Solution manual advanced accounting 2nd by hamlen CH05

Find more at www.downloadslide.com CHAPTER SOLUTIONS TO MULTIPLE CHOICE QUESTIONS, EXERCISES AND PROBLEMS MULTIPLE CHOICE QUESTIONS b Calculation of goodwill: Acquisition cost Fair value of noncontrolling interest Total fair value Book value Plant and equipment revaluation Identifiable intangibles Fair value of identifiable net assets Goodwill $13,000,000 (25,000,000) 40,000,000 28,000,000 $ 70,000,000 Allocation of goodwill between controlling and noncontrolling interest: Total goodwill $ 70,000,000 Pomegranate’s goodwill: $91,700,000 – 90%(28,000,000) 66,500,000 Goodwill to noncontrolling interest $ 3,500,000 Goodwill is allocated 95% to the controlling interest and 5% to the noncontrolling interest (R) Identifiable intangibles Goodwill 40,000,000 70,000,000 Plant and equipment Investment in Starfruit (1) Noncontrolling interest in Starfruit (2) (1) 90% x (40,000,000 - 25,000,000) + 66,500,000 (2) 10% x (40,000,000 - 25,000,000) + 3,500,000 Solutions Manual, Chapter 25,000,000 80,000,000 5,000,000 ©Cambridge Business Publishers, 2013 Find more at www.downloadslide.com c (R) Identifiable intangibles Goodwill 24,000,000 68,000,000 Plant and equipment Investment in Starfruit (1) Noncontrolling interest in Starfruit (2) (1) 90% x (24,000,000 - 20,000,000) + 95% x (70,000,000 – 2,000,000) (2) 10% x (24,000,000 - 20,000,000) + 5% x (70,000,000 – 2,000,000) 3,800,000 b Starfruit net income Revaluation write-offs: Plant and equipment depreciation Identifiable intangibles amortization Goodwill impairment loss 20,000,000 68,200,000 Equity in net income $ 6,750,000 NCI in net income $750,000 2,250,000 (7,200,000) (475,000) $ 1,325,000 250,000 (800,000) (25,000) $ 175,000 c 10% x $28,000,000 c Same calculation as in question 3, except the noncontrolling interest does not share in the goodwill impairment loss ©Cambridge Business Publishers, 2013 Advanced Accounting, 2nd Edition Find more at www.downloadslide.com d (E) Stockholders’ equity 13,000,000 Investment in Starfruit Noncontrolling interest in Starfruit (R) Identifiable intangibles (1) (2) 11,700,000 1,300,000 40,000,000 Plant and equipment 25,000,000 Investment in Starfruit (1) 14,300,000 Noncontrolling interest in Starfruit (2) 700,000 Investment in Starfruit balance on Pomegranate’s books is $26,000,000 (= 20,000,000 cost + 6,000,000 gain on acquisition) Elimination of the investment in (R) is the remainder of the investment balance, after elimination E The credit to noncontrolling interest in (R) brings the noncontrolling interest to fair value, after elimination (E) a There is no goodwill when the acquisition is a bargain purchase d b 10 a Solutions Manual, Chapter ©Cambridge Business Publishers, 2013 Find more at www.downloadslide.com EXERCISES E5.1 Combination and Consolidation, Date of Acquisition (see related E3.1) a Calculation of goodwill: Acquisition cost Fair value of noncontrolling interest Total fair value Book value of Sylvan Goodwill $ 43,200,000 4,250,000 47,450,000 17,000,000 $ 30,450,000 Allocation of goodwill between controlling and noncontrolling interest: Total goodwill Princecraft’s goodwill: $43,200,000 – 90%(17,000,000) Goodwill to noncontrolling interest $ 30,450,000 27,900,000 $ 2,550,000 b Consolidation Working Paper (in thousands) Accounts Taken From Books Total other assets Investment in Sylvan Princecraft $ 150,000 43,200 Sylvan $ 25,000 $ 193,200 $ 25,000 Total liabilities Common stock Additional paid-in capital Retained earnings Noncontrolling interest $ $ Total liabilities and equity $ 193,200 Dr Cr 15,300 (E) 27,900 (R) Goodwill Total assets 30,000 15,360 87,840 60,000 Eliminations 8,000 5,000 10,000 2,000 $ 25,000 (R) 