Question

On January 1, Year 1, Jacklin Corporation (JC) acquired 60 percent (60,000 shares of $2 par common stock) of Mantz Corporation (MC) for $2,500,000 in cash. The acquisition date fair value of the noncontrolling interest’s shares (40 percent) was $40 per share. JC uses the Initial Value Method for its internal accounting.

At the time of the acquisition MC has the following asset and liability accounts:

Book Value Fair Value Difference

Current Assets $ 500,000 $ 500,000 $ 0

PPE (25-year life) 800,000 1,000,000 200,000

Patents (10–year life) 400,000 900,000 500,000

Land 500,000 800,000 300,000

Liabilities (200,000) (200,000)                    0

   Total Net Assets $2,000,000 $3,000,000 $1,000,000

Information about Mantz Corporation’s Retained earnings account for the years 1 to 6 are shown below.

Mantz

Dividends Increase in Ending

Year Net Income Paid Dividends Book Value Retained Earnings

   1 200,000 50,000 1 50,000 650,000

   2 200,000 100,000 100,000 750,000

   3 250,000 150,000 100,000 850,000

   4 250,000 200,000 50,000 900,000

   5 300,000 200,000 100,000 1,000,000

   6   300,000 200,000 100,000 1,100,000

Totals- $1,500,000 900,000 600,000

Use the information on the previous page and the Jacklin Corporation-Mantz Corporation worksheet to provide consolidated financial statements for Jacklin Corporation for year 6. There are $40,000 of Mantz’s liabilities included in the worksheet that is an accounts payable to Jacklin Corporation. No goodwill impairments have occurred since JC acquired MC

December 31, Year 6 Initial Value

Accounts	Jacklin	Mantz	Debit	Credit	NC Interest	Totals
Income Statement
Revenues	(2,000,000)	(500,000)
Expenses	1,770,000	200,000
Investee Income	(120,000)	0
Net Income	(350,000)	(300,000)
Split net income
Statement of RE
Retained Earnings 1/1	(2,000,000)	(1,000,000)
Net Income	(350,000)	(300,000)
Dividends	150,000	200,000
Retained earnings 12/31	(2,200,000)	(1,100,000)
Balance Sheet
Current Assets	650,000	600,000
Investment in Mantz	2,500,000	0
PPE (net)	4,350,000	1,500,000
Patents	0	200,000
Goodwill	0	0
Land	1,000,000	500,000
Total Assets	8,500,000	2,800,000
Liabilities	(3,500,000)	(200,000)
Noncontrolling int 1/1
Noncontrolling int 12/31
Common Stock and APIC	(2,800,000)	(1,500,000)
Retained earnings	(2,200,000)	(1,100,000)
Total liabilities and equity	(8,500,000)	(2,800,000)

Answer 1

FINANCIAL STATEMENT OF JACKLIN & MANTZ FOR THE YEAR

PARTICULARS	AMT IN $'000	AMT IN $' 000
(A)EQUITY & LIABILITY :-
TOTAL LIABILITES & EQUITY		11300
RETAINED EARNINGS OPENING	3000
ADD:- RETAINED EARNING	3300	6300
NET INCOME		650
LIABILITIES :- EXPENSES	1970
DIVIDANDS	350
LIABILITIES	3700	6020
OTHER LIABILITY		2750
TOTAL		27020
(B) ASSESTS :-
CURRENT ASSESTS	1250
REVENUES	2500
INVESTMENTS	120

PPE	5850
PATENTS	200
LAND	1500
FIXED ASSESTS	11300
CLOSING STOCK	4300
TOTAL		27020