Student Name: MEGAN REED Class: ACCT610 I001 Spr 15 Problem 5-27
Requiremen! "# $or %on&oli'"ion purpo&e&( 'oe& )e 'ire%ion o* )e r"n&*er& + )e b"l"n%e& o be repore' )ere/ The noncontrolling interest interest is no longer computed since Akron Akron controls controls a of Toledo. oledo. Thus, Thus, the the dire directi ction on of the the trans transfers fers do not not aect aect the the conso consolida lida business combination. b# Prep"re " %on&oli'"e' in%ome &"emen *or )e e"r en'in D 3or4&)ee Enrie&! a.
Retained Earnings beginning !"!"#$!#% Cost of (oods Sold
!&,'$$.$$
b.
Amorti)ation E*pense #$!+% atented technolog-
!',$$$.$$
c.
Sales #$!+% Cost of (oods Sold
d.
Cost of (oods Sold n/entor-
+#$,$$$.$$
!#,'$$.$$
Con&oli'"e' In%ome S"emen! Akron, nc. and Subsidiar-
Consolidated ncome Statement 2or the 3ear Ended !#"+!"#$!+ Sales Cost of (oods Sold (ross ro0t 1perating E*penses Consolidated Net ncome
p&re"m or 'o,n&re"m ".e% ll the outstanding stock ed amounts of the
%ember 1( 2011# Compu"ion&! (ross ro0t
4 4 4
!&,'$$.$$ (ross ro0t (ross ro0t Rate
4 4 4
(ross ro0t Rate 5nreali)ed (ross ro0t #$!#% 5nreali)ed (ross ro0t #$!#%
4 4 4
!',$$$.$$
+#$,$$$.$$ (ross ro0t
4 4 4
!#,'$$.$$ (ross ro0t (ross ro0t Rate
4 4 4
(ross ro0t Rate 5nreali)ed (ross ro0t #$!+% 5nreali)ed (ross ro0t #$!+%
4 4 4
6
!,+7$,$$$.$$ '&',$$$.$$ 7$',$$$.$$ 9+',$$$.$$ 170(000#00
Sales:
4 !!$$$$$89$$$$$+#$$$ 1(0(000 Cost of (oods Sold 4 '$$$$$8; 575000 1perating E*penses 4 ;$$$$$8# 65000
Sales Cost of (oods Sold +#$,$$$ #;$,$$$ 7$,$$$ (ross ro0t"Sales 7$,$$$"+#$,$$$ #'< (R * Ending n/entor-#$!# #'< * &$,$$$ !&,'$$.$$
Sales Cost of (oods Sold +#$,$$$ #;$,$$$ 7$,$$$ (ross ro0t"Sales 7$,$$$"+#$,$$$ #'< (R * Ending n/entor-#$!# #'< * '$,$$$ !#,'$$.$$
$$$$$+#$$$$!&'$$8!#'$$ #$$$$8!'$$$
Student Name: MEGAN REED Class: ACCT610 I001 Spr 15 Problem 5-27
Require'! "# 3)" ,"& )e "nnu"l "mori"ion re&ulin *rom )e "%qui&iionConsideration paid 2air /alue of Noncontrolling nterest 2air /alue of Subsidiar- ac=uisition date >ook /alue of Subsidiar-?s E=uit2air /alue in e*cess of book /alue Assignment of E*cess 2air @alue
>uilding atented Technolog Total
Amount !7,$$$.$$ +9,$$$.$$
Hife in -rs% 9
Annual Amorti)ation 6 #,$$$.$$ 9,$$$.$$ (000#00
b# 3ere )e inr"-eni r"n&*er& up&re"m or 'o,n&re"m/ The intraentit- transfer is upstream since >re-, the subsidiar- compa to itino, the parent compan-. c. Bhat unreali)ed gross pro0t e*isted as of anuar- !, #$!+D
9e"r Co& o :re #$!# 7!,$$$.$$
Tr"n&*er Pri%e o Piino Gro&& Pro; Gro&& Pro; < !+',$$$.$$ ';,$$$.$$ ;$<
n/entor-, End !#"+!"#$!#% * (ross ro0t ercentage 5nreali)ed (ross ro0t, !"!"#$!+
+&,'$$.$$ ;$< 15(000#00
d. Bhat unreali)ed gross pro0t e*isted as of ecember +!, #$!+D
9e"r Co& o :re #$!+ #,7$$.$$
Tr"n&*er Pri%e o Piino Gro&& Pro; Gro&& Pro; < !9$,$$$.$$ 9&,#$$.$$ ;#<
n/entor-, End !#"+!"#$!+% * (ross ro0t ercentage 5nreali)ed (ross ro0t, !#"+!"#$!+
'$,$$$.$$ ;#< 21(000#00
e. Bhat amounts make up the 697,;$$ n/estment ncomeF>re- account ba n this problem, the method used is e=uit- method since the in/estment inco di/idend income Ghen initial /alue method is used% and also not $< of rep the partial e=uit- method is used%.
