FV of Acquisition $ 550,000 Account

Less: BV of Acquisition $ 350,000 TM

= Excess FV over BV $ 200,000 CR
ALLOCATIONS: Equip
Trademarks $ 100,000 160000 FV - 60000 BV Total
Customer Relationships $ 75,000
Equipment $ (30,000) 312000 FV - 342000 BV
= Goodwill $ 55,000 Revenues
COGS
Deprec Exp

The equity method, not initial value or partial equity, must be used because Amort
the calculation involves taking away amortization from the subsidiary's = NI
income. The partial equity method does not use the amortization in it.

The net income would have been 222000 if the partial equity method would
have been used.
 The company needs to determine the excess fair value amount.

FV-BV / years = amort

$ 100,000 indef $ -
$ 75,000 5 $ 15,000
$ (30,000) 10 $ (3,000)
$ 12,000

$ (520,000)
$ 228,000
$ 70,000
$ (222,000)
$ 12,000
$ (210,000)
 Account Amount
Revenues $ 1,645,000 1125000+520000
COGS $ 528,000 228000+300000
Depreciation Expense $ 142,000 70000+75000-((312000-342000)/10)
Amortization Expense $ 40,000 25000+0+(75000/5)
O Net Income $ -
P Net Income $ 935,000
Retained Earnings 1/1 $ 700,000 Subsidiary RE absorbed by parent
Dividends Declared $ 142,000 O paid div in same pd
Cash $ 290,000 105000+185000
Receivables $ 281,000 225000+56000
Inventory $ 310,000 135000+175000
Investment in O $ - Replaced with subsidiary's asset and liability accounts.
Trademarks $ 634,000 474000+60000+(160000-60000)
Customer Relationships $ 60,000 75000-15000
Equipment (net) $ 1,170,000 925000+272000+(312000-342000)+((312000-342000)/3)
Goodwill $ 55,000 from a
Total Assets $ 2,800,000 sum of cash through goodwill
Liabilities $ 907,000 771000+136000
Common Stocks $ 400,000 only P because S was purchased in the acquisition
Retained Earnings 12/31 $ 1,493,000 bb 700000 + ni 935000 - div 142000
Liabilities + Equity $ 2,800,000 L+CS+RE
 The Net income for O would be 0 since the balance
that would be reported by the parent serves to
eliminate the subsidiary's accounts that they use to
calculate their net income amount. P would still have
net income of 935000.

0-342000)/3)
 Account P Corporation O Corporation Consolidation Entries
Debit Credit
Revenues $ (1,125,000) $ (520,000)
COGS $ 300,000 $ 228,000
Depreciation Expense $ 75,000 $ 70,000 E $ 3,000
Amortization Expense $ 25,000 $ - E $ 15,000
Income from O $ (210,000) $ - I $ 210,000
Net Income $ (935,000) $ (222,000)

Retained Earings 1/1 $ (700,000) $ (250,000) S $ 250,000

Net Income $ (935,000) $ (222,000)
Dividends Declared $ 142,000 $ 80,000 D $ 80,000
Retained Earnings 12/31 $ (1,493,000) $ (392,000)

Cash $ 185,000 $ 105,000

Receivables $ 225,000 $ 56,000
Inventory $ 175,000 $ 135,000
Investment in O $ 680,000 $ - D $ 80,000 A $ 200,000
I $ 210,000
E $ -
S $ 350,000
Trademarks $ 474,000 $ 60,000 A $ 100,000
Customer Relationships $ - $ - A $ 75,000 E $ 15,000
Equipment (net) $ 925,000 $ 272,000 E $ 3,000 A $ 30,000
Goodwill $ - $ - A $ 55,000
Total Assets $ 2,664,000 $ 628,000

Liabilities $ (771,000) $ (136,000)

Common Stocks $ (400,000) $ (100,000) S $ 100,000
Retained Earnings 12/31 $ (1,493,000) $ (392,000)
Total Liabilities + Equity $ (2,664,000) $ (628,000)
 Consolidation Totals

$ (1,645,000)
$ 528,000
$ 142,000
$ 40,000
$ -
$ (935,000)

$ (700,000)
$ (935,000)
$ 142,000
$ (1,493,000)

$ 290,000
$ 281,000
$ 310,000
$ -

$ 634,000
$ 60,000
$ 1,170,000
$ 55,000
$ 2,800,000

$ (907,000)
$ (400,000)
$ (1,493,000)
$ (2,800,000)