Question

On January 1, 2018, Vacker Co. acquired 70% of Carper Inc. by paying $630,000. Carper reported...

On January 1, 2018, Vacker Co. acquired 70% of Carper Inc. by paying $630,000. Carper reported common stock on that date of $420,000 with retained earnings of $250,000. Book value equaled fair value for all items on Carper’s balance sheet except for the following:

Book Value:

Land - $40,000

Building (10 yr. remaining life) - $120,000

Copyrights (20 yr. remaining life) - $10,000

Fair Value:

Land - $60,000

Building (10 yr. remaining life) - $150,000

Copyrights (20 yr. remaining life) - $80,000

Carper earned net income and paid cash dividends as follows:

Net Income:

2018 - $105,000

2019 - $135,000

2020 - $150,000

Dividends Paid:

2018 - $50,000

2019 - $60,000

2020 - $80,000

Vecker Co. uses the partial equity method to account for its investment in Carper Inc.

Required:

1. Prepare a schedule to determine goodwill, and the amortization and allocation amounts.

2. Prepare the December 31, 2019, consolidating eliminating entries, in general journal form. (Vacker Co. and Subsidiary: Consolidated Worksheet).

Business   Accounting   
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Answer #1

Fair value of an ESPP = ` 56 - ` 50 = ` 6.00
Number of shares issued = 400 employees X 100 shares / employee= 40,000 shares
Fair value of ESPP which will be recognized as expenses in the year 2012-2013
= 40,000 shares × ` 6 = ` 2,40,000
Vesting period = 1 month
Expenses recognized in 2012-2013 = ` 2,40,000
Journals
Date Particulars Dr.
`
Cr.
`
30.04.2012 Bank A/c (40,000 shares X ` 50) Dr.
Employees compensation expenses A/c Dr.
To, Share Capital A/c (40,000 shares X ` 10)
To, Securities Premium (40,000 shares X ` 46)
( Being shares issued under ESPP @ ` 50.00)
20,00,000
2,40,000
4,00,000
18,40,000

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