56. Consolidation subsequent to date of acquisition—Equity method with noncontrolling interest,AAP, and upstream intercompany inventory saleAssume, on January 1, 2016, a parent company acquired an 80% interest in its subsidiary. The total fairvalue of the controlling and noncontrolling interests was $456,000 over the book value of the subsidiary'sStockholders' Equity on the acquisition date. The parent assigned the excess to the following [A] assets:Patent..Goodwill[A] AssetInitial Fair ValueUseful Life$171,000285,00010 yearsIndefinite$456,00080% of the Goodwill is allocated to the parent. Assume the subsidiary sells inventory to the parent(upstream) which includes that inventory in products that it ultimately sells to customers outside of thecontrolled group. You have compiled the following data as of 2021 and 2022:

Part 2: Explanation:Step 1: Calculation of GoodwillOn January 1, 2016, the parent company acquired…

Answered: 56. Consolidation subsequent to date of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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The following transactions occurred for the period ended regarding LL and its two subsidiaries L1 and L2: On January 1, 2020, LL acquired 60% of the outstanding common stocks of L1. On April 1, 2020, LL acquired 70% of the outstanding common stocks of L2. It is the policy of LL to account all its investment in subsidiary using cost method in its separate financial statements On May 1, 2020, LL sold inventory to L2 at a price of P100,000. On June 1, 2020, L2 resold the inventory coming from LL at a price of P150,000 as follows: 80% to unrelated parties and 20% to L1. On July 1, 2020, L1 sold a new set of inventory to L2 at a price of P200,000. On august 1, 2020, L2 resold the inventory coming from L1 at a price of P300,000 as follows: 40% to unrelated parties and 60% to LL. For the period ended December31, 2020, the affiliates reported the following sales revenue in their separate income statement: o LL – Sales Revenue P3,000,000 o…
Pre-consolidation bookkeeping, upstream intercompany sales, profits in ending inventory - Cost method Assume a parent company owns a 100% controlling interest in its long-held subsidiary. The following excerpts are from the parent’s and subsidiary’s “stand alone” pre-consolidation income statements for the year ending December 31, 2019, prior to any investment bookkeeping or intercompany adjustments: Parent Subsidiary Revenues $4,000,000 $2,500,000 Cost of goods sold (2,800,000) (1,500,000) Gross profit 1,200,000 1,000,000 Selling general & administrative expenses (780,000) (606,000) Net income $420,000 $394,000 On January 1, 2019, neither company held any inventories purchased from the other affiliate. All of the sales made by either company have the same gross margin regardless of whether they are made to affiliates or non-affiliates. The subsidiary declared and paid $200,000 of dividends during 2019. Assume during the year ended December 31, 2019, the subsidiary sold…
1. P Company acquired 70% interest in S Company in 2019. S reported net income of P80,000 and P90,000 for 2019 and 2020 respectively. During 2019, S sold merchandise to P for P10,000 at a profit of P2,000. The merchandise was later resold by P to outsiders for P15,000 during 2020. For consolidation purposes, what is the non-controlling interest in net income of S for 2020? * Your answer
Equity method and consolidations Assume that a parent company acquired 80% of the outstanding voting common stock of a subsidiary on January 1, 2018. On the acquisition date, the identifiable net assets of the subsidiary had fair values that approximated their recorded book values except for a patent, which had a fair value of $200,000 and no recorded book value. On the date of acquisition, the patent had five years of remaining useful life and the parent company amortizes its intangible assets using straight line amortization. During the year ended December 31, 2019, the subsidiary recorded sales to the parent in the amount of $240,000. On these sales, the subsidiary recorded pre-consolidation gross profits equal to 25%. Approximately 30% of this merchandise remains in the parent’s inventory at December 31, 2019. The following summarized pre-consolidation financial statements are for the parent and the subsidiary for the year ended December 31, 2019: Investor Investee Income…
