FAR M16Business Combination in class materials.xls

BS Immediate Before Consolidation1 1 20101 1 2010 PS Assets Cash30 00024 000 Accounts Receivables35 0009 000 Inventories23 00016 000 Equipment240 00060 000 Accu Depr 40 000 10 000 Patents 12 000 Client List Trademark Total assets288 000111 000 Liabilities and Equity Accounts Payable6 0007 000 Bonds Payable80 000 Capital stock 1 par 120 00060 000 APIC20 00010 000 Retained Earnings62 00034 000 Total Liabilities and Equity288 000111 000 Immediate Subseqent to Consolidation BS Immediate Before Consolidation1 1 2010Issurance of Stock1 1 2010 P Assets Cash30 00030 000 Accounts Receivables35 00035 000 Inventories23 00023 000 Equipment240 000240 000 Accu Depr 40 000 40 000 Patents Client List Trademark Investments160 000160 000 Total assets288 000 288 000 Liabilities and Equity Accounts Payable6 0006 000 Bonds Payable80 00080 000 Capital stock 1 par 120 00016 000136 000 APIC20 000144 000164 000 Retained Earnings62 00062 000 Total Liabilities and Equity288 000160 000448 000 FV of SDifferences 24 000 9 000 Annual Impact under Full Equity Method 17 0001 0001000 72 00012 000 12 000 2 000 2500 15 0003 000500 5 0005 0001000 14 00014 0001400 144 00033 0006400 7 000 1 1 2010 S 24 000 9 000 16 000 60 000 10 000 12 000 111 000 7 000 60 000 10 000 34 000 111 000 Consolidation Worksheet at the date of consolidation PS 1 1 20101 1 2010DrCr Total Assets Cash30 00024 00054 000 Accounts Receivables35 0009 00044 000 Inventories23 00016 0001 00040 000 Equipment240 00060 00012 000312 000 Accu Depr 40 000 10 000 2 000 52 000 Patents 12 0003 00015 000 Client List 5 0005 000 Trademark 14 00014 000 Investments160 000 160 000 Goodwill 23 00023 000 Total assets448 000111 00056 000 160 000 455 000 Liabilities and Equity Accounts Payable 6 000 7 000 13 000 Bonds Payable 80 000 80 000 Capital stock 1 par 136 000 60 000 60 000 136 000 APIC 164 000 10 000 10 000 164 000 Retained Earnings 62 000 34 000 34 000 62 000 Total Liabilities and Equity 448 000 111 000 104 000 455 000 Control 160 000 160 000 Consolidation Worksheet at the date of consolidation assuming using partial equity method PS 12 31 201012 31 2010 Income Statement for Year Ended 12 31 2010 Sales 800 000 400 000 Cost of Sales580 000250 000 Depreciation and Amortization expense28 00014 000 Other operating expenses115 00098 000 Gain on sale of equipment 3 000 Gain on bonds Income from acquiree 38 000 Net income 118 000 38 000 Statement of Retained Earnings for the Year ended 12 31 2010 1 1 2010 Retained Earnings P 62 000 S 34 000 Add Net Income 118 000 38 000 Deduct Dividend26 00015 000 12 31 2010 Retained Earnings 154 000 57 000 Balance sheet as of 12 31 2010 Assets Cash50 00021 000 Accounts Receivables42 0008 000 Inventories34 00014 000 Equipment290 00068 000 Accu Depr 50 000 17 000 Patents 12 000 Client List Trademark Investments in S183 000 Goodwill Investment in bonds of P Corp 39 000 Client List Trademarks Total assets549 000145 000 Liabilities and Equity Accounts Payable 15 000 18 000 Bonds Payable 80 000 Capital stock 1 par 136 000 60 000 APIC 164 000 10 000 Retained Earnings 154 000 57 000 Total Liabilities and Equity 549 000 145 000 Control DrCr Total 1 200 000 830 000 42 000 213 000 3 000 38 000 38 000 118 000 62 000 34 000 38 000 118 000 15 000 26 000 38 000 15 000 188 000 71 000 50 000 48 000 358 000 67 000 12 000 23 000 160 000 39 000 23 000 671 000 33 000 80 000 196 000 174 000 38 000 15 000 188 000 38 000 15 000 671 000 38 000 38 000 Consolidation Worksheet at the date of consolidation assuming using partial equity method Consolidation Worksheet at the date of consolidation assuming using cost method PS 12 31 201012 31 2010 Income Statement for Year Ended 12 31 2010 Sales 800 000 400 000 Cost of Sales580 000250 000 Depreciation and Amortization expense28 00014 000 Other operating expenses115 00098 000 Gain on sale of equipment 3 000 Gain on bonds Dividend Income 15 000 Investment Income Net income 95 000 38 