Question

On January 1, 2013, Starbucks acquired 100% of Dunkin. On this date:

Starbucks acquired 100% of Dunkin’s outstanding common stock for $842,000 in cash.

Dunkin’s Buildings had a FV in excess of BV of $72,000 and remaining Useful Life was 12 years.

Dunkin’s Equipment had a FV in excess of BV of $10,000 and remaining Useful Life was 10 years.

Dunkin had an unrecorded Patent with a FMV $20,000 and remaining Useful Life was 20 years.

Dunkin’s Stockholder’s Equity total balance was $720,000 (no additional paid in capital existed)

During 2013, Dell had the following transactions

Declared and paid dividends of $30,000

Had net income for the year ending 2013 of $100,000

During 2014, Dell had the following transactions

Declared and paid dividends of $20,000

Had net income for the year ending 2014 of $120,000

As of Dec. 31, 2015,

Starbucks and Dunkin reported the following selected balances, which include all revenue and expenses for the year 2015. NOT ALL OF THE BALANCE SHEET ACCOUNTS ARE PRESENTED HERE.

All balances are Normal Balances. Dividends declared in this table represent only 2015 activity

December 31, 2015	Starbucks	Dunkin
Revenues	$ 900,000	$ 300,000
Expenses	600,000	180,000
Dividends Declared	70,000	10,000
Equipment Land Inventory	280,000      330,000      280,000	200,000    250,000 260,000
Buildings	1,540,000	460,000
Cash Common Stock Retained Earnings, January 1, 2015	50,000    (900,000) (1,360,000)	90,000 (400,000)    (490,000)
Liabilities	(330,000)	(250,000)

A-Prepare a schedule of Allocation of Acquisition Date Subsidiary Fair Value, including Goodwill, if any, and include information on excess Fair Value depreciation or amortization, if any.

B-Prepare all the Journal Entries Starbucks (Parent Company) made associated with the Dunkin transactions on Starbucks’s standalone ledger for 2013 and 2014, PRIOR to the consolidation. The activity from the prior page is reproduced here for your convenience

During 2013, Dell had the following transactions

Declared and paid dividends of $30,000

Had net income for the year ending 2013 of $100,000

During 2014, Dell had the following transactions

Declared and paid dividends of $20,000

Had net income for the year ending 2014 of $120,000

During 2015 Activities for Starbucks and Dunkin are reflected in the table above

C-Prepare all of the required Consolidation Journal Entries as of December 31, 2015. Indicate the LETTER

D-Prepare a T-Account for the parent company (Starbuck that reflects all of the postings from the dat of acquisition through the posting of the Consolidation entries. HINT: The ending balance must be zero after all of your postings.

Answer 1

A. Answer

Fair Value Allocation and Annual

Land $20,000

Buildings 72,000 12 8,400

Equipment 10,000 10 1,000

Patent 720,000 1 7200

Total $16,600

Journal Entries for Starbucks and Dunkin as of 2013

Dividends A/c Dr..........$30,000

To Cash A/c...................$30,000

Journal Entries for Starbucks and Dunkin as of 2014

Dividends A/c Dr..........$20,000

To Cash A/c...................$20,000

Trial Balance:

Particulars	Debit	Credit
Cash	90,000
Retained Earnings		1,850,000
Expenses	780,000
Dividends	30,000
Equipment	470,000
Land	550,000
Inventory	460,000
Buildings	50,000
Liabilities		580,000
Total	2,430,000	2,430,000