美国高级会计AdvancedAccounting-Ch02_final.doc

0 CHAPTER 2 UNDERSTANDING THE ISSUES 1 a Johnson has a passive level of ownership and in future periods will record dividend income of only 10 of Bickler s declared dividends Johnson will also have to adjust the investment to market value at the end of each period b Johnson has an influential level of ownership and in future periods will record investment income of 30 of Bickler s net income Any dividends declared by Bickler will reduce the investment account but will not affect the investment income amount c Johnson has a controlling level of ownership and in future periods will add 100 of Bickler s net income to its own net income Bickler s nominal account balances will be added to Johnson s nominal accounts Any dividends declared by Bickler will not affect Johnson s income d Johnson has a controlling level of ownership and in future periods will add 100 of Bickler s net income to its own net income All 100 of Bickler s nominal account balances will be added to Johnson s nominal account balances This will result in consolidated net income followed by a distribution to the noncontrolling interest equal to 20 of Bickler s income Any dividends declared by Bickler will not affect Johnson s income 2 The elimination process serves to make the consolidated financial statements appear as though the parent had purchased the net assets of the subsidiary The investment account and the subsidiary equity accounts are eliminated and replaced by the subsidiary s net assets 3 a CompanyParentNCI ImpliedPriceValue Value Analysis ScheduleFair Value 100 0 Company fair value 900 000 900 000N A Fair value of net assets excluding goodwill 600 000600 000 Goodwill 300 000 300 000 Net Assets marked up 200 000 600 000 fair value 400 000 book value Goodwill 300 000 900 000 600 000 b CompanyParentNCI ImpliedPriceValue Value Analysis ScheduleFair Value 80 20 Company fair value 900 000 720 000 180 000 Fair value of net assets excluding goodwill 600 000480 000120 000 Goodwill 300 000 240 000 60 000 Net Assets marked up 200 000 600 000 fair value 400 000 book value Goodwill 300 000 900 000 600 000 The NCI would be valued at 180 000 20 of the implied company value to allow the full recognition of fair values 1 4 a CompanyParentNCI ImpliedPriceValue Value Analysis ScheduleFair Value 100 0 Company fair value 1 000 000 1 000 000N A Fair value of net assets excluding goodwill 850 000850 000 Goodwill 150 000 150 000 The determination and distribution of excess schedule would make the following adjustments 1 000 000 price 350 000 net book value 650 000 excess to be allocated as follows Current assets 50 000 Fixed assets 450 000 Goodwill 150 000 650 000 b CompanyParentNCI ImpliedPriceValue Value Analysis ScheduleFair Value 100 0 Company fair value 500 000 500 000N A Fair value of net assets excluding goodwill 850 000850 000 Gain on acquisition 350 000 350 000 The determination and distribution of excess schedule would make the following adjustments 500 000 price 350 000 net book value 150 000 excess to be allocated as follows Current assets 50 000 Fixed assets 450 000 Gain on acquisition 350 000 150 000 5 a CompanyParentNCI ImpliedPriceValue Value Analysis ScheduleFair Value 80 20 Company fair value 1 000 000 800 000 200 000 Fair value of net assets excluding goodwill 850 000680 000170 000 Goodwill 150 000 120 000 30 000 800 000 80 1 000 000 The determination and distribution of excess schedule would make the following adjustments 800 000 parent s price 80 350 000 net book value 520 000 NCI adjustment 200 000 20 350 000 net book value 130 