000 Statement of Retained Earnings for the Year ended 12 31 2010 1 1 2010 Retained Earnings P 62 000 S 34 000 Add Net Income 95 000 38 000 Deduct Dividend26 00015 000 12 31 2010 Retained Earnings 131 000 57 000 Balance sheet as of 12 31 2010 Assets Cash50 00021 000 Accounts Receivables42 0008 000 Inventories34 00014 000 Equipment290 00068 000 Accu Depr 50 000 17 000 Patents 12 000 Client List Trademark Investments in S160 000 Goodwill Investment in bonds of P Corp 39 000 Client List Trademarks Total assets526 000145 000 Liabilities and Equity Accounts Payable 15 000 18 000 Bonds Payable 80 000 Capital stock 1 par 136 000 60 000 APIC 164 000 10 000 Retained Earnings 131 000 57 000 Total Liabilities and Equity 526 000 145 000 Control DrCr Total 1 200 000 830 000 42 000 213 000 3 000 15 000 15 000 118 000 62 000 34 000 15 000 118 000 15 000 26 000 15 000 15 000 188 000 71 000 50 000 48 000 358 000 67 000 12 000 160 000 39 000 671 000 33 000 80 000 196 000 174 000 15 000 15 000 188 000 15 000 15 000 671 000 15 000 15 000 Consolidation Worksheet at the date of consolidation assuming using Full equity method PS 12 31 201012 31 2010 Income Statement for Year Ended 12 31 2010 Sales 800 000 400 000 Cost of Sales580 000250 000 Depreciation and Amortization expense28 00014 000 Other operating expenses115 00098 000 Gain on sale of equipment 3 000 Gain on bonds Income from acquiree 32 600 Net income 112 600 38 000 Statement of Retained Earnings for the Year ended 12 31 2010 1 1 2010 Retained Earnings P 62 000 S 34 000 Add Net Income 112 600 38 000 Deduct Dividend26 00015 000 12 31 2010 Retained Earnings 148 600 57 000 Balance sheet as of 12 31 2010 Assets Cash50 00021 000 Accounts Receivables42 0008 000 Inventories34 00014 000 Equipment290 00068 000 Accu Depr 50 000 17 000 Patents 12 000 Client List Trademark Investments in S177 600 Goodwill Investment in bonds of P Corp 39 000 Client List Trademarks Total assets543 600145 000 Liabilities and Equity Accounts Payable 15 000 18 000 Bonds Payable 80 000 Capital stock 1 par 136 000 60 000 APIC 164 000 10 000 Retained Earnings 148 600 57 000 Total Liabilities and Equity 543 600 145 000 Control DrCr Total 1 200 000 830 000 42 000 213 000 3 000 38 000 5 400 38 000 5 400 118 000 62 000 34 000 38 000 5 400 118 000 15 000 26 000 38 000 20 400 188 000 71 000 50 000 48 000 358 000 67 000 12 000 5 400 23 000 160 000 39 000 5 400 23 000 671 000 33 000 80 000 196 000 174 000 38 000 20 400 188 000 38 000 20 400 671 000 43 400 43 400 Consolidation Worksheet at the date of consolidation assuming using partial equity method 100 ownership PS 12 31 201012 31 2010 Income Statement for Year Ended 12 31 2010 Sales 800 000 400 000 Cost of Sales580 000250 000 Depreciation and Amortization expense28 00014 000 Other operating expenses115 00098 000 Gain on sale of equipment 3 000 Gain on bonds Income from acquiree 38 000 Net income 118 000 38 000 Statement of Retained Earnings for the Year ended 12 31 2010 1 1 2010 Retained Earnings P 62 000 S 34 000 Add Net Income 118 000 38 000 Deduct Dividend26 00015 000 12 31 2010 Retained Earnings 154 000 57 000 Balance sheet as of 12 31 2010 Assets Cash50 00021 000 Accounts Receivables42 0008 000 Inventories34 00014 000 Equipment290 00068 000 Accu Depr 50 000 17 000 Patents 12 000 Client List Trademark Investments in S183 000 Goodwill Investment in bonds of P Corp 39 000 Client List Trademarks Total assets549 000145 000 Liabilities and Equity Accounts Payable 15 000 18 000 Bonds Payable 80 000 Capital stock 1 par 136 000 60 000 APIC 164 000 10 000 Retained Earnings 154 000 57 000 Total Liabilities and Equity 549 000 145 000 Control Elimination Journal Entry 1 Eliminate the current year s investment income and adjust the investment balance to acquisition date Dr Income from acquiree Cr Investment in S Cr Dividend Declared 2 Eliminate the investment balance with the acquiree s equity section Dr Inventory Dr Equipment Dr Patents Dr Client List Dr