,500 400 j 300 k 5,600 Accumulated Depr. 1,400 420 300 k 40 m 1,560 Investment in S 3,060 3,000 j 60 k Common Stock 1,000 700 700 j 1,000 Ret. Earnings, end 8,560 2,000 2,300 300 8,560 10,960 10,960 3,120 3,120 3,700 3,700 11,120 11,120
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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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Ch6+BW - Prior to Acquisition 1 Jan 20x1 Sales Cost of...

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