Chapter 7, Exercise 5

Exercise 7-1
Determination and Distribution of

Excess Schedule
Company Value Parent Price NCI
Fair Value of Subsidiary
Less Book Value of Interest Acquired
Common Stock
Paid in Excess
Retained Earnings
Total Equity
Interest Acquired
Book Value
Excess of Cost over Book Value
Worksheet
Accounts Adjusted Distribution Amortization /year
Total 0
Penstar Company and Subsidiary Sargio Company

Consolidated Balance Sheet
1/2/2014
Assets
Total Assets
Liabilities and Stockholders' Equity
Total Liabilities and Stockholders' Equity

Exercise 7-2
Company
imprlied fair Parent Price
Particulars valuealue (60%)
Fair Value of Subsidiary A 250,000 150,000
Common Stock ($10 par) 100,000
Retained Earnings 20,000
Total Equity 120,000 120,000
Interest Acquired 60%
Book Value B 120,000 72,000
Excess of Cost over Book Value A-B 130,000 78,000
Adjustment of indentifiable accounts Adjustment Life
Equipment 130,000 10
150,000/60%=250,000
Analysis of 20% Interest, January 1, 2013
Price paid for additional investment in Hardwood 40,000

Less interest acquired:
Common stock ($10 par) 100,000
Retained earnings 50,000
Total stockholders’ equity 150,000
Interest acquired x20% 30,000
Excess 10,000
Equipment adjustment (8 remaining years × $13,000 × 20%) (20,800)
Parent paid-in capital in excess of par from stock retirement (10,800)
Common stock 100,000

Retained earnings 50,000
Controlling interest x20%
Value of interest acquired 30,000
Price paid for additional investment in H Company 40,000

Value of interest acquired (30,000)
Equipment adjustment (20,800)
Parent paid-in apital one in excess of par from stock retirement (10,800)
Equipment amortization value per year 13,000

Inrterest acquired x20%
life 8 years
Equipment adjustment value 20,800
B Corporation and Subsidiary H Corporation

Consolidated Balance sheet
December, 31 2013
Assets:
Current assets 350,000
Long-lived assets:
Property, plant and eqipment
(740,000+240,000+130,000-(5*13,000 amortizacion) 1,045,000
Total assets 1,395,000
Particular Amount
60% interest [ 60%x (120,000-20,000)] 60,000
20% interest [20% x (120,000-50,000)] 14,000
Share of retained earnings 74,000
Amrtizations:
2 years x 60% x 13,000 (15,600)
3 years x 80% x 13,000 (31,200)
Net adjustment (46,800)
Parent retained earnings balance, 31/12/2013 300,000
Total 327,200
NCI inteest (220,000x20%) 44,000

NCI at 40% [ 40%x(50,000-20,000)] 12,000
NCI at 20% [20%x(120,000-50,000)] 14,000
Equipent amortizaion value per year 20%x5 yaers x13,0 (13,000)
Total NIC interest 57,000
NCI value (40%)
100,000
120,000
40%
48,000
52,000
Amortization per year
13,000 Debit D
Liabilities and stockholders' Equity
Current liabilities 500,000
Bonds Payable
Stockholders' equity:
NCI 57,000
Common stock ($ 10) 500,000
Paid in capital in excess of par 10,800
Retained earning (Wna) 327,200 838,000
Total liabilities and stockholders' equity 1,395,000
Exercise 7-3
Excess Schedule
Common Stock
Retained Earnings
Total Equity
Interest Acquired
Book Value
Worksheet
Total 0
Entries Debit Credit

Exercise 7-5
(1) Retained Earnings (3 × 80% × $5,000) 12,000

Investment in Bruce Corporation
Investment in Bruce Corporation 26,000

Investment Income
adjust current year’s share of income and investment
account for one-half of the year’s building depreciation
[(80% × $35,000) – (1/2 × 80% × $5,000)].
Cash 890,000
Investment in Bruce Corporation($864,000 – $12,000 + $26,000)
Gain on Sale of Subsidiary
(2) Retained Earnings (3 × 80% × $5,000) 12,000


Investment Income
adjust one-half of current year’s share of income for
the first half of the year and one-half of the year’s building
depreciation, {1/2 × [(80% × $35,000) – (1/2 × 80% × $5,000)]}.
Cash 455,000
Investment in Bruce Corporation [1/2 × ($864,000 – $12,000)] + $13,000
Gain on Sale of Investment
the sale and the gain on the 12,000 shares
of Bruce stock.
A sophisticated equity adjustment for the other half of the investment will be
necessary at year-end
(3) Only the 20% portion sold (25% of the investment) needs adjustment; the remaining 60% of
the investment will be adjusted at year-end when consolidated statements are prepared
Retained Earnings [(3 × 80% × $5,000)* × 1/4] 3,000


