Problem 2 8 points fesler inc acquired all of the

Problem 2 (8 points)
Fesler Inc. acquired all of the outstanding common stock of Pickett Company on January 1, 2020.
Annual amortization of $22,000 resulted from this transaction. On the date of the acquisition, Fesler
reported retained earnings of $520,000 while Pickett reported a $240,000 balance for retained earnings.
Fesler reported net income of $100,000 in 2020 and $68,000 in 2021, and paid dividends of $25,000 in
dividends each year. Pickett reported net income of $24,000 in 2020 and $36,000 in 2021, and paid
dividends of $10,000 in dividends each year.
If the parent’s net income reflected use of the initial value method, what were the consolidated retained
earnings on December 31, 2021?
Problem 3 (14 points)
On January 1, 2019, Rand Corp. issued shares of its common stock to acquire all of the outstanding
common stock of Spaulding Inc. Spaulding's book value was only $140,000 at the time, but Rand issued
12,000 shares having a par value of $1 per share and a fair value of $20 per share. Rand was willing to
convey these shares because it felt that buildings (ten-year life) were undervalued on Spaulding's records
by $60,000 while equipment (five-year life) was undervalued by $25,000. Any consideration transferred
over fair value of identified net assets acquired is assigned to goodwill.
Following are the individual financial records for these two companies for the year ended December
31, 2022.
Rand
Corp.
Spaulding
Inc.
Revenues $ 372,000 $ 108,000
Expenses (264,000) (72,000)
Equity in subsidiary earnings 25,000 0
Net income $ 133,000 $ 36,000
Retained earnings, January 1, 2022 $ 765,000 $ 102,000
Net income (above) 133,000 36,000
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Dividends paid (84,000) (24,000)
Retained earnings, December 31, 2022 $ 814,000 $ 114,000
Current assets $ 150,000 $ 22,000
Investment in Spaulding Inc. 242,000 0
Buildings (net) 525,000 85,000
Equipment (net) 389,250 129,000
Total assets $ 1,306,250 $ 236,000
Liabilities $ 82,250 $ 50,000
Common stock 360,000 72,000
Additional paid-in capital 50,000 0
Retained earnings, December 31, 2022
(above)
814,000 114,000
Total liabilities and stockholders’ equity $ 1,306,250 $ 236,000
Required:
Prepare a consolidation worksheet for this business combination.
Problem 4 (5 points)
Caldwell Inc. acquired 65% of Club Corp. for $2,600,000. There was no active market for the shares of Club
Corp. Club owned a building and equipment with ten-year useful lives. The combined book value of these
assets was $830,000, and the fair value was $950,000. For Club's other assets and liabilities, book value was
equal to fair value. The total acquisition-date fair value of Club's net assets was $3,500,000.
Determine the amount of the noncontrolling interest as of the date of the acquisition.
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Problem 5 (13 points)
On January 1, 2018, Vacker Co. acquired 70% of Carper Inc. by paying $650,000. This included a $20,000
control premium. Carper reported common stock on that date of $420,000 with retained earnings of $252,000. A
building was undervalued in the company's financial records by $28,000. This building had a ten-year
remaining life. Copyrights of $80,000 were to be recognized and amortized over 20 years.