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# ch04_hw - Chapter 4 63 Chapter 4 CONSOLIDATION TECHNIQUES...

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Chapter 4 63 Chapter 4 CONSOLIDATION TECHNIQUES AND PROCEDURES SOLUTIONS TO EXERCISES Solution E4-1 1 d 6 d 2 a 7 b 3 a 8 b 4 d 9 a 5 b 10 b Solution E4-2 Preliminary computations: Investment cost January 2, 2006 \$300,000 Less: Book value acquired (\$250,000 net assets × 80%) (200,000 ) Excess cost over book value acquired \$100,000 Excess allocated to: Inventory (\$12,500 × 80%) \$ 10,000 Remainder to goodwill 90,000 Excess cost over book value acquired \$100,000 1 Income from Sally Forth Ponder’s share of Sally Forth’s reported income (\$70,000 × 80%) \$ 56,000 Less: Excess allocated to inventory (10,000 ) Income from Sally Forth for 2006 \$ 46,000 2 Noncontrolling interest expense Sally Forth’s net income \$70,000 × 20% noncontrolling interest percentage = \$ 14,000 3 Noncontrolling interest December 31, 2006 Sally Forth’s equity \$260,000 × 20% noncontrolling interest percentage = \$ 52,000 4 Investment in Sally Forth December 31, 2006 Investment cost January 2, 2006 \$300,000 Add: Income from Sally Forth (given) 50,000 Less: Dividends (\$60,000 × 80%) (48,000 ) Investment in Sally Forth December 31, 2006 \$302,000 5 Consolidated net income 2006 \$180,200 63

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64 Consolidation Techniques and Procedures Solution E4-3 1 c \$350,000 (\$150,000 + \$220,000 - \$20,000 intercompany) Preliminary computations for 2 and 3 Investment cost on January 1, 2006 \$15,000 Book value of interest acquired (\$15,000 × 70%) 10,500 Goodwill \$ 4,500 2 D Primrose’s separate income for 2008 \$12,000 Loss from investment in Starman (\$500 × 70%) (350 ) Consolidated net income for 2008 \$11,650 3 Investment cost January 1, 2006 \$15,000 Add: Share of income less dividends 2006 2008 (\$700 income - \$500 dividends) × 70% 140 Investment balance December 31, 2008 \$15,140 64
Chapter 4 65 Solution E4-4 Preliminary computations Investment cost \$580,000 Book value acquired (\$600,000 × 80%) 480,000 Total excess cost over book value acquired \$100,000 Excess allocated to: Equipment (5 year life) (\$50,000 × 80%) \$ 40,000 Patents (10 year amortization period) 60,000 Total excess cost over book value acquired \$100,000 Income from Stine 2007 2008 80% of Stine’s reported income \$96,000 \$120,000 Less: Depreciation of excess allocated to equipment (8,000) (8,000) Less: Amortization of patents (6,000 ) (6,000 ) Income from Stine \$82,000 \$106,000 1a Consolidated net income for 2007 Penair’s net income = consolidated net income under equity Method \$340,000 1b Investment in Stine December 31, 2007 Cost January 1, 2007 \$580,000 Add: Income from Stine 2007 82,000 Less: Dividends from Stine 2007 (\$80,000 × 80%) (64,000 ) Investment in Stine December 31, 2007 \$598,000 1c Noncontrolling interest expense 2007 (\$120,000 × 20%) \$ 24,000 1d Noncontrolling interest December 31, 2008 Stine’s equity December 31, 2006 \$600,000 Add: Income less dividends for 2007 and 2008 100,000 Stine’s equity December 31, 2008 700,000 Noncontrolling interest percentage 20 % Noncontrolling interest December 31, 2008

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## This homework help was uploaded on 04/05/2008 for the course ACCT 401 taught by Professor Schoderbek during the Spring '08 term at Rutgers.

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ch04_hw - Chapter 4 63 Chapter 4 CONSOLIDATION TECHNIQUES...

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