000 Total adjustment to be allocated 650 000as follows Current assets 50 000 Fixed assets 450 000 Goodwill 150 000 650 000 2 b CompanyParentNCI ImpliedPriceValue Value Analysis ScheduleFair Value 80 20 Company fair value 770 000 600 000 170 000 Fair value of net assets excluding goodwill 850 000680 000170 000 Gain on acquisition 80 000 80 000 N A Cannot be less than the NCI share of the fair value of net assets excluding goodwill 600 000 parent price 170 000 minimum allowable for NCI 770 000 600 000 parent s price 80 350 000 book value 320 000 NCI adjustment 170 000 20 350 000 net book value 100 000 Total adjustment to be allocated 420 000as follows Current assets 50 000 Fixed assets 450 000 Gain on acquisition 80 000 420 000 6 CompanyParentNCI ImpliedPriceValue Value Analysis ScheduleFair Value 80 20 Company fair value 1 000 000 800 000 200 000 Fair value of net assets excluding goodwill 800 000680 000120 000 Goodwill 200 000 120 000 80 000 800 000 80 1 000 000 The NCI will be valued at 200 000 which is 20 of the implied company value The NCI account will be displayed on the consolidated balance sheet as a subdivision of equity It is shown as a total not broken down into par paid in capital in excess of par and retained earnings Ch 2 Exercises 4 EXERCISES EXERCISE 2 1 Solara Corporation Pro Forma Income Statement Ownership Levels 10 20 70 Sales 640 000 640 000 1 010 000 Cost of goods sold 300 000300 000530 000 Gross profit 340 000 340 000 480 000 Selling and administrative expenses 120 000120 000195 000 Operating income 220 000 220 000 285 000 Dividend income 10 15 000 dividends 1 500 Investment income 20 65 000 reported income 13 000 Net income 221 500 233 000 285 000 Noncontrolling interest 30 65 000 reported income 19 500 Controlling interest 265 500 EXERCISE 2 2 CompanyParentNCI ImpliedPriceValue Value Analysis ScheduleFair Value 100 0 Company fair value 530 000 530 000N A Fair value of net assets excluding goodwill 280 000 book value 20 000 300 000300 000 Goodwill 230 000 230 000 1 a Cash 20 000 Accounts Receivable 70 000 Inventory 100 000 Property Plant and Equipment 270 000 20 000 290 000 Goodwill 230 000 Current Liabilities 80 000 Bonds Payable 100 000 Cash 530 000 Cash may be shown as a net credit of 510 000 Ch 2 Exercises 5 Exercise 2 2 Concluded b Glass Company Balance Sheet Assets Current assets Cash 30 000 Accounts receivable 120 000 Inventory 150 000 300 000 Property plant and equipment net 520 000 Goodwill 230 000 Total assets 1 050 000 Liabilities and Stockholders Equity Liabilities Current liabilities 220 000 Bonds payable 350 000 570 000 Stockholders equity Common stock 100 par 200 000 Retained earnings 280 000480 000 Total liabilities and stockholders equity 1 050 000 2 a Investment in Plastic 530 000 Cash 530 000 b Investment in Plastic appears as a long term investment on Glass s unconsolidated balance sheet c The balance sheet would be identical to that which resulted from the asset acquisition of part 1 EXERCISE 2 3 CompanyParentNCI ImpliedPriceValue Value Analysis ScheduleFair Value 100 0 Company fair value To be determinedN A Fair value of net assets excluding goodwill 560 000 560 000 Goodwill Gain on acquisition 370 000 net asset book value 40 000 inventory increase 50 000 land increase 100 000 building increase 560 000 fair value 1 Goodwill will be recorded if the price is above 560 000 2 A gain will be recorded if the price is below 560 000 Ch 2 Exercises 6 EXERCISE 2 4 1 Investment in Pail Inc 950 000 Cash 950 000 Acquisition Costs Expense 10 000 Cash 10 000 2 CompanyParentNCI ImpliedPriceValue Value Analysis