Week 4

Use the following information for Problems 4-3 and 4-4:

On January 1, 2015, Packard Corporation acquired 70% of the common stock of Stude Corporation for $400,000. On this date, Stude had the following balance sheet:

Stude Corporation

Balance Sheet

January 1, 2015

Assets

Liabilities and Equity

Accounts receivable

$ 60,000

Accounts payable

$ 40,000

Inventory

40,000

Bonds payable

100,000

Land

60,000

Common stock ($1 par)

10,000

Buildings

200,000

Paid-in capital in excess of par

90,000

Accumulated depreciation

(50,000)

Retained earnings

112,000

Equipment

72,000

Accumulated depreciation

(30,000)

Total assets

$352,000

Total liabilities and equity

$352,000

Buildings, which have a 20-year life, were understated by $150,000. Equipment, which has a 5-year life, was understated by $60,000. The 3,000 NCI shares had a fair value of $50 each. Any remaining excess was considered to be goodwill. Packard used the simple equity method to account for its investment in Stude.

Packard and Stude had the following trial balances on December 31, 2016:

Packard Corporation

Stude Corporation

Cash

66,000

132,000

Accounts Receivable

90,000

45,000

Inventory

120,000

56,000

Land

100,000

60,000

Investment in Stude

428,000

Buildings

800,000

200,000

Accumulated Depreciation

(220,000)

(65,000)

Equipment

150,000

72,000

Accumulated Depreciation

(90,000)

(46,000)

Accounts Payable

(60,000)

(102,000)

Bonds Payable

(100,000)

Common Stock

(100,000)

(10,000)

Paid-In Capital in Excess of Par

(800,000)

(90,000)

Retained Earnings, January 1, 2016

(325,000)

(142,000)

Sales

(800,000)

(350,000)

Cost of Goods Sold

450,000

208,500

Depreciation Expense—Buildings

30,000

7,500

Depreciation Expense—Equipment

15,000

8,000

Other Expenses

140,000

98,000

Interest Expense

8,000

Subsidiary Income

(14,000)

Dividends Declared

20,000

10,000

Totals

0

0