On January 1, 2011, Porter Company purchased an 90% interest in the capital stock of Salem Company for $850,000. ...

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Home>Business & Finance homework help>Accounting homework help> On January 1, 2011, Porter Company purchased an 90% interest in the capital stock of Salem Company for $850,000. ...

Sheet1

INCOME STATEMENT P CO. S CO. ELIMINATIONS CONS.TOT.
12/31/13 DR. CR. analysis of acquisition
Sales 1,843 675 2,518
Equity in sub earnings 122 122 0 1/1/12 90%
0
Total revenues 1,965 675 2,518 acquisition price 1710 1900
fv of nci 190
Cost of goods sold 1,100 322 1,422 total fv 1900
depr exp 125 120 245 book value 725
amort exp 275 11 80 366 diff 1175
interest exp 28 7 35
0
Total expenses 1,528 460 2,068 total fv 1900 2012 unamort diff 2013
Net income 451 fv of ID net assets 1525 amort @ 1/1/13 amort
Less Net income to NCI 13.5 14 goodwill 375 0 375 0
Net income to controlling 437 215 437 cust base 800 80 720 80
total diff 1175 80
RETAINED EARNINGS
STATEMENT step 2 parent co entries during 2013 (parent is using the equity method)
Retained Earnings 1/1 2,625 395 395 2,625 193.5
-72
Net income 437 215 437 121.5
dr investment in sub 193.5
Dividends declared 350 25 25 350 cr equity in sub earnings 193.5
Retained Earnings 12/31 2,712 585 2,712 dr cash 22.5 0
cr investment in sub 22.5
BALANCE SHEET dr equity in sub earnings 72
cr investment in sub 72
Current assets 1,204 430 1,634
Inestment in S 1,854 1,854 0
Land 0 calc of net income to controlling interest
Buildings 931 863 1,794
copyrights 950 107 1,057
Goodwill 375 375 P co only net income 316
cust base 720 80 640 Sub net income 215
0 Less amortization of diff -80
0 total net income 451
Total assets 4,939 1,400 5,500 Less net income to NCI -13.5
Net income to controlling interest 437
Accounts payable 485 200 685
Long-term debt 542 155 697
Common stock 900 400 400 900
Paid in capital 300 60 60 300
Retained earnings 2,712 585 2,712
Noncontrolling interest in sub 206 206
Total liabilities and equity 4,939 1,400 2165 2165 5,500
elim investment A/c vs equity of the sub, create goodwill & allocate differentials as of 1/1/13
Dr.Common stock 400 Investment in sub
Dr. Paid in cap 60 B/B 1,755 22.5
Dr. Retained earnings 395 194 72
Dr. Goodwill 375 1,854
Dr. cust base 720
Dr. Land proof of NCI @ 12/31/13
Cr Investment in Sub 1,755 determine the sub adjusted equity
cr Noncontrolling interest 195
1,950 1,950
St Joseph's College: Minority interest(Non-controlling interest = MI% times the book value of the sub 		0 common stk 400
PIC 60
RE 585
to eliminate the investment a/c activity for year goodwill 375
cust base 640
dr equity In sub earnings 122 Total adjusted sub equity 2,060
cr dividends declared 23 ''NCI@10% 206
cr investment in sub 99
set up NCI expense, elim NCI portion of sub dividends, and record net change in NCI
dr nci expense 13.5
cr dividends declared 2.5
cr NCI 11
to amortize the diff
dr amort exp 80 0
cr cust bas 80
2,165 2,165
to eliminate interco rec/pay
dr payable
cr receivables
4,330 4,330
Part b
NCI FV at acquisition date is 152.5
acquisition analysis
acquisition price 1710
FV of NCI 152.5
total fv 1862.5
book value 725
diff 1137.5
total fv 1862.5
FV of ID net assets 1525 2012 amort 1/1/13 2013 amort
goodwill 337.5 0 337.5 0
cust base 800 80 720 80
total diff 1137.5 80
dr common stk 400
dr PIC 60
dr RE 395
dr cust base 720
dr goodwill 337.5
cr investment in sub 1,755
cr NCI 157.5
1,913 1,913

Template

Sheet2

push
sub down
B/s diff
Current assets 430 430
Inestment in S 0
Land 0
Buildings 863 863
copyrights 107 107
Goodwill 375 375
cust base 640 640
0
Total assets 1400 2415
Accounts payable 200 200
Long-term debt 155 155
Common stock 400
Paid in capital 60
Retained earnings 585
Noncontrolling interest in sub 2060
Total liabilities and equity 1400 2415
elim investment A/c vs equity of the sub, create goodwill & allocate differentials as of 1/1/11
Dr.Common stock
Dr. Paid in cap
Dr. Retained earnings
Dr. Goodwill
Dr. cust base
Dr. Land
Cr Investment in Sub
cr Noncontrolling interest

Sheet3