You will continue your work with Roberts Corporation and William Company that you began during the...

Question

You will continue your work with Roberts Corporation and William Company that you began during the week 1 course project.

Let’s change some of the assumptions from what was used in week 1. Assume, instead, that on January 1, 2014, Roberts Corporation acquired 80 percent of the outstanding voting stock of William Company in exchange for $1,200,000 cash. At that time, although William’s book value was $925,000, Roberts assessed William’s total business fair value at $1,500,000.

The book values of William’s individual assets and liabilities approximated their fair values at the acquisition date, except for the equipment account, which was undervalued by $350,000. The undervalued equipment had a five-year remaining life at the acquisition date. Any remaining excess fair value was attributed to goodwill. No goodwill impairments have occurred.

During its first year of combined operations, William earned net income of $180,000 and paid dividends totaling $30,000. William immediately began supplying inventory to Roberts. Below are the details of the intercompany inventory sales for the current year:

Year	Intercompany sales	Intercompany ending inventory at transfer price	Gross profit rate on intercompany inventory transfers
2014	$125,000	$80,000	25%

Separate financial statements for both companies as of December 31, 2014, are shown below.

	Roberts	William
Revenues	$(1,740,000)	$(900,000)
Cost of goods sold	$820,000	$500,000
Depreciation expense	$104,000	$85,000
Amortization expense	$220,000	$120,000
Interest expense	$20,000	$15,000
Income from Subsidiary	$(72,000)	0
Net Income	$(648,000)	$(180,000)
Retained earnings, 1/1/14	$(2,800,000)	$(125,000)
Net Income (above)	$(648,000)	$(180,000)
Dividends paid	$200,000	$30,000
Retained earnings, 12/31/14	$(3,248,000)	$(275,000)

Cash	$691,000	$115,000
Accounts receivable	$500,000	$215,000
Inventory	$990,000	$800,000
Investment in William Stock	$1,248,000	0
Buildings and equipment (net)	$1,025,000	$863,000
Patents	$950,000	$107,000
Total assets	$5,404,000	$2,100,000

Accounts payable	$(411,000)	$(200,000)
Notes payable	$(545,000)	$(825,000)
Common stock	$(900,000)	$(700,000)
Additional paid-in capital	$(300,000)	$(100,000)
Retained earnings, 12/31/14 (above)	$(3,248,000)	$(275,000)
Total liabilities and stockholders' equity	$(5,404,000)	$(2,100,000)

Tasks:

Based on the information given above, complete the following tasks:

Assuming that Roberts accounts for its investment in William using the equity method, prepare all necessary general journal entries for the year ending December 31, 2014. Include supporting calculations of all amounts in a separate schedule.

Next, prepare the eliminating entries needed at January 1, 2014, to prepare the consolidated balance sheet as of the date of acquisition. You are not required to prepare the actual consolidated balance sheet.

Finally, prepare the eliminating entries needed at December 31, 2014, and prepare the consolidated income statement, retained earnings statement, and balance sheet as of December 31, 2014, using spreadsheet software (Microsoft Excel). Be sure to show clearly the noncontrolling interest in both net income and stockholders’ equity on your worksheet.

suacc5348w1cpgarnert-lxlmhlhg.xlsx suacc5348w1cpgarnert-3a5re2fp.docx

Prince · Accepted Answer

Deal Sheet
	Cash In		$   1,200,000.00
	Equity Ownership		80%
	Imputed Valuation		$   1,500,000.00
	Williams Book Value		$   925,000.00
	Change		$   575,000.00
	Total FMV		$   1,500,000.00
	Fixed Assets		$   350,000.00
	Goodwill		$   225,000.00
			As of 31/12/14				Eliminations				Minority 		Consolidated
			Roberts		Williams		Dr		Cr		Owner		Balances
	Cash		691,000.00		115,000.00								806,000.00
	Accounts Receivable		500,000.00		215,000.00				200,000.00				515,000.00
	Inventory		990,000.00		800,000.00		175,000.00						1,965,000.00
	Total Current Assets		2,181,000.00		1,130,000.00								3,286,000.00
	P,P & E (net)		1,025,000.00		863,000.00		340,000.00						2,228,000.00
	Patents		950,000.00		107,000.00								1,057,000.00
	Investment in Sub		1,248,000.00						1,200,000.00				- 0
									48,000.00
	Difference (Cost and Book)						340,000.00		340,000.00				- 0
	Goodwill												- 0
	Total Assets		5,404,000.00		2,100,000.00								6,571,000.00
	Accounts Payable		411,000.00		200,000.00								611,000.00
	Notes Payable		545,000.00		825,000.00								1,370,000.00
	Total Liabilities		956,000.00		1,025,000.00								1,981,000.00
	Additional Paid In Capital		300,000.00		100,000.00		100,000.00						300,000.00
	Common Stock		900,000.00		700,000.00		700,000.00						900,000.

You will continue your work with Roberts Corporation and William Company that you began during the week 1 course project.Let’s change some of the assumptions from what was used in week 1. Assume,...

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