Assessment 1 Instructions: Accounting for Equity Investments

Assessment 1: Accounting for Equity Investments

Problem 1

Equity entries for one year, includes conversion to equity method.

Entry One—To record second acquisition of Simon stock:

Account Title	Debit	Credit

Entry Two—To restate reported figures for 2019 to the equity method for comparability:

Account Title	Debit	Credit

Entry Three—To record income for the year:

Account Title	Debit	Credit

Entry Four—To record collection of dividends from Simon:

Account Title	Debit	Credit

Entry Five—To record amortization for 2020:

Account Title	Debit	Credit

Problem 2

(Prepare a consolidated balance sheet.)

Consideration transferred at fair value:

Book value:

Excess fair over book value:

Allocation of excess fair value to specific assets and liabilities:

to computer software:

to equipment:

to client contracts:

to in-process research and development:

to notes payable:

Goodwill

	Penn	Southern	Debit	Credit	Consolidated
Cash
Receivables
Inventory
Investment in Spider
Computer software
Buildings (net)
Equipment (net)
Client contracts
Research and development asset
Goodwill
Total assets
Accounts payable
Notes payable
Common stock
Additional paid-in capital
Retained earnings
Total liabilities and equities

Penn Company and Subsidiary Consolidated Balance Sheet

December 31, 2018

Assets		Liabilities and Owners’ Equity
Cash		Accounts payable
Receivables		Notes payable
Inventory
Computer software
Buildings (net)
Equipment (net)
Client contracts
Research and development asset		Common stock
		Additional paid in capital
Goodwill		Retained earnings
Total assets		Total liabilities and equities

Problem 3

Consolidated balances three years after the date of acquisition. Includes questions about parent's method of recording investment for internal reporting purposes.

Acquisition-Date Fair Value Allocation and Amortization:

		Life (if applicable)	Annual Excess Amortizations (if applicable)
Consideration transferred 1/1/20
Book value (given)
Fair value in excess of book value
Allocation to equipment based on difference in fair value and book value
Goodwill
Total

Answers to questions:

(Put your answers here.)

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