Question

On January 1, 2014, Packard Company purchased an 80% interest in Sage Company for $592,700. On this date Sage Company had common stock of $145,700 and retained earnings of $370,900.

Sage Company’s equipment on the date of Packard Company’s purchase had a book value of $402,500 and a fair value of $626,775. All equipment had an estimated useful life of 10 years on January 2, 2009.

Prepare the December 31 consolidated financial statements workpaper entries for 2014 and 2015 to allocate and depreciate the difference between book value and the value implied by the purchase price, recording accumulated depreciation as a separate balance. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
2014	equipment
	depreciation expense
	difference between implied and book value
	accumulated depreciation
2015	equipment
	retained earnings
	noncontrolling interest
	depreciation expense
	difference between implied and book value
	accumulated depreciation

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Can you also explain how you got your numbers too like the calculations. I don't know what I'm doing. Thanks

Answer 1

Acquisition analysis
Common stock	145700
Retained earnings	370900
Net asset book value	516600
Excess fair value over book value	224275
Net asset fair value	740875
NCI	148175	=592700/0.80*0.20
Parent	592700
Goodwill	0

Differential depreciation
Asset	Excess fair value over book value	useful life	Depreciation
Equipment	224275	10	22427.5
			=224275/10

Equipment value calculation	Excess value
Jan-14	224275
Depreciation for 2014	22427.5
Jan-15	201847.5
Depreciation for 2015	22427.5
Dec-15	179420

		Debit	Credit
2014	Equipment	224275
	Depreciation expense	22427.5
	Difference between implied and book value		224275
	Accumulated depreciation		22427.5
2015	Equipment	201847.5
	Depreciation expense	22427.5
	Difference between implied and book value		201847.5
	Accumulated depreciation		22427.5