Buscom - Subsequent-To-The-Date-Of-Acquisition - Cost Method

Cost Model
To record share in net income NOT APPLICABLE
To record share in net income NOT APPLICABLE
To record dividend received CASH XX

DIVIDEND INCOME XX
Equity Model
Investment in subsidiary XX
Investment income XX
Investment income XX
CASH XX
Parent
Net income xx
Less:
Dividend income/Invesment income (xx)
Net income from own operations xx
Add (less) amortization of excess
Undervaluation of assets
Overvaluation of assets
Undervaluation of liabilities
overvaluation of liabilities
Consolidated net income xx
Less: NCI's share in net income of the subsidiary ( NINIS)
Net income attributale to parent xx
Consolidated retained earnings ( 1st year of acquisition)

Retained earnings beg.-Parent
Add:Net income attributale to parent
Total
Less: Dividend declared-Parent
Consolidated retained earnings end
Consolidated retained earnings ( subsequent years)

* Consolidated retained earnings beg.
Total
Consolidated retained earnings beg.

Increase( decrease) in Retained eaernings of the subsidiary
Add or less previous years amortization of excess
Net increase (decrease)
Controlling interest
Non-controlling interest
* NCI beg
Add: NCI's share in net income of the subsidiary ( NINIS)
Total
Less: NCI's share in the dividend declared by the subsidiary
NCI end
* NCI beg
NCI at the date of acquisition
Non-ontrolling interest
NCI beg
Subsidiary Total
xx xx
(xx)
xx xx
(xx)
xx
xx
(xx)
xx xx
(xx) (xx)
xx xx
xx
xx
xx
(xx)
xx
xx
xx
xx
(xx)
xx
xx
xx
xx
xx
% xx
xx
xx
xx
xx
(xx)
xx
xx
xx
xx
% xx
xx
Trial balance for the companies for the year ended December 31, 2014 are as follows:
Book value ( net assets) 300,000
Inventory (undervalued) 5,000
Land (undervalued) 6,000
Equipment (undervalued) 80,000
Buildings (overvalued) - 20,000
Bonds payable (overvalued) 4,000 75,000
Fair value ( net assets) 375,000
80% 20%
Consideration + NCI 310,000 77,500
FV net assets 300,000 75,000
Goodwill 10,000 2,500
Controlling (Parent) 10,000

Non-controlling 2,500
are as follows: Total 12,500
Total
387,500
375,000
12,500
80%
20%
100%
Trial balances for the companies for the year ended December 31, 2014 are as follows:
Debits Perfect Co Son Co.

Cash 194,000 75,000
Accounts receivable 75,000 50,000
Inventory 100,000 75,000
Land 175,000 40,000
Equipment 200,000 150,000
Buidlings 600,000 450,000
Invesment in Son Company 310,000
Cost of good sold 170,000 115,000
Discount on bonds payable
Depreciation expense 50,000 20,000
Interest expense
Other expenses 40,000 15,000
Goodwill impairment loss
Dividends paid 60,000 30,000
Totals 1,974,000 1,020,000
Credits
Accumulated depreciaton-equipment 112,500 80,000
Accumulated depreciaton-buildings 337,500 240,000
Accounts payable 100,000 100,000
Bonds payable 200,000 100,000
Common stock, P10 par 500,000 200,000
Retained earnings 300,000 100,000
Sales 400,000 200,000
Dividends income 24,000
Totals 1,974,000 1,020,000
From the trial balances presented above the following summary for 2014 results of operations are
Perfect Co.
Sales 400,000
Less: Cost of goods sold 170,000
Gross profit 230,000
Less: Depreciation expense 50,000
Other expense 40,000
Net income from its own separate operations 140,000
Add: Dividend income 24,000
Net income 164,000
2014 are as follows:
r 2014 results of operations are as follows:
Son Co.
200,000
115,000
85,000
20,000
15,000
50,000
50,000
Parent Company Cost Model Entry
January 1, 2014
(1) Investment in Son Company 310,000
Cash
January 1, 2014- December 31, 2014

(2) Cash
Dividend income (P30,000x80%)
310,000
24,000
24,000
(E1) Common stock - Son Co. 200,000
Retained earnings- Son Co. 100,000
Investment in Son Co. (300,000*80%)
Non-controlling interest (300,000*20%)
To eliminate the equity of the subsidiary
(E2) Inventory 5,000

Accumulated depreciation-equipment 80,000
Accumulated depreciation- buildings 160,000
Discount on bonds payable 4,000
Land 6,000
Buildings
To adjsust the book value of the subsidiary to its fair value
(E3) Goodwill 12500