30,450 Consolidated Balances $ 175,000 -_30,450 $ 205,450 (E) 5,000 (E) 10,000 (E) 2,000 $ 38,000 15,360 87,840 60,000 1,700 (E) 2,550 (R) $ 47,450 $47,450 4,250 $ 205,450 Note: Princecraft’s balance sheet above reflects the following acquisition entry (in thousands): Investment in Sylvan 43,200 Common stock Additional paid-in capital ©Cambridge Business Publishers, 2013 360 42,840 Advanced Accounting, 2nd Edition Find more at www.downloadslide.com c Consolidated Balance Sheet, January 1, 2013 (in thousands) Assets Total assets Goodwill Total assets Liabilities and stockholders’ equity Total liabilities Stockholders’ equity Princecraft’s stockholders’ equity: Common stock Additional paid-in capital Retained earnings Total Princecraft’s stockholders’ equity Noncontrolling interest Total stockholders’ equity Total liabilities and stockholders’ equity E5.2 Date of Acquisition Consolidation with In-Process R&D a Calculation of goodwill: Acquisition cost Fair value of noncontrolling interest Total fair value Book value of Saylor Fair value – book value: Land IPR&D Goodwill $ 38,000 15,360 87,840 60,000 163,200 4,250 167,450 $ 205,450 $ 10,000,000 2,000,000 12,000,000 $ 6,000,000 500,000 1,000,000 $ Allocation of goodwill between controlling and noncontrolling interest: Total goodwill Pennant’s goodwill: $10,000,000 – 80%(7,500,000) Goodwill to noncontrolling interest Solutions Manual, Chapter $ 175,000 30,450 $ 205,450 $ $ 7,500,000 4,500,000 4,500,000 4,000,000 500,000 ©Cambridge Business Publishers, 2013 Find more at www.downloadslide.com b Consolidated Financial Statement Working Paper (E) Stockholders’ equity – Saylor 6,000,000 Investment in Saylor (80%) Noncontrolling interest in Saylor (20%) (R) Land IPR&D Goodwill 4,800,000 1,200,000 500,000 1,000,000 4,500,000 Investment in Saylor (1) Noncontrolling interest in Saylor (2) (1) 80% x (500,000 + 1,000,000) + 4,000,000 (2) 20% x (500,000 + 1,000,000) + 500,000 E5.3 5,200,000 800,000 Date of Acquisition Consolidation, Bargain Purchase a Acquisition cost Fair value of noncontrolling interest Total Book value of Sparrow Fair value – book value: Land Other plant assets Investments Long-term debt Fair value of identifiable net assets Gain on acquisition $ 22,000,000 4,000,000 26,000,000 $ 25,000,000 (800,000) 2,000,000 1,500,000 (700,000) 27,000,000 $ (1,000,000) Peregrine’s acquisition entry: Investment in Sparrow Merger expenses 23,000,000 3,000,000 Cash Gain on acquisition ©Cambridge Business Publishers, 2013 25,000,000 1,000,000 Advanced Accounting, 2nd Edition Find more at www.downloadslide.com b Consolidated Financial Statement Working Paper (E) Stockholders’ equity – Sparrow 25,000,000 Investment in Sparrow (80%) Noncontrolling interest in Sparrow (20%) (R) Other plant assets, net Investments Noncontrolling interest in Sparrow (1) 20,000,000 5,000,000 2,000,000 1,500,000 1,000,000 Land Long-term debt Investment in Sparrow (2) 800,000 700,000 3,000,000 (1) $5,000,000 – 4,000,000 (2) $23,000,000 – 20,000,000 E5.4 Consolidated Balance Sheet, Date of Acquisition: U.S GAAP and IFRS a Calculation of goodwill: Acquisition cost [($3,000,000 + (200,000 x $80)) Fair value of noncontrolling interest Total fair value Book value of Powerline Fair value – book value: Current assets Plant and equipment Brand names Goodwill $ 19,000,000 1,800,000 20,800,000 $ 4,500,000 500,000 6,000,000 2,000,000 Allocation of goodwill between controlling and noncontrolling interest: Total goodwill Microsoft’s goodwill: $19,000,000 – 90%(13,000,000) Goodwill to noncontrolling interest Solutions Manual, Chapter 13,000,000 $ 7,800,000 $ $ 7,800,000 7,300,000 500,000 ©Cambridge Business Publishers, 2013 Find more at www.downloadslide.com b