Investment Income
25% of the current year’s share of income
for the first half of the year and 25% of the one-half
year’s building depreciation,
{1/4 × [(80% × $35,000) – (1/2 × 80% × $5,000)]}.
Cash 232,500
Investment in Bruce Corporation [(1/4 × $864,000) – $3,000 + $6,500]
Paid-In Capital in Excess of Par
the sale and the gain on the 6,000 shares of
Bruce stock.
12,000
26,000
878,000
12,000
12,000
13,000
449,000
16,000
3,000
6,500
219,500
13,000
Exercise 7-6
Excess Schedule
Common Stock
Retained Earnings
Prefered Dividends in Arrears
Total Equity
Interest Acquired
Book Value
Worksheet
Total 0

Excess Schedule
Common Stock
Paid in Excess
Retained Earnings
Preferred Dividend Share of RE
Total Equity
Interest Acquired
Book Value
Worksheet
Total 0

Excess Schedule
Common Stock
Retained Earnings
Preferred Dividends Share of RE
Total Equity
Interest Acquired
Book Value
Worksheet
Total 0
Exercise 7-7
Excess Schedule
Common Stock
Retained Earnings
Preferred Dividends in Arrears
Total Equity
Interest Acquired
Book Value
Worksheet
Total 0

Problem 7-1
Price Paid
Less Interest Acquired
Common Stock
Retained Ernings
Total
Interest Acquired
Excess
Equipment Adjustment
Debit to RE
Income distribution schedules:

Subsidiary: DR CR
Internally generated net income
Depreciation
Net income
NCI share
Controlling share of sub. Income
Parent
Controlling share of subsidiary

Controlling interest
Consolidated net income
Consolidated Worksheet
Trial Balance Eliminations

Parker Share Dr Cr
Current Assets 160,000 80,000
Investment in Share 301,000
Property, Plant, and Equipment 450,000 170,000
Current Liabilities (110,000) (20,000)

Common stock - Parker (500,000)
Retained earnings - Parker (198,000)
Common stock - Share (100,000)
Retained earnings - Share (100,000)
Sales (400,000) (110,000)

Cost of goods sold 200,000 60,000
Other expenses 100,000 15,000
Subsidiary income (28,000)

Dividends declared - Parker 25,000
Dividends declared - Share 5,000
Totals 0 0
NCI share
Controlling share
NCI
Controlling retained earnings
Totals
Eliminations and Adjustments

Consol NCI Control. Consol.
Net Inc. R.E. Bal. Sht.
Problem 7-2
Common Information
Market
Number of Price per
Cash Shares Share Total
Price Paid First Purchase 0
Company
Value Analysis First Implied Fair
Purchase Value Parent Price NCI Value
Price Paid
Fair Value of Net Assets
Excluding Goodwill
Goodwill
Gain on Acquisition
Determination and
Distribution of Excess
Schedule
Company
Value Parent Price NCI
Less Book Value of Interest
Acquired
Common Stock
Paid in Excess
Retained Earnings
Total Equity
Interest Acquired
Book Value
Value
Worksheet
Accounts Adjusted Distribution
Total 0
Analysis of 20% Interest

Price Paid
Less interest Acquired
Common Stock
Paid in Excess
Retained Earnings
Income
Total
Entries and Computations Debit Credit
Intercompany Inventory Profit Deferral

Parent Parent Parent Sub Sub Sub
Amount % Profit Amount % Profit
Beginning
Ending

Subsidiary: DR CR
Adjusted Net Income

NCI share
Parent
Purchased Income
James Craft Dr Cr
Inventory, December 31 100,000 50,000
Other Current Assets 126,000 180,000
Investment in Craft Company 413,000
Land 50,000 50,000

Buildings and Equipment 350,000 320,000
Accumulated Depreciation (100,000) (60,000)
Goodwill
Other Intangibles 20,000
Current Liabilities (120,000) (40,000)
Bonds Payable (100,000)
Other Long-Term Liabilities (200,000)
Common Stock—James (200,000)
Other Paid-In Capital—James (100,000)
Retained Earnings—James (214,000)
Common Stock—Craft (50,000)

Other Paid-In Capital—Craft (100,000)
Retained Earnings—Craft (190,000)
Net Sales (520,000) (450,000)