ScheduleFair Value 100 0 Company fair value 950 000 950 000N A Fair value of net assets excluding goodwill 850 000 850 000 Goodwill 100 000 100 000 700 000 net book value 50 000 inventory increase 100 000 depreciable fixed assets increase 850 000 fair value Determination and Distribution of Excess Schedule CompanyParentNCI ImpliedPriceValue Fair Value 100 0 Fair value of subsidiary 950 000 950 000N A Less book value of interest acquired Common stock 10 par 300 000 Paid in capital in excess of par380 000 Retained earnings 20 000 Total stockholders equity 700 000 700 000 Interest acquired 100 Book value 700 000 Excess of fair value over book value 250 000 250 000 Adjustment of identifiable accounts Worksheet AdjustmentKey Inventory 250 000 fair 200 000 book value 50 000debit D1 Depreciable fixed assets 700 000 fair 600 000 book value 100 000debit D2 Goodwill 100 000debit D3 Total 250 000 Ch 2 Exercises 7 Exercise 2 4 Concluded 3 Elimination entries Common Stock 10 par Pail 300 000 Paid In Capital in Excess of Par Pail 380 000 Retained Earnings Pail 20 000 Investment in Pail Inc 700 000 Inventory 50 000 Depreciable Fixed Assets 100 000 Goodwill 100 000 Investment in Pail Inc 250 000 EXERCISE 2 5 1 CompanyParentNCI ImpliedPriceValue Value Analysis ScheduleFair Value 100 0 Company fair value 700 000 700 000N A Fair value of net assets excluding goodwill 885 000885 000 Goodwill Gain on acquisition 185 000 185 000 Determination and Distribution of Excess Schedule CompanyParentNCI ImpliedPriceValue Fair Value 100 0 Price paid for investment 700 000 700 000N A Less book value of interest acquired Common stock 5 par 200 000 Paid in capital in excess of par300 000 Retained earnings 175 000 Total equity 675 000 675 000 Interest acquired 100 Book value 675 000 Excess of fair value over book value 25 000 25 000 Ch 2 Exercises 8 Exercise 2 5 Concluded Adjustment of identifiable accounts Worksheet AdjustmentKey Inventory 215 000 fair 200 000 book value 15 000debit D1 Property plant and equipment 700 000 fair 500 000 book value 200 000debit D2 Computer software 130 000 fair 125 000 book value 5 000debit D3 Premium on bonds payable 200 000 fair 210 000 book value 10 000 credit D4 Gain on acquisition 185 000 credit D5 Total 25 000 2 Elimination entries Common Stock 5 par Genall 200 000 Paid In Capital in Excess of Par Genall 300 000 Retained Earnings Genall 175 000 Investment in Genall Company 675 000 Inventory 15 000 Property Plant and Equipment 200 000 Computer Software 5 000 Gain on Acquisition 185 000 Premium on Bonds Payable 10 000 Investment in Genall Company 25 000 EXERCISE 2 6 1 CompanyParentNCI ImpliedPriceValue Value Analysis ScheduleFair Value 80 20 Company fair value 900 000 720 000 180 000 Fair value of net assets excluding goodwill 820 000656 000164 000 Goodwill 80 000 64 000 16 000 720 000 80 900 000 900 000 20 180 000 Ch 2 Exercises 9 Exercise 2 6 Concluded Determination and Distribution of Excess Schedule CompanyParentNCI ImpliedPriceValue Fair Value 80 20 Fair value of subsidiary 900 000 720 000 180 000 Less book value of interest acquired Common stock 5 par 100 000 Paid in capital in excess of par150 000 Retained earnings 250 000 Total equity 500 000 500 000 500 000 Interest acquired 80 20 Book value 400 000 100 000 Excess of fair value over book value 400 000 320 000 80 000 Adjustment of identifiable accounts Worksheet AdjustmentKey Inventory 300 000 fair 200 000 book value 100 000debit D1 Land 200 000 fair 100 000 book value 100 000debit D2 Building 600 000 fair 450 000 book value 150 000debit D3 Equipment 200 000 fair 230 000 book value 30 000 