Investment in Son Co.
To recognize goodwill on acquisition
(E4)) Cost of goods sold 5,000

Depreciation expense 5,000
Accumulated depreciation -buildings 5,000
Interest expense 1,000
Goodwill impairment loss 3,125
Inventory
Accumulated depreciation-equipment
Goodwill
To provide for 2014 impairment loss and depreciation and
amortization on differences between acquisition date fair value and
book value of Son's identifiable assets and liabilities
(E4) Dividend income-Perfect 24,000

Non-controlling interest (P30,000x20%) 6,000
Dividends paid- Son
To eliminate intercompany dividends and non-controlling Interest
share of dividends.
(E5) Non-cotrolling interest in Net Income of Subsidiary 7,175

Non-cotrolling interest
To establish non-controlling interest in subsidiary's adjusted net
income for 2014 as follows:
Net income of subsidiary 50,000

Amortization of allocated excess -11,000
39,000
Multiplied by: Non-controlling interest % 20%
7,800
Less: NCI's share in goodwill impairment 625
Non-controlling Interest in Net Income (NICNI) 7,175
240,000
60,000
180,000
60,000
15,000
2500
10000
5,000
10,000
1,000
3,125
Controlling (Parent) 3,125 80%
Non-controlling 3,125 20%
30,000 Total 100%
7,175
2,500.00
625.00
3,125.00
Income Statement Perfect Co. Son Co.
Sales 400,000 200,000
Total Revenue 424,000 200,000
Cost of goods sold 170,000 115,000
Interest expense - -
Total Cost and Expenses 260,000 150,000
Net Income 164,000 50,000
NCI-in net income of subsidiary
Net Income to Retained Earnings 164,000 50,000
Statement of Retained Earnings Perfect Co. Son Co.

Retained earnings,1/1
Perfect Company 300,000
Son Company 100,000
Net income, from above 164,000 50,000
Total 464,000 150,000
Dividends paid
Son Company 30,000
Retained earnings,12/31 Balance 404,000 120,000
Balance Sheet Perfect Co. Son Co.

Cash 194000 75000
Acccounts receivable 75000 50000
Inventory 100000 75000
Land 175000 40000
Equipment 200000 150000
Buildings 600000 450000
Goodwill
Investment in Son Company 310,000
Total 1,654,000 840,000

Accumulated depreciation-equipment 112,500 80,000
Accumulated depreciation- buildings 337,500 240,000
Accounts payable 100000 100000
Bonds payable 200000 100000
Common stock, P10 par 500000
Common stock, P10 par 200,000
Retained earnings from above 404,000 120,000
Non-Controlling interest
Total 1,654,000 840,000

Dr. Cr. Consolidated
600,000
24,000 -
600,000
5,000 290,000
5,000 75,000
1,000 1,000
55,000
3,125 3,125
424,125
175,875
7,175 - 7,175
168,700
300,000
100,000
168,700
468,700
60,000
30,000
408,700

269,000
125,000
5,000 5,000 175,000
6,000 221,000
350,000
180,000 870,000
4,000 1,000 3,000
12,500 3,125 9,375
240,000
60,000
10,000 -
2,022,375
80,000 10,000 122,500
160,000
5,000 412,500
200,000
300,000
500,000
200,000
408,700
6,000 60,000
15,000
2,500
7,175 78,675
2,022,375
Net income
Less:
Dividend income/Invesment income
Net income from own operations
Inventory
Equipment
Buildings
Bonds payable
Consolidated net income
Net income attributale to parent
Consolidated retained earnings ( 1st year of acquisition)

