Chapter 4-17 - $8,000 CONSOLIDATION TOTALS: Sales (1)...

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CHAPTER 4 CONSOLIDATED FINANCIAL STATEMENTS AND OUTSIDE OWNERSHIP Answers to Problems 30. (20 Minutes) (A variety of consolidated balances-midyear acquisition) Book value of Damon, 1/1/06 (stockholders' equity accounts) . ............. $1,400,000 Increase in book value: Net Income (revenues less cost of goods sold and expenses) . ................. $120,000 Dividends . ......................................... (20,000 ) Change during year . ................................. $100,000 Change during first six months of year 50,000 Book value of Damon, 7/1/06 (date of purchase) . $1,450,000 Purchase price . .............................................. $1,330,000 Book value of Damon (above) × 80%. ........... (1,160,000 ) Purchase price in excess of book value. ....... $170,000 Annual Excess Excess purchase price assigned based Life Amortizations on fair value: Buildings ($100,000 × 80%) . .......................... 80,000 10 years $8,000 Goodwill . ......................................................... $90,000 indefinite -0- Total . .........................................................
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Unformatted text preview: $8,000 CONSOLIDATION TOTALS: Sales (1) $1,050,000 Cost of goods sold (2) (540,000) Operating expenses (3) (254,000) Noncontrolling Interest (4) (12,000 ) Net Income $244,000 (1) $800,000 Ortiz revenues plus $250,000 (post-acquisition subsidiary revenue) (2) $400,000 Ortiz COGS plus $140,000 (post-acquisition subsidiary COGS) (3) $200,000 Ortiz operating expenses plus $50,000 (post-acquisition subsidiary operating expenses) plus six month excess amortization of $4,000 (4) 20% of $60,000 post-acquisition subsidiary income (120,000 year) Retained Earnings, 1/1/06 = $1,400,000 (the parent balance because the subsidiary was acquired during the current year) Buildings (net) = $1,076,000 (add the two book values and the purchase price allocation after taking onehalf year excess amortization) Land = $800,000 (add the two book values) Goodwill = $90,000 (the original allocation)...
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Chapter 4-17 - $8,000 CONSOLIDATION TOTALS: Sales (1)...

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