9621-9-6P

AID: 1150 | 07/11/2013

(A)
Computation and allocation of difference between implied value and book value
(common stock) is as follows:
Particulars

Parent Share

Purchased price and implied value

Less: Book value of equity acquired
Common Stock
Retained Earnings ($100,000/$500,000) X $200,000
Difference beween implied and book value
Allocated to land
Balance

NoncontrollingEntire
share value

600,000.00

$
$
$
$
$

(360,000.00)
(144,000.00)
96,000.00
(96,000.00)
-

$ 66,667.00

$
$
$
$
$

$ (400,000.00)
$ (160,000.00)
$ 106,667.00
$ (106,667.00)
$
-

(40,000.00)
(16,000.00)
10,667.00
(10,667.00)
-

666,667.00

Computation and allocation of difference between implied value and book value
(Preferred stock) is as follows:
Particulars

Parent Share

Purchased price and implied value

Less: Book value of equity acquired
Preferred Stock
Retained Earnings ($400,000/$500,000) X $200,000
Difference beween implied and book value

NoncontrollingEntire
share value

60,000.00

$ 90,000.00

150,000.00

$ (40,000.00) $ (60,000.00) $ (100,000.00)

$ (16,000.00) $ (24,000.00) $ (40,000.00)
$
4,000.00 $ 6,000.00 $
10,000.00

*Retained Earnings would be based on the capital balance as there are no preferred
dividends in arrears.

(B)
Consolidated statements workpapers for the year ended December 31, 2011 is as follows:
P Corporation and Subsidiary
For the Year Ended December 31, 2011
P Company

Income Statement
Sales
Other revenue
Total Revenue
Cost of Goods Sold
Other Expense
Net/Consolidated Income
Noncontrolling interest in consolidated Income
Preferred Stock ($24,000* X .60)
Common Stock ($96,000 X .10)
*($100/$500X $120,000)
Net Income to Retained Earnings
Retained Earnings Statement
Retained Earnings, 1/1
P Company
S Company
Preferred Stock
Common Stock
Net Income from above
Dividends Declared:
P Company
S Company

$
$
$
$
$
$

S Company

890,000
91,000
981,000
500,000
330,000
151,000

$ 151,000

$
$
$
$
$
$

750,000
50,000
800,000
400,000
280,000
120,000

$ 120,000

$ 560,000

Balance Sheet
Current Assets
Investment in S Co. Stock
Investment in S Co.Bonds
Other assets

Liabilities
Preferred Stock
Common Stock
P Company
S Company
Retained Earnings from above
1/1 Noncontrolling Interest

Elimination
Dr.
Cr.

NoncontrollingConsolidated
Interest
Balances

$ 1,640,000
$
73,000
$ 1,713,000
$ 900,000
$ 610,000
$ 203,000

(2) 68,000

$ 68,000

14,400

$
$

9,600
24,000

$
$

(24,000)
179,000

650,000

179,000

$ (15,600)
$ (6,400)
$
2,000 $

829,000

(3) 10,000 (1) 100,000

$ 151,000

$ 74,000
$ 256,000
$ 120,000

$ 711,000

$ (26,000)
$ (64,000)
$ 360,000 $ 408,000

$ 810,000
$ 600,000
$
60,000
$ 1,276,000
$ 2,746,000

$ 380,000

$ 1,335,000

$ 120,000
$ 100,000

$ 600,000
$ 980,000

(3) 74,000
(4) 256,000
$ 68,000

$
(2) 10,400
(2) 57,600
$ 168,000

24,000

$ 1,190,000
(1) 86,400 (4) 686,400
(1) 13,600 (3) 73,600
(4) 106,667

$ 1,982,667
$ 3,172,667
$ 1,455,000

(3) 100,000

$ 700,000

12/31 Noncontrolling Interest

Total

$ 711,000

$ 400,000
$ 360,000

$ 2,746,000

$ 980,000

(4) 400,000
$ 408,000 $ 168,000 $
2,000
(3) 110,400 $ 110,400
(4) 76,267 $ 76,267
$ 188,667
######## $1,114,667

700,000

829,000

$ 188,667
$ 3,172,667

1) To establish the reciprocity.

2) To eliminate the dividends of intercompany.
3) To eliminate the preferred stock investment account and create non-controlling
interest account.
4) To eliminate the common stock investment account and create non-controlling
interest account.
Supporting computation of workpaper is as follows:
(1)
Allocation of beginning retained earnings:
Preferred Stock
Dividends in arrears-1/1/2011
Participating (1/5)

$
$
$

10,000.00
64,000.00
74,000.00

Common Stock

(4/5)

$
$
$

256,000.00
256,000.00

(2)
Computation of dividend allocation for year 2011 is as follows:

Total
$
$
$

10,000.00
320,000.00
330,000.00

Preferred Stock
Dividends in arrears-1/1/2011 $
Current year's dividend
$
Participating dividend (1/5)
$
$

10,000.00
10,000.00
6,000.00
26,000.00

Common Stock
$
$
$
$

(4/5)

40,000.00
24,000.00
64,000.00

Total
$
$
$
$

10,000.00
50,000.00
30,000.00
90,000.00

(3)
Computation of net income allocation for year 2010 is as follows:
Preferred Stock
Current year's dividend
Participating (1/5)

$
$
$

10,000.00
24,000.00
34,000.00

Common Stock

(4/5)

$
$
$

96,000.00
96,000.00

Total
$
$
$

10,000.00
120,000.00
130,000.00

(4)
Computation of net income allocation for year 2011 is as follows:
Preferred Stock
Current year's dividend
Participating (1/5)

$
$
$

10,000.00
14,000.00
24,000.00

Common Stock

(4/5)

$
$
$

40,000.00
56,000.00
96,000.00

Total
$
$
$

50,000.00
70,000.00
120,000.00