Cost of Goods Sold 300,000 260,000
Operating Expenses 120,000 100,000
Subsidiary Income (75,000)
Dividends Declared 50,000 30,000
Purchased Income
Total 0 0
Consolidated Net Income
To NCI (see distribution schedule)
To Controlling Interest (see distribution schedule)
Total NCI
Retained Earnings—Controlling Interest, December 31, 20X2
Totals
Eliminations and Adjustments
Consol NCI Control. Consol.
Net Inc. R.E. Bal. Sht.
Problem 7-3
Excess Schedule
Company
Common Stock
Retained Earnings
Total Equity
Interest Acquired
Book Value
Gain on Acquisition
Analysis of September 30, 2017, purchase:

Price paid
Less interest acquired:
Common stock
Retained earnings, January 1
Income, January–September
Total stockholders’ equity
Interest acquired
Excess

Subsidiary: DR CR
Adjusted Net Income

NCI share
Parent
Adjustments
Gain on Acquisition
Away Stallward Dr
Cash 99,500 78,000
Notes Receivable 100,000
Accounts Receivable 200,000 100,000

Interest Receivable 3,000
Dividends Receivable 4,500
Inventories 924,000 125,000
Investment in Stallman 469,200
Property, Plant, and Equipment 1,250,000 500,000

Deferred Charges 25,000
Patents and Licenses 50,000
Cash in Transit
Accounts Payable (425,000) (80,000)
Notes Payable (75,000)
Dividends Payable (5,000)
Capital Stock—Away (300,000)
Retained Earnings—Away (1,605,000)
Capital Stock—Stallward (100,000)
Retained Earnings—Stallward (400,000)
Sales and Services (1,800,000) (750,000)
Subsidiary Income (43,200)

Interest Income (3,000)
Cost of Goods Sold 1,350,000 525,000
Administrative and Selling Expenses 251,000 174,000
Interest Expense 3,000

Dividends Declared 5,000
Total 0 0
NCI share
Controlling share
NCI
Controlling retained earnings
Totals
Eliminations and Adjustments:

inations Consol NCI Control. Consol.
Cr Net Inc. R.E. Bal. Sht.
Problem 7-4
Excess Schedule
Company
Common Stock
Paid in Excess
Retained Earnings
Total Equity
Interest Acquired
Book Value
Worksheet
Accounts Adjusted Distribution Amortization/year
Total 0

Problem 7-6
Determination and
Schedule
Company
Acquired
Common Stock
Retained Earnings
Preferred arrearage
Total Equity
Interest Acquired
Book Value
Worksheet
Total 0

Subsidiary: DR CR
Adjusted Net Income

NCI share
Parent
Marsha Corporation and Subsidiary Transam Corporation
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2016

Marsha Transam Dr
Current Assets 806,400 463,250

Investment in Transam 720,000
Land 400,000 210,000

Building 950,000 500,000
Accumulated Depreciation—Building (200,000) (160,000)
Equipment 1,500,000 740,000
Accumulated Depreciation—
Equipment (400,000) (200,000)
Goodwill
Liabilities (800,000) (550,000)
Common Stock—Marsha (2,000,000)
Retained Earnings—Marsha (860,000)
Preferred Stock—Transam (100,000)

Common Stock—Transam (750,000)
Retained Earnings (common)—
Transam (124,000)
Retained Earnings (preferred)—

Transam
Sales (2,100,000) (1,000,000)
Subsidiary Dividend Income (21,400)
Cost of Goods Sold 1,155,000 600,000
Other Expenses 650,000 320,000
0 0
To NCI (see distribution schedule)
To Controlling Interest (see
distribution schedule)
Total NCI
Retained Earnings—Controlling
Interest, December 31, 20X6
Totals
ons Consol NCI Control. Consol.
Problem 7-7
Adjustment of Investment Account Debit Credit
Determination and
Schedule
Company
Acquired
Common Stock
Retained Earnings
January 1 to June 20 Income
Total Equity
Interest Acquired
Book Value
Worksheet
Total 0
January 1, 2018 Motor Corporation Preferred
Determination and
Schedule
Company
Acquired
Common Stock
Retained Earnings
Total Equity
Interest Acquired
Book Value
Worksheet
Total 0

Subsidiary: DR CR
Boat
Total
NCI share
Controlling share
Motor
Total
NCI share
Controlling share
Parent
Controlling share of Boat
Controlling share of Motor
Amortizations
Total

