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# Final Project Tips: 1. in this project Goodwill is called "intangibles" and amortized over a period of time ( if this amount is 240,000 over 10 years, at 12/31/x3 worksheet intangible will be (240,000...

Final Project Tips:
1. in this project Goodwill is called "intangibles" and amortized over a period of time ( if
this amount is 240,000 over 10 years, at 12/31/x3 worksheet intangible will be (240,000
-24, XXXXXXXXXX,000, x4 intangible will be 192,000 and so forth)
2. Project : focus on the worksheet for XXXXXXXXXXthis has intercompany sales, use 20x3 as
an example. (once you do x4, you can make progress on x5 & x6 - you can leave the
ond for last)
3. To start the project - you should do some preliminary calculations: figure out 100%
value of the subsidiary, allocation of FV-BV schedule this out for the 20x3-6, then
calculate the controlling % of these items and non-controlling %
4. Bonds affect 20x5 and 20x6 - calculations need to be done
Steps needed to be done on the worksheets:
1. remove income from Sub
2. remove the sub capital and
e
3. remove dividend payable
ecieviable
4. intercompany sales - i.e.
Gross Profit in ending inventory
this is for the worksheet
onds are a special intercompany item
5. amortization of differences FV-BV
Answered Same Day Jul 24, 2021

## Solution

Sumit answered on Aug 04 2021
Problem

CONSOLIDATION WORKSHEET PROBLEM                                Colke
Prepare the co
esponding consolidating worksheets based on the following facts.
Companies involved: Parent and Sub.
Date of acquisition:            Jan. 1,    20X3
Date of the worksheets you must prepare: December 31,                        20X4
"    20X5
"    20X6
Percentage of common shares of S owned by P                                80%
Price paid by P                                \$ 1,800,000
At the time of acquisition these were some values concerning S:
Common stock                                \$ 300,000
Retained earnings                                \$ 198,000
Years                FMV-BV
Inventories                <1                \$ 240,000
Other cu
ent assets                <1                \$ 90,000
Plant & equipment, remaining life:                8                \$ 600,000
Land                                \$ 420,000
Long term liabilities; remaining life:                10                \$ 90,000
Intangibles amortization:                10
Intercompany transactions:
20X3    20X4    20X5    20X6
Upstream inventory sales                    -    \$ 45,000    \$ 38,250    \$ 40,928
% in ending inventory                    -    8.00%    9.60%    11.52%
Gross profit rate on sales                    -    40.00%    48.00%    57.60%
Upstream building sale, Dec. 31
Sold for                        \$ 600,000
Book value at time of sale                        \$ 216,000
Remaining life:                10
% of S bonds purchased by P, Jan. 1                            30%
Price paid                            \$ 272,768
BV at that date                            \$ 278,415
Remaining life:                5
Maturity value of acquired bonds                            \$ 270,000
Required:
1. Complete the worksheets for 20X4-6.
Author:
Excess of FMV of Sub's assets and liabilities over their BV when Parent acquired Sub.
Author:
When P acquired S, the fair value (i.e., present value) of these liabilities was less than their book value.
Wksheets

CONSOLIDATION WORKSHEET PROBLEM
CONSOLIDATION WORKING PAPERS -- YEAR ENDED DECEMBER 31,                20X3    Colke
Parent    Subsidiary    Adjusts. and Elims.        Cons.
Income Statement
Sales    6,000,000    3,000,000            9,000,000        Reconciliation: Investment to S's Equity                                        BONDS
Income from S    291,115        291,115    -    -                                        Issuer's Facts:            Acquirer's Facts:
Cost of goods sold    (4,200,000)    (1,710,000)    240,000        (6,150,000)        Investment, 12/31        20X3            1,941,529                        Acquired Jan.    20X5
Operating expenses    (900,000)    (450,000)    175,200        (1,525,200)        Removal of unamortized differential:                                            % acquired    30%
Interest Expense        (60,906)            (60,906)                    Initial    Amortiz.                Face value    900,000        Face value    270,000
Non-contr. interest income            72,779        (72,779)        Inventories            (192,000)    192,000    -            Stated Rate    7.25%        Stated Rate    7.25%
Net income    1,191,115    779,094            1,191,115        Other cu
ent assets            (72,000)    72,000    -            Effective Rate    6.50%        Effective Rate    7.00%
Plant & equipment            (480,000)    60,000    (420,000)            Interest Pmts.    65,250        Interest Pmts.    19,575
Retained Earnings                            Land            (336,000)    -    (336,000)            Bonds Life    10        Bonds Life    5
Retained earnings--P, 1/1/X3    2,100,000                2,100,000        L. T. liabilities            (72,000)    7,200    (64,800)
Retained earnings--S, 1/1/X3        198,000    198,000                Intangibles            (9,600)    960    (8,640)            At issuance:            At bond purchase:
Net income    1,191,115    779,094            1,191,115        Unamortized differential                    (829,440)            PV of Principal    \$479,453        PV of Principal    \$192,506
Dividends    (285,868)    (186,982)        186,982    (285,868)                            1,112,089            PV of Interest    \$469,071        PV of Interest    \$80,261
Retained earnings--12/31/X3    3,005,247    790,111            3,005,247                                        Bond price    \$948,525        Bond...
SOLUTION.PDF