Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. 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.
Demers earns income and pays dividends as follows: 2014. 2015. 2016
net income. 100000. 120000. 130000
dividends. 40000. 50000. 60000
Assume the initial value method is applied.
Make journal entry C if consolidation worksheet is to prepared
Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. 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.
Demers earns income and pays dividends as follows: 2014. 2015. 2016
net income. 100000. 120000. 130000
dividends. 40000. 50000. 60000
Assume the initial value method is applied.
Make journal entry C if consolidation worksheet is to prepared
Related questions
| Chapman Company obtains 100 percent of Abernethy Companyâs stock on January 1, 2014. As of that date, Abernethy has the following trial balance: |
| Debit | Credit | ||||
| Accounts payable | $ | 57,300 | |||
| Accounts receivable | $ | 42,200 | |||
| Additional paid-in capital | 50,000 | ||||
| Buildings (net) (4-year life) | 214,000 | ||||
| Cash and short-term investments | 82,250 | ||||
| Common stock | 250,000 | ||||
| Equipment (net) (5-year life) | 375,000 | ||||
| Inventory | 90,500 | ||||
| Land | 117,000 | ||||
| Long-term liabilities (mature 12/31/17) | 170,000 | ||||
| Retained earnings, 1/1/14 | 409,650 | ||||
| Supplies | 16,000 | ||||
| Totals | $ | 936,950 | $ | 936,950 | |
| During 2014, Abernethy reported net income of $117,500 while declaring and paying dividends of $15,000. During 2015, Abernethy reported net income of $171,250 while declaring and paying dividends of $55,000. |
| Assume that Chapman Company acquired Abernethyâs common stock for $860,500 in cash. As of January 1, 2014, Abernethyâs land had a fair value of $132,000, its buildings were valued at $287,600, and its equipment was appraised at $352,500. Chapman uses the equity method for this investment. |
| Prepare consolidation worksheet entries for December 31, 2014, and December 31, 2015. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) There should be ten entries and I solved the first few:
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Pecos Company acquired 100% of Suaro's outstanding stock for$1,450,000 cash on January 1, 2014, when Suara had the followingbalance sheet: Assets: Cash: $37,000 Receivables: $82,000Inventory: $149,000 Land: $90,000 Equipment: $225,000 Software:$315,000 Liabilities: $(422,000) Common Stock: $(350,000) RetainedEarnings: $(126,000) At the acquisition date, the fair value ofeach identifiable asset and liability that differed from book valuewere as follows: Land: $80,000 Brand Name: $60,000 Software:$415,000 (indefinite life-unrecognized on Suaro's books) In ProcessR&D: $300,000 (2-year estimated remaining useful life)Additional Info: -Although at acquisition date Pecos expectedfuture benefits from Suaro's in Process R&D by the end of 2014it became clear that the research project was a falure with notfuture benefit -During 2014, Suaro earns $75,000 and pays nodividends -Selected amounts from Pecos and Suaro's separatefinancial statements at 12/31/15 are presented in teh consolidatedinformation worksheet. All consolidated worksheets are to beprepared as of 12/31/15, two years subsequent to acquisition.-Pecos's January 1, 2015 Retained Earnings balance-before anyeffect from Suar's 2014 income is ($930,000) (Credit balance)-Pecos has $500,000 common shares outstanding for EPS calculationsand reported $2,943,100 for consolidated assets at the beginning ofperiod. *I have the consolidated worksheet and am supposed toprepare trial balances for Equity method, initial value and partialequity. I have done this and done it right. The second part is whati need help with. 2. Using references to other cells only (eitherfrom the consolidated information sheet or from the sep methodsheet) prepare for each of the three consolidation worksheets:Adjustments and Eliminations and Consolidated balances.
| 12/31/15 Trial Balances | |||
| Pecos | Suaro | ||
| Revenues | ($1,052,000) | ($427,000) | |
| Operating Expenses | $821,000 | $262,000 | |
| Goodwill Impairment Loss | ? | ||
| Income of Suaro | ? | ||
| Net Income | ? | ($165,000) | |
| Retained Earnings-Pecos 1/1/15 | ? | ||
| Retained Earnings-Suaro 1/1/15 | ($201,000) | ||
| Net Income (above) | ? | ($165,000) | |
| Dividends Declared | $200,000 | $35,000 | |
| Retained Earnings 12/31/15 | ? | ($331,000) | |
| Cash | $195,000 | $95,000 | |
| Receivables | $247,000 | $143,000 | |
| Inventory | $415,000 | $197,000 | |
| Investment in Suearo | ? | ||
| Land | $341,000 | $85,000 | |
| Equipment (net) | $240,100 | $100,000 | |
| Software | $312,000 | ||
| Other Intangibles | $145,000 | ||
| Goodwill | |||
| Total Assets | ? | $932,000 | |
| Liabilities | ($1,537,100) | ($251,000) | |
| Common Stock | ($500,000) | ($350,000) | |
| Retained Earnings (above) | ? | ($331,000) | |
| Total Liabilities and equity | ? | ($932,000) | |
| Fair Value allocation schedule | |||
| Price Paid | $1,450,000 | ||
| Book Value | $476,000 | ||
| Excess Initial Value | $974000 | Amortizations | |
| to land | ($10,000) | 2014 | 2015 |
| to brand name | $60,000 | ? | ? |
| to software | $100,000 | ? | ? |
| to IPR&D | $300,000 | ? | ? |
| to goodwill | $524,000 | ? | ? |
| Suaro's RE Changes | Income | Dividends | |
| 2014 | $75,000 | 0 | |
| 2015 | $165,000 | $35,000 | |
