Explain the consolidation entries for nci

Question

The Krause Corporation acquired 80 percent of the 100,000 outstanding voting shares of Leahy, Inc., for $7.00 per share on January 1, 2012. The remaining 20 percent of Leahy's shares also traded actively at $7.00 per share before and after Krause's acquisition. An appraisal made on that date determined that all book values appropriately reflected the fair values of Leahy's underlying accounts except that a building with a 5-year life was undervalued by $65,000 and a fully amortized trademark with an estimated 10-year remaining life had a $73,000 fair value. At the acquisition date, Leahy reported common stock of $100,000 and a retained earnings balance of $237,000.

Following are the separate financial statements for the year ending December 31, 2013:

 

		Krause Corporation				Leahy, Inc.
Sales		$	(728,000	)		$	(304,000	)
Cost of goods sold			232,000				136,000
Operating expenses			334,000				74,000
Dividend income			(16,000	)			0
Net income		$	(178,000	)		$	(94,000	)
Retained earnings, 1/1/13		$	(776,000	)		$	(307,000	)
Net income (above)			(178,000	)			(94,000	)
Dividends paid			70,000				20,000
Retained earnings, 12/31/13		$	(884,000	)		$	(381,000	)
Current assets		$	402,000			$	179,000
Investment in Leahy, Inc.			560,000				0
Buildings and equipment (net)			790,000				323,000
Trademarks			152,000				225,000
Total assets		$	1,904,000			$	727,000
Liabilities		$	(700,000	)		$	(246,000	)
Common stock			(320,000	)			(100,000	)
Retained earnings, 12/31/13 (above)			(884,000	)			(381,000	)
Total liabilities and equities		$	(1,904,000	)		$	(727,000	)

Note: Parentheses indicate a credit balance.

a.

Prepare a worksheet to consolidate these two companies as of December 31, 2013. (Leave no cells blank - be certain to enter "0" wherever required. Enter the consolidation entries for NCI & Investment in Leahy, in the order of (S) Elimination of subsidiary's stockholders' equity and (A) Allocation of subsidiary total fair value in excess of book value. Input all amounts as positive values except for the credit balances which should be entered with the minus sign.)

 

KRAUSE CORPORATION AND LEAHY, INC. Consolidation Worksheet For Year Ending December 31, 2013
		Krause				Consolidation Entries		Noncontrolling	Consolidated
Accounts	corporation		Leahy inc.			Debit	Credit	Interest	Totals
Sales		(728,000)		(304,000)
Cost of goods sold		232,000		136,000
Operating expenses		334,000		74,000
Dividend income		(16,000)		0
Separate company net income		(178,000)		(94,000)
Consolidated net income
NCI in Leahy's income
Krause's interest in consolidated income
Retained earnings, 1/1		(776,000)		(307,000)
Net income (above)		(178,000)		(94,000)
Dividends paid		70,000		20,000
Retained earnings, 12/31		(884,000)		(381,000)
Current assets		402,000		179,000
Investment in Leahy		560,000		0
Buildings and equipment (net)		790,000		323,000
Trademarks		152,000		225,000
Goodwill		0		0
Total assets		1,904,000		727,000
Liabilities		(700,000)		(246,000)
Common stock		(320,000)		(100,000)
Retained earnings, 12/31 (above)		(884,000)		(381,000)
NCI in Leahy, 1/1
NCI in Leahy, 12/31
Total liabilities and equities		(1,904,000)		(727,000)

 

b.	Prepare a 2013 consolidated income statement for Krause and Leahy. (Input all amounts as positive values.)

 

KRAUSE CORPORATION AND LEAHY, INC.
Consolidated Income Statement
December 31, 2013
			$
	$
Total expenses
			$
			$

 

c.	If instead the noncontrolling interest shares of Leahy had traded for $4.75 surrounding Krause's acquisition date, what is the impact on goodwill?

Goodwill to $