Determining ending consolidated balances in the second
year following the acquisition—Equity method
Assume a parent company...
Determining ending consolidated balances in the second
year following the acquisition—Equity method
Assume a parent company acquired a subsidiary on January 1,
2018. The purchase price was $760,000 in excess of the subsidiary’s
book value of Stockholders’ Equity on the acquisition date, and
that excess was assigned to the following [A] assets:
[A] Asset
Original
Amount
Original
Useful Life
(years)
Property, plant and equipment (PPE), net
$360,000
12
Goodwill
400,000
Indefinite
$760,000
The AAP asset relating to undervalued PPE with...
Parent acquired Subsidiary on January
1, 2020 at a price $450,000 in excess of book value....
Parent acquired Subsidiary on January
1, 2020 at a price $450,000 in excess of book value. Of that
excess, $350,000 was allocated to an unrecorded patent with a
10-year life, with the remainder to goodwill. The parent uses the
equity method to account for its investment in its subsidiary.
In 2021, Subsidiary sold to Parent
land having a book value of $90,000 for a total price of
$244,000.
Financial statements of the two
companies for the year ended December 31,...
Consolidation several years subsequent to date of
acquisition—Equity method
Assume that a parent company acquired a...
Consolidation several years subsequent to date of
acquisition—Equity method
Assume that a parent company acquired a subsidiary on January 1,
2014. The purchase price was $665,000 in excess of the subsidiary’s
book value of Stockholders’ Equity on the acquisition date, and
that excess was assigned to the following [A] assets:
[A] Asset
Original
Amount
Original
Useful
Life
Property, plant and equipment (PPE), net
$140,000
16
years
Patent
245,000
7
years
License
105,000
10
years
Goodwill
175,000
Indefinite
$665,000
The [A]...
Assume that our company owns a subsidiary operating in Germany.
The subsidiary has adopted the Euro...
Assume that our company owns a subsidiary operating in Germany.
The subsidiary has adopted the Euro (€) as its functional currency.
Following are the subsidiary’s financial statements (in €) for the
most recent year:
Subsidiary (in €)
Income statement:
Sales
8,000,000
Cost of goods sold
(5,100,000)
Gross Profit
2,900,000
Operating expenses
(1,490,000)
Depreciation
(405,000)
Remeasurement gain or loss
Net income
1,005,000
Statement of retained earnings:
BOY retained earnings
4,615,000
Net income
1,005,000
Dividends
(118,000)
Ending retained earnings
5,502,000
Balance...
Parent acquired Subsidiary on January 1, 2016, at a price
$300,000 in excess of book value....
Parent acquired Subsidiary on January 1, 2016, at a price
$300,000 in excess of book value. Of that excess, $200,000 was
allocated to an unrecorded patent with a 10-year life, with the
remainder to goodwill. The parent uses the equity method to account
for its investment in its subsidiary.
In 2017, Subsidiary sold to Parent land having a book value of
$90,000 for a total price of $145,000.
Financial statements of the two companies for the year ended
December 31,...
Assume that our subsidiary reports the following financial
statements in Brazilian Real (R$):
Subsidiary
(in R$)...
Assume that our subsidiary reports the following financial
statements in Brazilian Real (R$):
Subsidiary
(in R$)
Income statement:
Sales
2,000,000
Cost of goods sold
(1,200,000)
Gross Profit
800,000
Operating expenses
(410,000)
Net income
390,000
Statement of retained earnings:
BOY retained earnings
978,500
Net income
390,000
Dividends
(39,000)
Ending retained earnings
1,329,500
Balance sheet:
Assets
Cash
318,600
Accounts receivable
627,000
Inventory
508,800
PPE, net
1,603,700
Total Assets
3,058,100
Liabilities and Stockholders’ Equity
Current Liabilities
323,400
Long-term Liabilities
635,200
Common Stock...
In January 1, 2014 James Company has acquired 85% of LuLu
Company for
$2,125,000
on the...
In January 1, 2014 James Company has acquired 85% of LuLu
Company for
$2,125,000
on the date of the acquisition the subsidiary had retained earnings
$650,000 and a capital of $1,100,000.
Separate balance sheet as of 1 January 2014 for James and its
Subsidiary.
Description
Parents
Subsidiary
Cash
60,000
35,000
Receivable
35,000
40,000
Land
1,550,000
550,000
Property
1,500,000
1,200,000
Investment in Subsidiary
2,125,000
-
Total asset
5,270,000
1,825,000
Account payable
50,000
60,000
Other liabilities
67,000
15,000
Capital stock
3,900,000
1,100,000...
On January 1, 20X1, Parent Company purchased 80% of the common
stock of Subsidiary Company for...
On January 1, 20X1, Parent Company purchased 80% of the common
stock of Subsidiary Company for $316,000. On this date, Subsidiary
had common stock, other paid-in capital, and retained earnings of
$40,000, $120,000, and $190,000, respectively. Net income and
dividends for 2 years for Subsidiary Company were as follows:
20X1 20X2
Net income $50,000 $90,000
Dividends 10,000 20,000
On January 1, 20X1, the only tangible assets of Subsidiary that
were undervalued were inventory and building. Inventory, for which
FIFO is...
Consolidation at the end of the first year subsequent to
date of acquisition—Cost method (purchase price...
Consolidation at the end of the first year subsequent to
date of acquisition—Cost method (purchase price equals book
value)
Assume that the parent company acquires its subsidiary on January
1, 2016, by exchanging 31,500 shares of its $1 par value Common
Stock, with a market value on the acquisition date of $40 per
share, for all of the outstanding voting shares of the acquiree.
You have been charged with preparing the consolidation of these two
companies at the end of...
In January 1, 2014 James Company has acquired 85% of LuLu
Company for
$2,125,000
on the...
In January 1, 2014 James Company has acquired 85% of LuLu
Company for
$2,125,000
on the date of the acquisition the subsidiary had retained earnings
$650,000 and a capital of $1,100,000.
Separate balance sheet as of 1 January 2014 for James and its
Subsidiary.
Description
Parents
Subsidiary
Cash
60,000
35,000
Receivable
35,000
40,000
Land
1,550,000
550,000
Property
1,500,000
1,200,000
Investment in Subsidiary
2,125,000
-
Total asset
5,270,000
1,825,000
Account payable
50,000
60,000
Other liabilities
67,000
15,000
Capital stock
3,900,000
1,100,000...