Total
NCI beg
Total
NCI end
Parent Subsidiary Total
164,000 50,000 214,000
24,000 24,000
140,000 50,000 190,000
- 5,000 - 5,000
- 10,000 - 10,000
5,000 5,000
- 1,000 - 1,000
- 2,500 - 625 - 3,125
137,500 38,375 175,875
- 7,175 - 7,175
137,500 31,200 168,700
(39000*20%)-625 7,175
300,000
168,700
468,700
60,000
408,700
77500
7,175
84,675
-6,000
78,675
Parent Company and Subsidiary
Consolidated Income Statement
For the year ended December 31, 2014
Sales 600,000
Gross Profit 310,000
Less: Expenses
Interest epense 1,000
Goodwill impairment loss 3,125
Consolidated net income 175,875
Net income attributable to:
Non-controlling interest 7,175
Controlling interest 168,700
Consolidated Balance Sheet
As of December 31, 2014
Assets
Cash 269,000
Accounts Receivable 125,000
Inventory 175,000
Land 221,000
Buildings 870,000
Less: Accumulated depreciation 412500 457,500
Equipment 350000
Goodwill 9,375
Total Assets 1,484,375
Liabilities and Shareholder's equity
Liabilities
Accoiunts payable 200,000
Bonds payable 300,000
Less: Discount on bonds payable 3,000 297,000
Total Liabilities 497,000
Shareholders Equity
Retained earnings 408,700
Parent's stockholders Equity/Equity Attributable to to the
owner;s of the parent 908,700
Non-Controlling interest 78,675
Total Stockholder's equity 987,375
Total Liabilities and Shareholder's equity 1,484,375
Second Year after Acquisition
Parent Company Cost Model Entry
January 1, 2015- December 31, 2015

(2) Cash 32,000
Dividend income (P40,000x80%) 32,000
(E1) Investment in Son Co.
Retained earnings-Perfect company
To provide entry to convert from the cost method to the equityn method
or the entry to establish reciprocity at the beginning of the year 1/1/15
Retained earnings-Son Company
Retained earnings-Son Company
Increase in retaiened earnings
Retroactive adjustment
(E2) Common stock - Son Co.

Retained earnings- Son Co.
To eliminate the equity of the subsidiary
(E3) Inventory
Accumulated depreciation- buildings
Land
Buildings
To adjsust the book value of the subsidiary to its fair value
(E4) Goodwill
Investment in Son Co.
To recognize goodwill on acquisition
(E4)) Retained earnings-Perfect company (11,000*80%)+2500

Non-controlling interest (11000*20%)+625
Depreciation expense
Accumulated depreciation -buildings
Interest expense
Inventory
Goodwill
To provide for 2014 and 2015 impairment loss and depreciation and
amortization on differences between acquisition date fair value and
(E5) Dividend income-Perfect

Non-controlling interest (P30,000x20%)
Dividends paid- Son
To eliminate intercompany dividends and non-controlling Interest
share of dividends.
(E6) Non-cotrolling interest in Net Income of Subsidiary

Non-cotrolling interest
To establish non-controlling interest in subsidiary's adjusted net
income for 2015 as follows:
Net income of subsidiary

Amortization of allocated excess
Adjusted
Multiplied by: Non-controlling interest %
Non-controlling Interest in Net Income (NICNI)
16,000
16,000
tyn method
ear 1/1/15
1/1/2015 120,000
1/1/2014 100,000
20,000
80%
16,000
200,000
120,000
256,000
64,000
5,000
80,000
160,000
4,000
6,000
180,000
60,000
15,000
12500
2500
10000
11,300
2,825
5,000
10,000
1,000
5,000
20,000
2,000
3,125
ation and
32,000
8,000
40,000
13,800
13,800
75,000
-6,000
69,000
20%
13,800
Income Statement Perfect Co. Son Co.
Sales 450,000 300,000
Total Revenue 482,000 300,000
Cost of goods sold 180,000 160,000
Interest expense - -
Total Cost and Expenses 290,000 225,000
Net Income 192,000 75,000
NCI-in net income of subsidiary
Net Income to Retained Earnings 192,000 75,000
Statement of Retained Earnings Perfect Co. Son Co.

Retained earnings,1/1
Son Company 120,000
Net income, from above 192,000 75,000
Total 596,000 195,000
Dividends paid
Son Company 40,000
Retained earnings,12/31 Balance 536,000 155,000
Balance Sheet Perfect Co. Son Co.

Cash 221000 85000
Acccounts receivable 150000 80000
Inventory 180000 90000
Land 175000 40000
Equipment 200000 150000
Buildings 600000 450000
Goodwill
Investment in Son Company 310,000
Total 1,836,000 895,000

Accumulated depreciation-equipment 125,000 85,000
Accumulated depreciation- buildings 375,000 255,000
Accounts payable 100000 100000
Bonds payable 200000 100000
Common stock, P10 par 500000
Retained earnings from above 536,000 155,000
Non-Controlling interest
Total 1,836,000 895,000

750,000
32,000 -
750,000
340,000
5,000 75,000
1,000 1,000
105,000
521,000
229,000
13,800 - 13,800
215,200
11,300 16,000 408,700