Parent Parent Parent Sub Sub
Amount % Profit Amount %
Beginning
Ending

Titan Boat Engine Dr
Cash 100,000 87,000 95,000

Accounts Receivable 158,200 210,000 105,000
Inventories 290,000 90,000 115,000
Advance to Boat Corporation 17,000
Property, Plant, and Equipment 777,600 325,000 470,000
Accumulated Depreciation (180,000) (55,000) (160,000)
Investment in Boat Corporation:
6% Bonds 23,800
Common Stock 293,600
Investment in Engine Corporation:

Preferred Stock 7,400
Common Stock 207,200
Notes Payable (45,000) (14,000) (44,000)

Accounts Payable (170,000) (96,000) (86,000)
Bonds Payable (285,000) (150,000) (125,000)

Discount on Bonds Payable 8,000
Dividends Payable (22,000) (30,000)
Preferred Stock—Titan (400,000)
Common Stock—Titan (600,000)
Retained Earnings—Titan (154,600)
Common Stock—Boat (250,000)
Retained Earnings—Boat (107,000)
Preferred Stock—Engine (50,000)
Common Stock—Engine (200,000)
Retained Earnings (common)—
Engine (100,000)
Retained Earnings (preferred)—

Engine
Sales (1,050,000) (500,000) (650,000)

Other Revenue (2,100)
Gain on Bond Retirement
Unrealized gain on investment (1,000)
Subsidiary Income:
Common Stock—Boat (16,000)
Preferred Stock—Engine (400)
Common Stock—Engine (11,200)
Cost of Goods Sold 650,000 300,000 400,000
Other Expenses 358,500 160,000 230,000
Purchased Income
0 0 0
To NCI—Boat (see distribution
schedule)
To NCI—Motor (see distribution
schedule)
To Controlling Interest (see
distribution schedule)
NCI—Boat
NCI—Engine
Retained Earnings—Controlling
Interest, December 31, 20X8
Totals
Sub
Profit
Eliminations Consol NCI Control. Consol.
Problem 7-8
Determination and Distribution of Excess

Schedule
Company
Common Stock
Retained Earnings
Preferred Arrearage
Total Equity
Interest Acquired
Book Value
Worksheet
Total 0

Subsidiary: DR CR
Total
Less Preferred Share
NCI share
Controlling share
Parent
Total

Parent Parent Parent Sub
Amount % Profit Amount
Beginning
Ending

Black Jack Zeppo Dr
Cash 30,400 10,000

Accounts Receivable (net) 80,000 76,000
Property, Plant, and Equipment 1,450,000 122,000
Investment in Zeppo—Preferred Stock 56,000

Investment in Zeppo—Common Stock 121,200
Liabilities (350,000) (18,000)

Common Stock—Black Jack (1,000,000)
Retained Earnings—Black Jack (195,000)
Preferred Stock—Zeppo ($100 par) (50,000)

Common Stock—Zeppo (100,000)
Paid-In Capital in Excess of Par—Zeppo (20,000)
Retained Earnings (preferred)—Zeppo
Retained Earnings—Zeppo (41,000)
Sales (420,000) (96,000)

Cost of Goods Sold 300,000 60,000
Other Expenses 80,000 26,000

Subsidiary Income—Preferred (4,000)

Subsidiary Income—Common (3,600)
Paid-In Capital in Excess of Par—Black Jack
0 0
To NCI—Boat (see distribution schedule)
To NCI—Motor (see distribution schedule)
To Controlling Interest (see distribution schedule)
NCI—Boat
NCI—Engine
Retained Earnings—Controlling Interest,
December 31, 20X8
Totals
Sub Sub
% Profit
Eliminations Consol NCI Control. Consol. Consol.

Cr Net Inc. R.E. Bal. Sht. Bal. Sht.
Problem 7-A1
Analysis of 20% Purchase
Balance Sheet Eliminations and Adjustments

Marley Foster Debit Credit
Cash 167,250 101,000
Notes Receivable 87,500 28,000
Property, Plant, and
Equipment
487,000 252,000
Investment in Foster 248,800
Accounts Payable (222,000) (76,000)

Notes Payable (79,000) (89,000)
Dividends Payable (40,000)
Common Stock ($10 par)—
Marley
(400,000)
Common Stock ($10 par)—
Foster
(100,000)
Retained Earnings—Marley (501,000)
Retained Earnings—Foster (152,000)

Totals 0 0
NCI
Totals
Consolidated
NCI Balance Sheet
Problem 7A-2
Determination and
Schedule
Company
Acquired
Common Stock
Retained Earnings
Preferred arrearage
Total Equity
Interest Acquired
Book Value
Value
Worksheet
Total 0

