Father, Inc., buys 80 percent of the outstanding common stock of Sam Corporation on January 1, 2013, for $760,960 cash. At the acquisition date, Sam's total fair value, including the noncontrolling interest, was assessed at $951,200 although Sam's book value was only $619,000. Also, several individual items on Sam's financial records had fair values that differed from their book values as follows:
|
|
Book Value |
|
Fair Value |
| Land |
$ |
67,400 |
$ |
290,400 |
|
Buildings and equipment
(10-year remaining life)
|
|
335,000 |
|
299,000 |
| Copyright (20-year life) |
|
197,000 |
|
323,000 |
| Notes payable (due in 8 years) |
|
(165,000) |
|
(145,800) |
|
|
For internal reporting purposes, Father, Inc., employs the equity method to account for this investment. The following account balances are for the year ending December 31, 2013, for both companies.
|
|
|
Father |
|
|
Sam |
|
| Revenues |
$ |
(1,465,280 |
) |
$ |
(636,600 |
) |
| Cost of goods sold |
|
788,000 |
|
|
417,000 |
|
| Depreciation expense |
|
308,000 |
|
|
13,000 |
|
| Amortization expense |
|
0 |
|
|
9,850 |
|
| Interest expense |
|
50,200 |
|
|
6,750 |
|
| Equity in income of Sam |
|
(147,920 |
) |
|
0 |
|
|
|
|
|
|
|
|
| Net income |
$ |
(467,000 |
) |
$ |
(190,000 |
) |
|
|
|
|
|
|
|
| Retained earnings, 1/1/13 |
$ |
(1,402,500 |
) |
$ |
(459,000 |
) |
| Net income (above) |
|
(467,000 |
) |
|
(190,000 |
) |
| Dividends paid |
|
260,000 |
|
|
65,000 |
|
|
|
|
|
|
|
|
| Retained earnings, 12/31/13 |
$ |
(1,609,500 |
) |
$ |
(584,000 |
) |
|
|
|
|
|
|
|
| Current assets |
$ |
939,620 |
|
$ |
494,450 |
|
| Investment in Sam |
|
856,880 |
|
|
0 |
|
| Land |
|
309,000 |
|
|
67,400 |
|
| Buildings and equipment (net) |
|
976,000 |
|
|
322,000 |
|
| Copyright |
|
0 |
|
|
187,150 |
|
|
|
|
|
|
|
|
| Total assets |
$ |
3,081,500 |
|
$ |
1,071,000 |
|
|
|
|
|
|
|
|
| Accounts payable |
$ |
(200,000 |
) |
$ |
(162,000 |
) |
| Notes payable |
|
(522,000 |
) |
|
(165,000 |
) |
| Common stock |
|
(300,000 |
) |
|
(100,000 |
) |
| Additional paid-in capital |
|
(450,000 |
) |
|
(60,000 |
) |
| Retained earnings (above) |
|
(1,609,500 |
) |
|
(584,000 |
) |
|
|
|
|
|
|
|
| Total liabilities and equities |
$ |
(3,081,500 |
) |
$ |
(1,071,000 |
) |
|
|
|
|
|
|
|
|
Note: Parentheses indicate a credit balance.
|
Using the acquisition method, prepare the worksheet to consolidate these two companies. (Leave no cells blank - be certain to enter "0" wherever required. Enter consolidation entries for noncontrolling interest in Sam Corporation in the order of (S) Elimination of subsidiary's stockholders' equity and (A) Allocation of subsidiary total fair value in excess of book value. Enter consolidation entries for Investment in Sam in the order of (S) Elimination of subsidiary's stockholders' equity (I) Elimination of intra-entity income 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.)
|
FATHER INC., AND SAM CORPORATION
Consolidated Worksheet
For Year Ending December 31, 2013 |
|
|
|
|
Consolidation Entries |
Noncontrolling |
Consolidated |
| Accounts |
Father |
Sam |
|
Debit |
Credit |
Interest |
Totals |
| Revenues |
$ |
(1,465,280) |
$ |
(636,600) |
|
|
|
|
|
| Cost of goods sold |
|
788,000 |
|
417,000 |
|
|
|
|
|
| Depreciation expense |
|
308,000 |
|
13,000 |
|
|
|
|
|
| Amortization expense |
|
0 |
|
9,850 |
|
|
|
|
|
| Interest expense |
|
50,200 |
|
6,750 |
|
|
|
|
|
| Equity in income of Sam |
|
(147,920) |
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Separate company net income |
$ |
(467,000) |
$ |
(190,000) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Consolidated net income |
|
|
|
|
|
|
|
|
|
| Noncontrolling interest in Sam's income |
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| Controlling interest in CNI |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Retained earnings 1/1 |
$ |
(1,402,500) |
$ |
(459,000) |
|
|
|
|
|
| Net income (above) |
|
(467,000) |
|
(190,000) |
|
|
|
|
|
| Dividends paid |
|
260,000 |
|
65,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Retained earnings 12/31 |
$ |
(1,609,500) |
$ |
(584,000) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Current assets |
|
939,620 |
|
494,450 |
|
|
|
|
|
| Investment in Sam |
|
856,880 |
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Land |
$ |
309,000 |
$ |
67,400 |
|
|
|
|
|
| Buildings and equipment (net) |
|
976,000 |
|
322,000 |
|
|
|
|
|
| Copyright |
|
0 |
|
187,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total assets |
$ |
3,081,500 |
$ |
1,071,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accounts payable |
$ |
(200,000) |
$ |
(162,000) |
|
|
|
|
|
| Notes payable |
|
(522,000) |
|
(165,000) |
|
|
|
|
|
| NCI in Sam 1/1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| NCI in Sam 12/31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common stock |
|
(300,000) |
|
(100,000) |
|
|
|
|
|
| Additional paid-in capital |
|
(450,000) |
|
(60,000) |
|
|
|
|
|
| Retained earnings 12/31 (above) |
|
(1,609,500) |
|
(584,000) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total liabilities and equities |
$ |
(3,081,500) |
$ |
(1,071,000) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|