Assigning bargain purchase gain (i.e., "negative goodwill") to controlling and noncontrolling interests Assume that on July 1, 2013, a parent company paid $1,740,000 to purchase a 75% interest in a subsidiary's voting common stock. On that date, the fair value of the 25% interest not purchased by the parent company is $575,000. The acquisition-date fair value of the identifiable net assets of the subsidiary is $2,400,000. What is the amount of goodwill assigned to the controlling and noncontrolling interests, respectively, on the acquisition date? $60,000 bargain purchase gain assigned to the controlling interest and $10,000 bargain purchase gain assigned to the noncontrolling interest $60,000 goodwill assigned to the controlling interest and $10,000 goodwill assigned to the noncontrolling interest $35,000 bargain purchase gain assigned to the controlling interest and $35,000 bargain purchase gain assigned to the noncontrolling interest $85,000 bargain purchase gain assigned…
1. Nicole Company acquires 75% of Carl John Company (CJC) for P6,000,000. The carrying and fair values of CJC’s net assets at the time of acquisition are P4,500,000 and P4,900,000, respectively.Required:a. Determine the goodwill or gain on bargain purchase from the above acquisition if the non-controlling interest (NCI) is to be valued on a proportionate basis. b. Determine the goodwill or gain on bargain purchase from the above acquisition if the NCI is to be valued on a fair value basis.2. The Statement of Financial Position (SFP) of Arthur Corporation on June 30, 202X is presented below:Current Assets P195,000Land 1,320,000Building 660,000Equipment 525,000Total Assets P2,700,000Liabilities P525,000Ordinary Shares, P5 par 900,00Share Premium 825,000Retained Earnings 450,000Total Equities P2,700,000All the assets and liabilities of Arthur were assumed to approximate their fair values except for land and building. It is estimated that the land has a fair value of P2,100,000, and the…
1. Nicole Company acquires 75% of Carl John Company (CJC) for P6,000,000. The carrying and fair values of CJC's net assets at the time of acquisition are P4,500,000 and P4,900,000, respectively. Required: a. Determine the goodwill or gain on bargain purchase from the above acquisition if the non-controlling interest (NCI) is to be valued on a proportionate basis. b. Determine the goodwill or gain on bargain purchase from the above acquisition if the NCI is to be valued on a fair value basis.
Consolidated net income and net income attributable to the noncontrolling interest Assume that on January 1, 2012, a parent company acquired a 70% interest in a subsidiary's voting common stock. On the date of acquisition, the fair value of the subsidiary's net assets equaled their reported book values except for machinery and equipment, which had a fair value of $460,000 and a reported book value of $250,000. The machinery and equipment had a 5 year remaining useful life and no salvage value. The following are the highly summarized pre-consolidation income statements of the parent and subsidiary for the year ended December 31, 2013: Income Statement Parent Subsidiary Revenues $2,160,000 $288,000 71,400 (1,440,000) (144,000) $791,400 $144,000 Equity income Expenses Net income For the year ended December 31, 2013, what amounts will be reported for (1) consolidated net income and (2) net income attributable to the noncontrolling interest, respectively, in the parent's consolidated…
Parent Company acquired Subsidiary Company in two stages: In 2017, Parent acquired a 30% equity interest for cash consideration of P320,000 when the fair value of Subsidiary’s identifiable net assets was P800,000. In 2021, Parent acquired a further 50% equity interest for cash consideration of P750,000. On the acquisition date, the fair value of Subsidiary’s identifiable net assets was P920,000. The fair value of Parent’s original 30% holding was P400,000 and the fair value of the non-controlling interest is assessed as P280,000. NCI is measured at their share of net assets. What is the amount of goodwill (gain or bargain purchase) from the step acquisition?
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Assume a parent company acquired 80% of the outstanding voting common stock of a subsidiary on January 1, 2018. On the acquisition date, the identifiable net assets of the subsidiary had fair values that approximated their recorded book values except for a patent, which had a fair value of $200,000 and no recorded book value. On the date of acquisition, the patent had five years of remaining useful life and the parent company amortizes its intangible assets using straight line amortization. During the year ended December 31, 2019, the subsidiary recorded sales to the parent in the amount of $240,000. On these sales, the subsidiary recorded pre-consolidation gross profits equal to 25%. Approximately 30% of this merchandise remains in the parent’s inventory at December 31, 2019. The following summarized pre-consolidation financial statements are for the parent and the subsidiary for the year ended December 31, 2019: Investor Investee Income statement: Revenues $4,800,000…

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