Consolidation Working Paper (in thousands) Accounts Taken From Books Current assets Plant and equipment, net Investment in Powerline Brand names Goodwill Total assets Current liabilities Long-term liabilities Common stock, par value Additional paid-in capital Retained earnings Noncontrolling interest Microsoft Powerline $ 7,000 $ 2,000 35,000 7,000 19,000 $ $ Total liabilities and equity 61,000 5,000 20,000 5,000 20,000 11,000 $ 61,000 $ $ $ 9,000 1,500 3,000 100 1,400 3,000 9,000 Eliminations Dr Consolidated Balances $ 9,500 48,000 Cr (R) 500 (R) 6,000 4,050 (E) 14,950 (R) -2,000 7,800 $ 67,300 (R) 2,000 (R) 7,800 $ 6,500 23,000 5,000 20,000 11,000 (E) 100 (E) 1,400 (E) 3,000 450 (E) 1,350 (R) $ 20,800 $ 20,800 1,800 $ 67,300 Note 1: Microsoft’s balance sheet above reflects the following acquisition entry (in thousands): Investment in Powerline 19,000 Cash Common stock Additional paid-in capital Note 2: 3,000 2,000 14,000 The $14,950,000 credit to investment in entry (R) = 90% (500,000 + 6,000,000 + 2,000,000) + 7,300,000 (goodwill) The $1,350,000 credit to noncontrolling interest in entry (R) = 10% (500,000 + 6,000,000 + 2,000,000) + 500,000 (goodwill) c Calculation of goodwill: Acquisition cost 90% x fair value of identifiable net assets Goodwill ©Cambridge Business Publishers, 2013 90% x $13,000,000 $ 19,000,000 11,700,000 $ 7,300,000 Advanced Accounting, 2nd Edition Find more at www.downloadslide.com Consolidation Working Paper (in thousands) Accounts Taken From Books Current assets Plant and equipment, net Investment in Powerline Brand names Goodwill Total assets Microsoft Powerline $ 7,000 $ 2,000 35,000 7,000 19,000 $ Current liabilities Long-term liabilities Common stock, par value Additional paid-in capital Retained earnings Noncontrolling interest $ Total liabilities and equity $ 61,000 5,000 20,000 5,000 20,000 11,000 _ 61,000 $ $ 9,000 1,500 3,000 100 1,400 3,000 _ $ 9,000 Eliminations Dr Cr (R) 500 (R) 6,000 4,050 (E) 14,950 (R) (R) 2,000 (R) 7,300 Consolidated Balances $ 9,500 48,000 -2,000 7,300 $ 66,800 $ (E) 100 (E) 1,400 (E) 3,000 450 (E) 850 (R) $ 20,300 $ 20,300 6,500 23,000 5,000 20,000 11,000 1,300 $ 66,800 Note: The IFRS alternative valuation method attributes no goodwill to the noncontrolling interest Solutions Manual, Chapter ©Cambridge Business Publishers, 2013 Find more at www.downloadslide.com E5.5 Consolidation Eliminating Entries, Date of Acquisition: U.S GAAP and IFRS (amounts in thousands) a Plummer’s acquisition entry: Investment in Softek Merger expenses 25,000 500 Cash Common stock, par value Additional paid-in capital 500 4,000 21,000 Consolidation eliminating entries: (E) Common stock Additional paid-in capital Retained earnings 200 8,000 5,000 Accumulated OCI Treasury stock Investment in Softek Noncontrolling interest in Softek 800 400 10,800 1,200 (R) Trademarks Customer lists Goodwill (1) 1,500 1,000 16,100 Plant assets, net 3,000 Long-term debt 100 Investment in Softek (2) 14,200 Noncontrolling interest in Softek (3) 1,300 (1) ($25,000 + $2,500) – ($12,000 – $3,000 + $1,500 + $1,000 – $100) = $27,500 – $11,400 (2) 90% x ($1,500 + $1,000 – $3,000 – $100) + ($25,000 – 90% x $11,400) (3) 10% x ($1,500 + $1,000 – $3,000 – $100) + [$16,100 – ($25,000 – 90% x $11,400)] ©Cambridge Business Publishers, 2013 10 Advanced Accounting, 2nd Edition Find more at www.downloadslide.com P5.5 Consolidated Working Paper Two Years after Acquisition, Bargain Purchase (see related P5.4) (all amounts in millions) a Equity in NI Total Saxon’s reported net income for 2014 ($12,000 – 9,500 – 60 – 40 – 2,200 = $200) Revaluation writeoffs: Buildings and equipment ($300/20) Long-term debt ($110/5) $ 200 $ 180 Noncontrolling interest in NI $ 20 (15) (13.5) (1.5) (22) (19.8) (2.2) $ 163 $ 146.7 $ 16.3 Note: Inventory (FIFO) and marketable securities revaluations were realized through sale in 2013 b Consolidation Working Paper, December 31, 2014 Trial Balances Taken From Books Dr (Cr) Eliminations Consolidated Paxon Cash and receivables Inventory Investment in Saxon $ 3,000 2,500 2,063.9 Land Buildings and equipment, net Current liabilities Long-term debt Common stock Additional paid-in capital Retained earnings, Jan Noncontrolling interest 650 5,905 (2,500) (6,000) (500) (1,200) (3,022.2) Dividends Sales revenue Equity in income of Saxon Cost of goods sold Depreciation expense Interest expense Other operating expenses Noncontrolling interest in NI Solutions Manual, Chapter 500 (35,000) (146.7) 30,000 450 300 3,000 _-$ -0- Saxon $ Dr Cr 850 950 250 1,440 (1,000) (800) (100) (350) (1,090) $ 101.7 (C) 1,386 (E) 576.2 (R) (R) 245 (R) 285 (R) 88 (E) 100 (E) 350 (E) 1,090 15 (O-1) 22 (O-2) 154 (E) 41.8 (R) 11.3 (N) 45 (C) (N) 50 (12,000) -9,500 60 40 2,200 _-$ -0- Balances (C) 146.7 (O-1) 15 (O-2) 22 $ (N) 16.3 2,358 _ $ 2,358 3,850 3,450 1,145 7,615 (3,500) (6,734) (500) (1,200) (3,022.2) (207.1) 500 (47,000) -39,500 525 362 5,200 _16.3 $ -0- ©Cambridge Business Publishers, 2013 27 Find more at www.downloadslide.com P5.6 Consolidation Working Paper, Second Year Following Acquisition (amounts in millions) a Calculation of goodwill is as follows: Acquisition cost Fair value of noncontrolling interest Total Book value of S Identifiable intangibles Goodwill $ 600 225 825 $ 580 100 680 $ 145 Allocation of goodwill between controlling and noncontrolling interest: Total goodwill Harrah’s goodwill: $600 – 70% x $680 Goodwill to noncontrolling interest b $ 145 124 $ 21 Calculation of 2008 equity in net loss and noncontrolling interest in net loss: Total Emerald Safari Resort reported income ($2,200 + 300 + 200 – 1,670 – 1,000 = $30) Revaluation writeoffs: Identifiable intangibles Goodwill ©Cambridge Business Publishers, 2013 28 $ 30 ( 8) (145) $ (123) Equity in NL $ 21 (5.6) (124) $ (108.6) Noncontrolling interest in NL $ (2.4) (21) $ (14.4) Advanced Accounting, 2nd Edition Find more at www.downloadslide.com c Consolidation Working Paper, December 31, 2008 Trial Balances Taken From Books Dr (Cr) Current assets Land, buildings, riverboats and equipment, net Intangible assets Investment in Emerald Goodwill Current liabilities Long-term liabilities Common stock Capital surplus Retained earnings, Jan Noncontrolling interest Harrah’s Emerald Safari Resort $ $ 1,400 17,696.2 2,500 515.2 Dividends Casino revenues Food and beverage revenues Rooms revenues Equity in net loss of Emerald Direct casino, food and beverage, rooms expenses General and administrative expenses Amortization expense Goodwill impairment loss Noncontrolling interest in net loss $ Solutions Manual, Chapter -(300) (2,600) (4) (320) (300) 100 (6,600) (1,400) (1,000) 108.6 7,200 (2,200) (300) (200) -1,670 1,400 1,000 0- $ Consolidated Dr Cr 200 2,549 800 -(1,500) (14,000) (20) (5,500) (900) Eliminations 0- Balances $ (R) 95 (C) 112.1 (R) 145 (E) (E) 320 (E) 300 (N) 15.9 (O) 436.8 (E) 190.5 (R) 145 (O) 3,387 (1,800) (16,600) (20) (5,500) (900) (220.8) 187.2 (E) 49.5 (R) 3.5 (C) 1.5 (N) 100 (8,800) (1,700) (1,200) -8,870 108.6 (C) (O) (O) 145 _ 14.4 (N) $ 1,145 $ 1,145 1,600 20,245.2 $ 2,400 145 (14.4) -0- ©Cambridge Business Publishers, 2013 29 Find more at www.downloadslide.com P5.7 Equity Method and Eliminating Entries Three Years after Acquisition (see related P4.2) a Calculation of equity in net income and noncontrolling interest in net income for 2014: Sunset Coast’s reported net income for 2014 Revaluation writeoffs: Plant assets ($1,000,000)/10 Identifiable