advanced financial accounting problem
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accounting_homework.docxHug Company acquires 80% of Corpuz Company for $320,000 cash on January 1, 2014. Corpuz reported common stock of $145,000 and retained earnings of $125,000 on that date. Equipment (remaining life 10 years) was undervalued by $60,000 and buildings (remaining life 15 years) were undervalued by $30,000 and Land was undervalued by $20,000. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired. Corpuz earns income and pays dividends as follows:
2014 2015 2016
Net income $70,000 $70,000 $60,000
Dividends $10,000 $10,000 $20,000
Hug uses the acquisition method and the full equity method for its investments.
Assignment:
1. Prepare all journal entries on Hug’s accounting records to account for the activity of Corpuz for each year (2014, 2015, and 2016). This should include the acquisition.
2. Prepare the consolidation/elimination/reclassification entries on the consolidation worksheet at January 1, 2014, December 31, 2014, December 31, 2015 and December 31, 2016.
3. Compute Hug's general ledger “investment in Corpuz” at January 1, 2014, December 31, 2014, December 31, 2015 and December 31, 2016. Show in T account format
4. Compute the amount Hug records as “Income from Corpuz” for the years ended December 31, 2014, December 31, 2015, and December 31, 2016
5. Compute the Non-controlling interest in the Net Income of Corpuz at December 31, 2014 December 31, 2015 and December 31, 2016. Show in T account format
6. Compute the Non-controlling Interest in Net Assets (consolidated balance sheet) in Corpuz at January 1, 2014, December 31, 2014, December 31, 2015 and December 31, 2016. Show in T account format.
PROBLEM 2
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TRIAL BALANCES JANUARY 1, 2016 - BEFORE ACQUISITION |
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John Corporation |
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Carissa Inc. |
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Christine Inc. |
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Dr. |
Cr. |
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Dr. |
Cr. |
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Dr. |
Cr. |
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Cash |
800,000 |
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20,000 |
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Accounts Receivable |
400,000 |
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50,000 |
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150,000 |
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Prepaid Expenses |
50,000 |
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- |
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Inventory |
150,000 |
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50,000 |
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80,000 |
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Investment in Carissa Inc. |
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Investment in Christine Inc. |
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Land |
600,000 |
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150,000 |
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Buildings |
400,000 |
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200,000 |
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300,000 |
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Accum. Depr. Building |
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100,000 |
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100,000 |
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100,000 |
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Cars and Trucks |
500,000 |
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400,000 |
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Accum. Depr. Cars and Trucks |
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100,000 |
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150,000 |
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Patents |
60,000 |
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Accum. Amortization Patents |
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10,000 |
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Trademarks |
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Accum. Amortization Trademarks |
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Accounts Payable |
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850,000 |
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150,000 |
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100,000 |
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Accrued Expenses |
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600,000 |
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50,000 |
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Short Term Debt |
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700,000 |
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150,000 |
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100,000 |
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Common Stock at Par |
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10,000 |
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10,000 |
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3,000 |
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Additional Paid in Capital |
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240,000 |
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90,000 |
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47,000 |
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Retained Earnings |
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350,000 |
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150,000 |
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200,000 |
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NCI in Net Assets of Carissa Inc. |
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NCI in Net Assets of Christine Inc. |
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2,960,000 |
2,960,000 |
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850,000 |
850,000 |
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550,000 |
550,000 |
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On January 1, 2016, John made two acquisitions as follows: |
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Carissa Inc.: John purchased 60% of Carissa Inc. for cash of $210,000. The NCI interests were proportional to CI. |
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Carissa Inc. assets and liabilities were stated at fair value EXCEPT inventory (fair value $80,000) and |
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Building (fair value $140,000) |
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Christine Inc.: John purchased 80% of Christine Inc. for cash of $320,000. The NCI interests were proportional to CI. |
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Christine Inc. assets and liabilities were stated at fair value EXCEPT Christine had unrecorded patents of $30,000, |
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Building fair value of $250,000 and Inventory fair value of $90,000. |
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ASSIGNMENT |
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1. Prepare the Parent acquisition method computation of differential and goodwill for both acquisitions |
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2. Prepare the Parent journal entries to record the acquisitions |
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3. Prepare the consolidation worksheet at completion of the acquisitions (obviously you need to do part 3) |
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4. Prepare the consolidation/elimination/reclassification entries needed to complete the worksheet |
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5. Prepare a final consolidated balance sheet in good format (like a public company annual report) |
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Note: answers to be submitted in both written format and excel used for consolidation. |
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