credit D4 Goodwill 80 000debit D5 Total 400 000 2 Elimination entries Common Stock 5 par Cobalt 80 80 000 Paid In Capital in Excess of Par Cobalt 80 120 000 Retained Earnings Cobalt 80 200 000 Investment in Cobalt Company 400 000 Inventory 100 000 Land 100 000 Building 150 000 Goodwill 80 000 Equipment 30 000 Investment in Cobalt Company excess remaining 320 000 Noncontrolling Interest to adjust to fair value 80 000 Ch 2 Exercises 10 EXERCISE 2 7 1 CompanyParentNCI ImpliedPriceValue Value Analysis ScheduleFair Value 80 20 Company fair value 646 000 512 000 134 000 Fair value of net assets excluding goodwill 670 000536 000134 000 Gain on acquisition 24 000 24 000 N A must at least equal fair value of assets Determination and Distribution of Excess Schedule CompanyParentNCI ImpliedPriceValue Fair Value 80 20 Price paid for investment 646 000 512 000 134 000 Less book value of interest acquired Common stock 5 par 50 000 Paid in capital in excess of par130 000 Retained earnings 370 000 Total equity 550 000 550 000 550 000 Interest acquired 80 20 Book value 440 000 110 000 Excess of fair value over book value 96 000 72 000 24 000 Adjustment of identifiable accounts Worksheet AdjustmentKey Inventory 400 000 fair 280 000 book value 120 000debit D1 Property plant and equipment 500 000 fair 400 000 book value 100 000debit D2 Goodwill 0 fair 100 000 book value 100 000 credit D3 Gain on acquisition 24 000 credit D4 Total 96 000 Ch 2 Exercises 11 Exercise 2 7 Concluded 2 Elimination entries Common Stock 5 par 80 40 000 Paid In Capital in Excess of Par 80 104 000 Retained Earnings 80 296 000 Investment in Sundown Company 440 000 Inventory 120 000 Property Plant and Equipment 100 000 Goodwill 100 000 Gain on Acquisition Venus retained earnings 24 000 Investment in Sundown Company excess remaining 72 000 Noncontrolling Interest to adjust to fair value 24 000 EXERCISE 2 8 1 CompanyParentNCI ImpliedPriceValue Value Analysis ScheduleFair Value 80 20 Company fair value 450 000 360 000 90 000 Fair value of net assets excluding goodwill 390 000312 00078 000 Goodwill 60 000 48 000 12 000 1 000 prior shares included at 45 315 000 7 000 shares per share the market value on 1 1 X6 Determination and Distribution of Excess Schedule CompanyParentNCI ImpliedPriceValue Fair Value 80 20 Fair value of subsidiary 450 000 360 000 90 000 Less book value of interest acquired Common stock 10 par 100 000 Retained earnings 240 000 Total equity 340 000 340 000 340 000 Interest acquired 80 20 Book value 272 000 68 000 Excess of fair value over book value 110 000 88 000 22 000 Ch 2 Exercises 12 Exercise 2 8 Concluded Adjustment of identifiable accounts Worksheet AdjustmentKey Equipment 150 000 fair 100 000 book value 50 000debit D1 Goodwill 60 000debit D2 Total 110 000 2 Investment in Doyle 315 000 Cash 315 000 Investment in Doyle 1 000 45 45 000 Available for Sale Investment 40 000 Unrealized Gain on Investment 5 000 Note Applicable allowance for market value adjustment would also be reversed EXERCISE 2 9 1 Investment in Craig Company 950 000 Cash 950 000 2 CompanyParentNCI ImpliedPriceValue Value Analysis ScheduleFair Value 100 0 Company fair value 950 000 950 000N A Fair value of net assets excluding goodwill 900 000 Goodwill 50 000 Determination and Distribution of Excess Schedule CompanyParentNCI ImpliedPriceValue Fair Value 100 0 Fair value of subsidiary 950 000 950 000N A Less book value of interest acquired Common stock 10 par 300 000 Retained earnings 420 000 Total equity 720 000 720 000 Interest acquired 100 Book value 720 000 Excess of fair value over book value 230 000 