intangibles $3,600,000/20 (1) Total Equity in NI $ 200,000 $ 180,000 100,000 (180,000) Noncontrolling interest in NI $ 20,000 90,000 (162,000) 10,000 (18,000) $ 120,000 $ 108,000 (1) $3,600,000 = $3,150,000 + 350,000 – (1,400,000 – 500,000 – 1,000,000) b $ 12,000 Calculation of investment balance at December 31, 2014: Investment in Sunset Coast, December 31, 2011 90% x Sunset Coast’s reported income, 2012-2014 90% x Sunset Coast’s reported dividends, 2012-2014 (50% of reported income) Revaluation writeoffs, 2012-2014: Plant assets [($1,000,000)/10] x x 90% Identifiable intangibles ($3,600,000/20) x x 90% Investment in Sunset Coast, December 31, 2014 $3,150,000 765,000 (382,500) 270,000 (486,000) $3,316,500 Note: Under LIFO and increasing inventory, the revalued inventory is assumed to still be on hand c Calculation of noncontrolling interest balance at December 31, 2014: Fair value of noncontrolling interest, December 31, 2011 10% x Sunset Coast’s reported income, 2012-2014 10% x Sunset Coast’s reported dividends, 2012-2014 (50% of reported income) Revaluation writeoffs, 2012-2014: Plant assets [($1,000,000)/10] x x 10% Identifiable intangibles ($3,600,000/20) x x 10% Noncontrolling interest in Sunset Coast, December 31, 2014 ©Cambridge Business Publishers, 2013 30 $350,000 85,000 (42,500) 30,000 (54,000) $368,500 Advanced Accounting, 2nd Edition Find more at www.downloadslide.com d Consolidation working paper eliminating entries for 2014: (C) Equity in net income of Sunset Coast 108,000 Dividends–Sunset Coast (.5 x $200,000 x 90%) Investment in Sunset Coast 90,000 18,000 (E) Stockholders’ equity—Sunset Coast, 1/1 1,725,000 Investment in Sunset Coast 1,552,500 Noncontrolling interest in Sunset Coast 172,500 Sunset Coast’s stockholders’ equity, January 1, 2014 = $1,400,000 + (1 - 5)(850,000 – 200,000) = $1,725,000 (R) Identifiable intangibles 3,240,000 Inventory 500,000 Plant assets, net 800,000 Investment in Sunset Coast 1,746,000 Noncontrolling interest in Sunset Coast 194,000 Revaluations at January 1, 2014 = original revaluations less writeoffs for 2012 and 2013 (O) Plant assets, net Amortization expense 100,000 180,000 Depreciation expense Identifiable intangibles (N) Noncontrolling interest in NI of Sunset Coast 12,000 Dividends – Sunset Coast (.5 x $200,000 x 10%) Noncontrolling interest in Sunset Coast Solutions Manual, Chapter 100,000 180,000 10,000 2,000 ©Cambridge Business Publishers, 2013 31 Find more at www.downloadslide.com P5.8 Consolidation Working Paper after Several Years (amounts in thousands) a Calculation of goodwill: Acquisition cost Fair value of noncontrolling interest Total fair value Book value of Piedmont Fair value – book value of franchise rights Goodwill $ 70,000 15,000 85,000 $ 25,000 5,000 Allocation of goodwill between controlling and noncontrolling interest: Total goodwill Coca-Cola Consolidated’s goodwill: $70,000 – 75%(30,000) Goodwill to noncontrolling interest 30,000 $ 55,000 $ 55,000 47,500 $ 7,500 b Calculation of equity in net loss and noncontrolling interest in net loss for 2012: Equity Noncontrolling Total in NL interest in NL Piedmont’s reported net income for 2012 (1) $ 3,000 $ 2,250 $ 750 Revaluation write-offs: Franchise rights impairment (2,500) (1,875) (625) Goodwill impairment (47.5: 7.5 ratio) (6,000) (5,182) (818) $ (5,500) $ (4,807) $ (693) (1) $3,000 = $300,000 – (175,000 + 114,000 + 8,000) c Calculation of investment balance at December 31, 2012: Investment in Piedmont, January 1, 2003 75% x Piedmont reported income less dividends, 2003-2011 (1) 75% x Revaluation write-offs for franchise rights, 2003-2011 Equity in net loss, 2012 Investment in Piedmont, December 31, 2012 $ 70,000 4,350 (750) (4,807) $ 