120,000
215,200
623,900
60,000
40,000
563,900

306,000
230,000
5,000 5,000 270,000
6,000 221,000
350,000
180,000 870,000
4,000 2,000 2,000
12,500 3,125 9,375
240,000
60,000
10,000 -
2,258,375
80,000 20,000 150,000
160,000
10,000 460,000
200,000
300,000
500,000
200,000
563,900
8,000 64,000
2,825 15,000
2,500
13,800 84,475
2,258,375
-
Net income
Less:
Dividend income/Invesment income
Net income from own operations
Equipment
Buildings
Bonds payable
Consolidated net income
Net income attributale to parent
Consolidated retained earnings ( subsequent years)

Consolidated retained earnings beg. (1/1/2015)
Total

Retained earnings beg.-Parent ( 2015)
NCI beg
Total
NCI end
NCI beg
NCI at the date of acquisition
Non-ontrolling interest
NCI beg
Parent Subsidiary Total
192,000 75,000 267,000
32,000 32,000
160,000 75,000 235,000
- 10,000 - 10,000
5,000 5,000
- 1,000 - 1,000
160,000 69,000 229,000
- 13,800 - 13,800
160,000 55,200 215,200
(69,000*20%) 13,800
408,700
215,200
623,900
60,000
563,900
404,000
20,000
- 11,000
9,000
80%
7,200 2,500 4,700
408,700
78675
13,800
92,475
-8,000
84,475
77500
20,000
- 11,000
9,000
20%
1,800 625 1,175
78,675
Consolidated Income Statement
For the year ended December 31, 2015
Sales 750,000
Gross Profit 410,000
Less: Expenses
Interest epense 1,000
Net income attributable to:
Non-controlling interest 13,800
Controlling interest 215,200
Consolidated Balance Sheet
As of December 31, 2015
Assets
Cash 306,000
Accounts Receivable 230,000
Inventory 270,000
Land 221,000
Buildings 870,000
Equipment 350000
Goodwill 9,375
Total Assets 1,646,375
Liabilities and Shareholder's equity
Liabilities
Accoiunts payable 200,000
Bonds payable 300,000
Less: Discount on bonds payable 2,000 298,000
Total Liabilities 498,000
Shareholders Equity
Retained earnings 563,900
Parent's stockholders Equity/Equity Attributable to to the
owner;s of the parent 1,063,900
Non-Controlling interest 84,475
Total Stockholder's equity 1,148,375
Total Liabilities and Shareholder's equity 1,646,375

Buscom - Subsequent-To-The-Date-Of-Acquisition - Cost Method

Uploaded by

Copyright:

Available Formats

Buscom - Subsequent-To-The-Date-Of-Acquisition - Cost Method

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Buscom - Subsequent-To-The-Date-Of-Acquisition - Cost Method

Uploaded by

Copyright:

Available Formats

Cost Model

To record share in net income NOT APPLICABLE

To record share in net income NOT APPLICABLE

To record dividend received CASH XX

Consolidated retained earnings ( 1st year of acquisition)

Consolidated retained earnings ( subsequent years)

Consolidated retained earnings beg.

Controlling (Parent) 10,000

Debits Perfect Co Son Co.

Totals 1,974,000 1,020,000

Totals 1,974,000 1,020,000

r 2014 results of operations are as follows:

January 1, 2014- December 31, 2014

(E2) Inventory 5,000

(E3) Goodwill 12500

(E4)) Cost of goods sold 5,000

(E4) Dividend income-Perfect 24,000

(E5) Non-cotrolling interest in Net Income of Subsidiary 7,175

Net income of subsidiary 50,000

Statement of Retained Earnings Perfect Co. Son Co.

Balance Sheet Perfect Co. Son Co.

Total 1,654,000 840,000

Total 1,654,000 840,000

Dr. Cr. Consolidated

Dr. Cr. Consolidated

Consolidated retained earnings ( 1st year of acquisition)

Parent Company Cost Model Entry

January 1, 2015- December 31, 2015

(E2) Common stock - Son Co.

(E4)) Retained earnings-Perfect company (11,000*80%)+2500

(E5) Dividend income-Perfect

(E6) Non-cotrolling interest in Net Income of Subsidiary

Net income of subsidiary

Statement of Retained Earnings Perfect Co. Son Co.

Balance Sheet Perfect Co. Son Co.

Total 1,836,000 895,000

Total 1,836,000 895,000

Dr. Cr. Consolidated

11,300 16,000 408,700

Dr. Cr. Consolidated

Consolidated retained earnings ( subsequent years)

Consolidated retained earnings beg.

You might also like

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.