Trademarks Dr Goodwill Dr Common Stock Dr APIC Dr Retained Earnings 01 01 2010 Cr Investment in S Cr Accu Depr 3 Adjust the impact on the income statement due to the revaluation on the acquired identifiable net assets upon acquisition Dr Depr and Amortization Exp Cr Accu Depr Cr Patents Cr Client List Cr Trademarks 4 Intercompany Transactions subseqent to the consolidation Intercompany sale of inventory from P to S Dr Sales Cr COGS Cr Inventory Intercompany sale of inventory from S to P Dr Sales Cr COGS Intercompany sale of equipment Dr Equipment Cr Gain on sale of equipment Cr Accu Depr Dr Accu Depr Cr Depr Expenses Intercompany bonds payable Dr Bond Payable Cr Investment in bonds of P Cr Gain on extinruishment of debt Eliminate any intercompany items in transit Dr Cash Cr Accounts Receivable Eliminate intercompany AP and AR Dr Accounts Payable Cr Accounts Receivable JE 1JE 2JE 3JE 4 DrCr DrCr Dr Cr Dr Cr 46 000 42 400 5 400 800 3 000 1 000 38 000 38 000 5 400 49 000 44 200 34 000 38 000 5 400 49 000 44 200 15 000 38 000 15 000 34 000 5 400 49 000 44 200 1 000 4 000 1 000 3 600 12 0004 000 6 200 2 000 2 500 3 000 500 5 000 1 000 14 000 1 400 23 000 160 000 23 000 39 000 23 000 58 000 162 000 5 400 5 000 52 800 3 000 40 000 60 000 10 000 38 000 15 000 34 0005 400 49 000 44 200 38 000 15 000 104 000 5 400 92 000 44 200 38 000 38 000 162 000 162 000 5 400 5 400 97 000 97 000 Consolidation Worksheet at the date of consolidation assuming using partial equity method 100 ownership 1 Eliminate the current year s investment income and adjust the investment balance to acquisition date 38 000 23 000 15 000 1 000 12 000 3 000 5 000 14 000 23 000 60 000 10 000 34 000 160 000 2 000 5 400 2 500 500 1 000 1 400 30 000 26 400 3 600 16 000 16 000 4 000 3 000 7 000 800 800 40 000 39 000 1 000 3 Adjust the impact on the income statement due to the revaluation on the acquired identifiable net assets upon acquisition 1 000 1 000 3 000 3 000 Total 1 154 000 787 600 46 600 213 000 1 000 107 800 62 000 107 800 26 000 143 800 72 000 46 000 45 400 367 800 71 500 14 500 4 000 12 600 23 000 513 800 30 000 40 000 136 000 164 000 143 800 513 800 Consolidation Worksheet at the date of consolidation assuming using partial equity method 90 ownership PS 12 31 201012 31 2010 Income Statement for Year Ended 12 31 2010 Sales 800 000 400 000 Cost of Sales580 000250 000 Depreciation and Amortization expense28 00014 000 Other operating expenses115 00098 000 Gain on sale of equipment 3 000 Gain on bonds Income from acquiree 34 200 Net income 114 200 38 000 Net Income attributable to NCI Net Income attributable to Acquirer Statement of Retained Earnings for the Year ended 12 31 2010 1 1 2010 Retained Earnings P 62 000 S 35 000 Add Net Income 114 200 38 000 Deduct Dividend26 00015 000 12 31 2010 Retained Earnings 150 200 58 000 Balance sheet as of 12 31 2010 Assets Cash48 50021 000 Accounts Receivables42 0008 000 Inventories34 00014 000 Equipment290 000107 000 Accu Depr 50 000 17 000 Patents 12 000 Client List Trademark Investments in S170 700 Goodwill Client List Trademarks Total assets535 200145 000 Liabilities and Equity Accounts Payable 15 000 17 000 Bonds Payable 80 000 Capital stock 1 par 135 000 60 000 APIC 155 000 10 000 Non controlling interest Retained Earnings 150 200 58 000 Total Liabilities and Equity 535 200 145 000 Control Elimination Journal Entry 1 Eliminate the current year s investment income and adjust the investment balance to acquisition date Dr Income from acquiree Cr Investment in S Cr Noncontrolling Interest Cr Dividend Declared 2 Eliminate the investment balance with the acquiree s equity section Dr Goodwill Dr Common Stock Dr APIC Dr Retained Earnings 01 01 2010 Cr Non Controlling Interest Cr Investment in S 3 Adjust the impact on the income statement due to the revaluation on the acquired identifiable net assets upon acquisition None 4 Intercompany Transactions subseqent to the consolidation Intercompany sale of inv