230 000 Ch 2 Exercises 13 Exercise 2 9 Concluded Adjustment of identifiable accounts Worksheet AdjustmentKey Land 250 000 fair 200 000 book value 50 000debit D1 Building 700 000 fair 600 000 book value 100 000debit D2 Discount on bonds payable 280 000 fair 300 000 book value 20 000debit D3 Deferred tax liability 40 000 fair 50 000 book value 10 000debit D4 Goodwill 50 000debit D5 Total 230 000 3 Adjustments on Craig books Land 50 000 Building 100 000 Discount on Bonds Payable 20 000 Goodwill 50 000 Deferred Tax Liability 10 000 Retained Earnings 420 000 Paid In Capital in Excess of Par 650 000 4 Elimination entries Common Stock 300 000 Paid In Capital in Excess of Par 650 000 Investment in Craig Company 950 000 Ch 2 Exercises 14 APPENDIX EXERCISE EXERCISE 2A 1 Public CompanyParentNCI ImpliedPriceValue Value Analysis ScheduleFair Value 60 b 40 c Company fair value 5 000a 3 000 2 000 Fair value of net assets excluding goodwill 3 0001 8001 200 Goodwill 2 000 1 200 800 aValues are prior to acquisition 200 shares 25 market value bSubsequent to acquisition Private Company is the parent with 60 ownership prior to acquisition Private Company has 0 ownership of Public Company cPrior to acquisition this represents 100 ownership of Public Company subsequent to acquisition these holders of 100 shares of Public Company become the 40 NCI Determination and Distribution of Excess Schedule Public CompanyParentNCI ImpliedPriceValue Fair Value 60 40 Fair value of subsidiary 5 000 3 000 2 000 Less book value of interest acquired Common stock 1 par 200 Paid in capital in excess of par 800 Retained earnings 1 000 Total equity 2 000 2 000 2 000 Interest acquired 60 40 Book value 1 200800 Excess of fair value over book value 3 000 1 800 1 200 Adjustment of identifiable accounts Worksheet AdjustmentKey Fixed assets 3 000 fair 2 000 book value 1 000debit D1 Goodwill 2 000debit D2 Total 3 000 Ch 2 Problems 15 PROBLEMS PROBLEM 2 1 1 Investment in Duke Company 630 000 Common Stock 10 par 180 000 Paid In Capital in Excess of Par 450 000 18 000 shares 35 Acquisition Expense close to retained earnings 25 000 Cash 25 000 2 CompanyParentNCI ImpliedPriceValue Value Analysis ScheduleFair Value 100 0 Company fair value 630 000 630 000N A Fair value of net assets excluding goodwill 400 000400 000 Goodwill 230 000 230 000 Determination and Distribution of Excess Schedule CompanyParentNCI ImpliedPriceValue Fair Value 100 0 Fair value of subsidiary 630 000 630 000N A Less book value of interest acquired Common stock 10 par 200 000 Retained earnings 140 000 Total equity 340 000 340 000 Interest acquired 100 Book value 340 000 Excess of fair value over book value 290 000 290 000 Adjustment of identifiable accounts Worksheet AdjustmentKey Inventory 65 000 fair 60 000 book value 5 000debit D1 Land 100 000 fair 40 000 book value 60 000debit D2 Building 150 000 fair 120 000 book value 30 000debit D3 Equipment 75 000 fair 110 000 book value 35 000 credit D4 Goodwill 230 000debit D5 Total 290 000 Ch 2 Problems 16 Problem 2 1 Concluded 3 Rose Company and Subsidiary Duke Company Consolidated Balance Sheet July 1 20X6 Assets Current assets Other assets 95 000 Inventory including 5 000 adjustment 185 000 280 000 Long lived assets Land including 60 000 increase 200 000 Building including 30 000 increase 450 000 Equipment including 35 000 decrease 505 000 Goodwill 230 0001 385 000 Total assets 1 665 000 Liabilities and Stockholders Equity Current liabilities 240 000 Stockholders equity Common stock 580 000 Paid in capital in excess of par 450 000 Retained earnings 395 000 Total stockholders equity