Book Cray Debit
Cash
Accounts and Other Current 825,000 330,000
Receivables 2,140,000 835,000
Inventories 2,310,000 1,045,000
Land 650,000 300,000
Depreciable Assets (net) 4,575,000 1,980,000
Goodwill
Investment in Cray Inc. 2,860,000
Long Term Investments and
Other Assets 865,000 385,000
Accounts Payable and Other
Current Liabilities (2,465,000) (1,145,000)
Long-Term Debt (1,900,000) (1,300,000)
Common Stock ($25 par) (3,200,000) (1,000,000)
Additional Paid-In Capital (3,260,000) (190,000)
Retained Earnings (3,400,000) (1,240,000)
Totals 0 0
NCI
Totals
Adjustments and Eliminations
Book Inc. and Subsidiary Cray Inc.
Consolidated Statement of Retained Earnings
Consolidated
djustments NCI Balance Sheet
Credit
Problem 7-A3
Excess Schedule
Company
Total Equity
Interest Acquired
Book Value
Worksheet
Total 0

Press Soap Debit
Assets:
Bond Interest Receivable 1,500
Minimum Lease Payments Receivable 80,000
Unearned Interest Income (2,961)
Inventory 86,000 80,000
Investment in Soap Company 351,000
Investment in Soap Bonds 59,225

Land 60,000 30,000
Buildings and Equipment 300,000 230,000
Accumulated Depreciation—Buildings and

Equipment (100,000) (50,000)
Equipment Under Capital Lease 111,332

Accumulated Depreciation—Equipment
Under Lease (35,000)
Goodwill
Total 960,000 600,000
Liabilities and Equity:

Accounts Payable 78,000 70,000
Bond Interest Payable 2,500
Lease Interest Payable 5,707
Other Current Liabilities 57,000 48,911
Lease Obligation Payable 71,332
Bonds Payable 150,000 100,000
Premium on Bonds 1,550
Common Stock—Press 200,000
Other Paid-In Capital—Press 150,000
Retained Earnings—Press 325,000
Common Stock—Soap 100,000

Other Paid-In Capital—Soap 70,000
Retained Earnings—Soap 130,000
960,000 600,000
NCI
Totals
Consolidated
ations and Adjustments NCI Balance Sheet
Credit

Chapter 7, Exercise 5

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Chapter 7, Exercise 5

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Exercise 7-1

Determination and Distribution of

Penstar Company and Subsidiary Sargio Company

Liabilities and Stockholders' Equity

Total Liabilities and Stockholders' Equity

Analysis of 20% Interest, January 1, 2013

Price paid for additional investment in Hardwood 40,000

Common stock 100,000

Price paid for additional investment in H Company 40,000

Equipment amortization value per year 13,000

B Corporation and Subsidiary H Corporation

Total assets 1,395,000

NCI inteest (220,000x20%) 44,000

Entries Debit Credit

(1) Retained Earnings (3 × 80% × $5,000) 12,000

Investment in Bruce Corporation 26,000

(2) Retained Earnings (3 × 80% × $5,000) 12,000

Investment in Bruce Corporation 13,000

Retained Earnings [(3 × 80% × $5,000)* × 1/4] 3,000

Investment in Bruce Corporation 6,500

Determination and Distribution of

Determination and Distribution of

Entries Debit Credit

Income distribution schedules:

Controlling share of subsidiary

Consolidated net income

Trial Balance Eliminations

Property, Plant, and Equipment 450,000 170,000

Current Liabilities (110,000) (20,000)

Sales (400,000) (110,000)

Subsidiary income (28,000)

Eliminations and Adjustments

Analysis of 20% Interest

Intercompany Inventory Profit Deferral

Income distribution schedules:

Adjusted Net Income

Land 50,000 50,000

Common Stock—Craft (50,000)

Net Sales (520,000) (450,000)

Analysis of September 30, 2017, purchase:

Income distribution schedules:

Adjusted Net Income

Controlling share of subsidiary

Accounts Receivable 200,000 100,000

Property, Plant, and Equipment 1,250,000 500,000

Subsidiary Income (43,200)

Administrative and Selling Expenses 251,000 174,000

Interest Expense 3,000

Eliminations and Adjustments:

Entries Debit Credit

Income distribution schedules:

Adjusted Net Income

Controlling share of subsidiary

Trial Balance Eliminations

Current Assets 806,400 463,250

Land 400,000 210,000

Preferred Stock—Transam (100,000)

Retained Earnings (preferred)—

January 1, 2018 Motor Corporation Preferred

Income distribution schedules:

Intercompany Inventory Profit Deferral

Trial Balance Eliminations