68,793 (1) Change in book value 2003-2011 of $5,800 (= $30,800 – $25,000) is attributed to accumulated income less dividends, since the stock accounts did not change; $30,800 = $1,000 + $12,000 + $18,000 – $200 ©Cambridge Business Publishers, 2013 32 Advanced Accounting, 2nd Edition Find more at www.downloadslide.com d Consolidation Working Paper, December 31, 2012 Trial Balances Taken From Books Dr (Cr) Current assets Property, plant & equipment, net Franchise rights, net Investment in Piedmont Goodwill Current liabilities Long-term debt Common stock Additional paid-in capital Retained earnings, Jan Accumulated other comprehensive loss Treasury stock Noncontrolling interest Dividends Net sales Equity in loss of Piedmont Cost of sales Selling, delivery and administrative expenses Amortization expense Interest expense Goodwill impairment loss Noncontrolling interest in NI Solutions Manual, Chapter Eliminations Consolidated Coca-Cola Consolidated Piedmont $ 160,000 250,000 466,400 68,793 $ 30,000 233,800 - -(120,000) (700,000) (12,000) (100,000) (50,500) 12,000 30,000 -(20,000) (210,000) (1,000) (12,000) (18,000) -200 2,000 (1,200,000) 4,807 760,000 400,000 -(300,000) -175,000 114,000 500 28,000 - _ -$ -0- -8,000 - _-$ -0- Dr Cr Balances $ (R) 4,000 (C) 4,807 (R) 55,000 2,500 (O) 23,100 (E) 50,500 (R) 6,000 (O) (E) 1,000 (E) 12,000 (E) 18,000 (N) 693 200 (E) 7,700 (E) 8,500 (R) 4,807 (C) (O) 2,500 (O) 6,000 _ 693 (N) $ 104,000 $104,000 190,000 483,800 467,900 -49,000 (140,000) (910,000) (12,000) (100,000) (50,500) 12,000 30,000 (15,507) 2,000 (1,500,000) -935,000 514,000 3,000 36,000 6,000 (693) $ -0- ©Cambridge Business Publishers, 2013 33 Find more at www.downloadslide.com e Consolidated Income Statement and Statement of Retained Earnings, Year Ended December 31, 2012 Net sales $ 1,500,000 Cost of sales (935,000) Gross profit 565,000 Selling, delivery and administrative expenses (514,000) Amortization expense (3,000) Interest expense (36,000) Goodwill impairment loss (6,000) Consolidated net income 6,000 Plus: Net loss attributable to noncontrolling interest _693 Net income attributable to Coca-Cola Consolidated 6,693 Plus retained earnings, January 50,500 Less dividends _(2,000) Retained earnings, December 31 $ 55,193 Consolidated Balance Sheet, December 31, 2012 Assets Current assets Property, plant and equipment, net Franchise rights, net Goodwill Total assets Liabilities and stockholders’ equity Current liabilities Long-term liabilities Total liabilities Stockholders’ equity Coca-Cola Consolidated stockholders’ equity: Common stock Additional paid-in capital Retained earnings Treasury stock Accumulated other comprehensive loss Total Coca-Cola Consolidated stockholders’ equity Noncontrolling interest Total stockholders’ equity Total liabilities and stockholders’ equity ©Cambridge Business Publishers, 2013 34 $ 190,000 483,800 467,900 49,000 $ 1,190,700 $ 140,000 910,000 1,050,000 12,000 100,000 55,193 (30,000) (12,000) 125,193 15,507 140,700 $ 1,190,700 Advanced Accounting, 2nd Edition Find more at www.downloadslide.com P5.9 Consolidated Statement of Cash Flows Sunny Valley Resort and Subsidiary Consolidated Statement of Cash Flows For the year 2012 Cash from operating activities Consolidated net income ($400,000 + $24,000) (1) Add (subtract) items not affecting cash: Depreciation expense $ 350,000 Goodwill impairment loss 30,000 Loss on retirement of plant assets (2) 50,000 Changes in current assets and liabilities: Increase in other current assets (400,000) Decrease in current liabilities (268,000) Net cash from operating activities Cash from investing activities Acquisition of plant assets (3) Cash from financing activities Increase in noncurrent liabilities 