Thus: >re- Compan-Is reported incomeF#$!+ Annual Amorti)ation e*cess of fair /alue% Recognition of #$!# unreali)ed gross pro0t eferral of #$!+ unreali)ed gross pro0t Earned income of subsidiar- from consolidated perspecti/e arentIs oGnership percentage In8e&men In%ome - :re
*# 3)" ,"& )e non%onrollin inere&=& &)"re o* )e &ub&i'i"r=& n Earned income of subsidiar- from consolidated perspecti/e Noncontrolling nterest < Non%onrollin Inere& in &ub&i'i"r>& ne in%ome
# 3)" "moun& m"4e up )e ?50(000 In8e&men in :re "%%oun 201/ n/estment in >re- Consideration paid% ncome of >re#$!! #$!# #$!+ Total 5nreali)ed gross pro0t !#"+!"#$!+ Reali)ed income #$!!#$!+ itino?s 1Gnership ercentage
6
9;,$$$.$$ 7$,$$$.$$ $,$$$.$$ #+;,$$$.$$ #!,$$$.$$% #!+,$$$.$$ $<
Annual Amorti)ation e*cess of fair /alue% : 67$$$ * + -rs * $< i/idends paid b- >re#$!! #$!# #$!+ Total itino?s 1Gnership ercentage In8e&men in :re( 12@1@201
!,$$$.$$ #+,$$$.$$ #&,$$$.$$ 9,$$$.$$ $<
)# Prep"re )e 201 ,or4&)ee enr o elimin"e )e &ub&i'i"r=& b b"l"n%e&# Common Stock, >reRetained Earnings>re-, !"!"#$!! #&7,$$$!'$$$% n/estment in >re- $< * ;!+$$$% Noncontrolling nterest in >re- !$< * ;!+$$$% i# 3i)ou prep"rin " ,or4&)ee or %on&oli'"ion enrie&( 'eermin b"l"n%e& *or )e&e ,o %omp"nie&#
a. Sales 6!,$97,$$$. The parentIs balance is added to the subsidiar-Is balan intraentit- transfers for the period. b. Cost of (oods Sold 6'&$,$$$. The computation begins b- adding the par balance less the 6!9$,$$$ in intraentit- transfers for the period. The 6!',$$ #$!# is deducted to recogni)e this income currentl-. Ne*t, the6#!,$$$ endin to cost of goods sold to defer the income until a later -ear Ghen the goods are sold to an outside part-. c. E*penses 6#9$,;$$ Gherein he parentIs balance is added to the subsidiare*cess fair/alue amorti)ation of 67,$$$ is added. d. n/estment ncomeF>re- 4 6$ intercompan- balance is eliminated to incl indi/idual re/enue and e*pense accounts of the subsidiar-% e. Noncontrolling nterest in >re-Is ncome 6&,9$$. f. Consolidated Net ncome 6#+$,$$$ computed as Sales less Cost of (oods S E*penses and the noncontrolling interest share of >re-?s ncome g. Retained Earnings, !"!"!! 6;77,$$$. The e=uit- method has been applied balance e=uals the consolidated total. h. i/idends aid 6!+9,$$$. 1nl- the amount the parent paid is shoGn in th istributions from the subsidiar- to the parent are eliminated as intraentit- t noncontrolling interest reduces the ending balance attributed to these outsid i. Cash and Accounts Recei/able 6##7,$$$. The tGo balances are added aft 6!9,$$$ intercompan- balance K. n/entor- 6+&$,$$$. The tGo balances are added after deducting 6#!,$$$ gross pro0t k. n/estment in >re- 6$. The in/estment balance is eliminated so that the ac subsidiar- can be included. l. Hand, >uildings, and E=uipment 6!,+$;,$$$. Net allocation of 6!#,$$$ for + added m. atented technolog- 6!7,$$$ amorti)ation of 69,$$$ per -ear f or + -ears n. Total Assets 6!,#$,$$$. This 0gure is a summation of the preceding cons o. Hiabilities 6&&+,$$$. The tGo balances are added after remo/al of the 6! balance p. Noncontrolling nterest in >re-, !#"+!"!+ 6'$,$$$ =. Common Stock 6'!',$$$. 1nl- the parent compan- balance is reported Gi statements. r. Retained Earnings, !#"+!"#$!+ 6'7#,$$$ s. Total Hiabilities and E=uities 6!,#$,$$$. This 0gure is the summation of a e=uities.
"e *"ir-8"lue "llo%"ion&/ 6 6
+;#,$$$.$$ +7,$$$.$$% +7$,$$$.$$ +#9,$$$.$$% ';,$$$.$$
- sold in/entor-
lance for #$!+D me is not $< of rted income if
6
$,$$$.$$ 7,$$$.$$% !',$$$.$$ #!,$$$.$$% &9,$$$.$$ $< 6(?00#00
in%ome *or 201/ 6 6
&9,$$$.$$ !$< &,9$$.$$
b"l"n%e "& o* De%ember 1(
6
+;#,$$$.$$
!!,&$$.$$ #!,9$$.$
%$
9#,!$$.$$% ?50(000#00
innin o,ner&= equi 6
!'$,$$$.$$ #9+,$$$.$$ 6 +&!,&$$.$$ ;!,+$$.$$
)e %on&oli'"ion
ce less the 6!9$,$$$ in ntIs balance to the subsidiar-Is unreali)ed gross pro0t from unreali)ed gross pro0t is added
Is balance. Annual ude
old, 1perating J therefore, the parentIs
consolidated statements. ransfers. An- pa-ment to the oGners. r remo/al of the
unreali)ed tual assets and liabilities of the -ear amorti)ation is
olidated assets. ,$$$ intraentit-
hin the consolidated
ll consolidated liabilities and