100,000 Dividends paid to controlling stockholders (70,000) Dividends paid to noncontrolling stockholders (16,000) Net decrease in cash Plus cash balance, January Cash balance, December 31 $ 424,000 430,000 (668,000) 186,000 (300,000) 14,000 (100,000) 700,000 $ 600,000 (1) Noncontrolling interest in net income = $120,000 x 20% (2) $1,600,000 + 350,000 – 1,500,000 = $450,000 accumulated depreciation on plant assets scrapped; $500,000 – 450,000 = $50,000 loss on retirement of plant assets (3) X = cost of plant assets acquired; $4,200,000 + X – 500,000 = $4,000,000; X = $300,000 Solutions Manual, Chapter ©Cambridge Business Publishers, 2013 35 Find more at www.downloadslide.com P5.10 Consolidated Statement of Cash Flows Prime Casinos and Saratoga International Hotels Consolidated Statement of Cash Flows For the Year ended December 31, 2013 (in millions) Cash from operating activities: Consolidated net income Add (subtract) items not affecting cash from operations: Depreciation expense Goodwill impairment loss Loss on sale of plant assets Changes in current assets and liabilities: Increase in other current assets Increase in current liabilities Net cash from operating activities Cash from investing activities: Sale of plant assets (1) Acquisition of plant assets Cash from financing activities: Increase in long-term liabilities Issuance of capital stock Dividends paid to majority stockholders Dividends paid to noncontrolling interest (2) Net increase in cash Plus cash balance, January 1, 2013 Cash balance, December 31, 2013 $ 612 $ 250 25 10 285 (100) 250 150 1,047 15 (675) (660) 150 200 (435) (2) $ (87) 300 200 500 (1) Cost of plant assets sold = $2,500 + $675 - $3,100 = $75 Accumulated depreciation on plant assets sold = $800 + $250 - $1,000 = $50 Cash received from sale of plant assets = $75 - $50 - $10 = $15 (2) $150 + 12 – 160 = $2 ©Cambridge Business Publishers, 2013 36 Advanced Accounting, 2nd Edition Find more at www.downloadslide.com P5.11 Consolidation Two Years after Acquisition, IFRS (all dollar amounts in millions) a Calculation of goodwill is as follows: Acquisition cost Book value of Monaco Revaluations: Inventory Property, plant and equipment Identifiable intangibles Fair value of identifiable net assets Goodwill b € 4,000 € 1,000 (100) 400 300 1,600 x 80% 1,280 € 2,720 Calculation of equity in net income and noncontrolling interest in net income for 2013: Equity Noncontrolling Total in NI interest in NI Monaco’s reported net income for 2013 (1) € 600 € 480 € 120 Revaluation writeoffs: Property, plant and equipment $400/10 (40) (32) (8) Identifiable intangibles $300/3 (100) (80) (20) Goodwill (200) (200) -€ 260 € 168 € 92 (1) $600 = $3,500 – (2,500 + 400) Solutions Manual, Chapter ©Cambridge Business Publishers, 2013 37 Find more at www.downloadslide.com c Consolidation Working Paper, December 31, 2013 Trial Balances Taken From Books Dr (Cr) Rendezvous Current assets Property, plant and equipment, net Investment in Monaco € Identifiable intangibles Goodwill Liabilities Capital stock Retained earnings, Jan Noncontrolling interest Monaco € 900 2,000 (4,648) (1,500) (1,000) Dividends 200 -(1,150) (800) (600) Sales revenue Equity in net income of Monaco Cost of sales Goodwill impairment loss Administrative and other operating expenses Noncontrolling interest in NI € ©Cambridge Business Publishers, 2013 38 500 3,000 4,316 Eliminations Dr Cr (R) 360 (R) 200 (R) 2,620 (E) (E) (3,500) -2,500 300 0- 400 0- € -300 2,420 (5,798) (1,500) (1,000) 800 600 280 (E) 112 (R) 82 (N) 40 (C) 10 (N) 50 (5,000) (168) 4,200 40 (O) 128 (C) 1,120 (E) 3,068 (R) 100 (O) 200 (O) Consolidated Balances € 1,400 5,320 (C) (474) -(8,500) -6,700 200 168 (O) 200 (O) 40 (O) 100 (N) 92 € 5,180 € 5,180 € Advanced Accounting, 2nd Edition 840 92 -0- Find more at www.downloadslide.com P5.12 Consolidation Several Years after Acquisition, IFRS (dollar amounts in thousands) a Calculation of goodwill is as follows: Acquisition cost Book value of Hearty Revaluations: Plant and equipment Identifiable intangibles Long-term debt Fair value of identifiable net assets Goodwill b € 150,000 € 70,000 (50,000) 40,000 2,000 62,000 x 75% 46,500 € 103,500 Calculation of equity in net income and noncontrolling interest in net income for 2014: Noncontrolling Total Equity in NI interest in NI Hearty’s reported net income for 2014 (1) € 15,000 € 11,250 € 3,750 Revaluation writeoffs: Property, plant and equipment (€50,000/10) 5,000 3,750 1,250 Identifiable intangibles (€40,000/10) (4,000) (3,000) (1,000) Goodwill (750) (750) -€ 15,250 € 11,250 € 4,000 (1) €15,000 = €140,000 – (80,000 + 45,000) Solutions Manual, Chapter ©Cambridge Business Publishers, 2013 39 Find more at www.downloadslide.com c Consolidation Working Paper, December 31, 2014 Trial Balances Taken From Books Dr (Cr) Current assets Property, plant and equipment, net Investment in Hearty Identifiable intangibles Goodwill Current liabilities Long-term debt Capital stock Retained earnings, Jan Noncontrolling interest Sales revenue Equity in net income of Hearty Cost of goods sold Goodwill impairment loss Other operating expenses Noncontrolling interest in NI Lily € 35,000 226,500 176,750 100,000 -(30,000) (350,000) (80,000) (60,000) -(400,000) (11,250) 250,000 -143,000 -€ -0- ©Cambridge Business Publishers, 2013 40 Hearty € 20,000 202,000 Eliminations Dr Cr Consolidated Balances € (O) 5,000 30,000 (R) 11,250 (C) 69,000 (E) 96,500 (R) (R) 24,000 4,000 (O) (R) 101,000 750 (O) 10,000 -(25,000) (100,000) (54,000) (E) 54,000 (38,000) (E) 38,000 (R) 1,500 23,000 (E) 4,000 (N) (140,000) (C) 11,250 80,000 (O) 750 45,000 (O) 4,000 5,000 (O) (N) 4,000 € -0€243,500 €243,500 55,000 403,500 -130,000 100,250 (55,000) (450,000) (80,000) (60,000) (25,500) (540,000) -330,000 750 187,000 4,000 € -0- Advanced Accounting, 2nd Edition Find more at www.downloadslide.com P5.13 Noncontrolling Interest in Comprehensive Income a Vodafone’s 45 percent noncontrolling interest in net income is $7,668, implying that Verizon Wireless’ total net income (adjusted for revaluation write-offs) was $17,040 (= $7668/.45) Since consolidated income is $10,217, Verizon’s separate results are a loss of $6,823 (= $10,217 - $17,040) b Verizon Wireless reported a net loss in OCI for 2010, but Verizon Communications reported a net gain in OCI Verizon Wireless’ total OCI loss for 2010 must have been $78 (= $35/.45), and Verizon’s share is $43 Consolidated OCI for 2010 is a gain of $2,363 Therefore Verizon’s separate OCI for 2010 is a gain of $2,441 (= $2,363 + $78) c (N) Noncontrolling interest in income of Verizon Wireless 7,668 Noncontrolling interest in other comprehensive loss of Verizon Wireless Dividends – Verizon Wireless Noncontrolling interest in Verizon Wireless Solutions Manual, Chapter 35 2,051 5,582 ©Cambridge Business Publishers, 2013 41 ... elimination (E) a There is no goodwill when the acquisition is a bargain purchase d b 10 a Solutions Manual, Chapter ©Cambridge Business Publishers, 2013 Find more at www.downloadslide.com EXERCISES... goodwill Pennant’s goodwill: $10,000,000 – 80%(7,500,000) Goodwill to noncontrolling interest Solutions Manual, Chapter $ 175,000 30,450 $ 205,450 $ $ 7,500,000 4,500,000 4,500,000 4,000,000 500,000... goodwill Microsoft’s goodwill: $19,000,000 – 90%(13,000,000) Goodwill to noncontrolling interest Solutions Manual, Chapter 13,000,000 $ 7,800,000 $ $ 7,800,000 7,300,000 500,000 ©Cambridge Business