160000 Other Contributed Capital 92000 Retained Earnings ID: 370875
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Slide1Slide2
a.
Common Stock
160,000 Other Contributed Capital 92,000 Retained Earnings 43,000
Difference between implied and book value 56,000
(351,000/100% - (160,000+92,000+43,000)
Investment in
Saltez
351,000
Property, Plant, and Equipment
56,000
Difference between implied and book value 56,000
b.
Common Stock
190,000
Other Contributed Capital
75,000
Difference between implied and book value 21,778
(232,000/0.9-[190,000+75,000-29,000])
Retained Earnings
29,000
Investment in
Saltez
232,000
Noncontrolling
Interest
25,778
Property, Plant, and Equipment
21,778
Difference between implied and book value 21,778Slide3
c.
Common Stock
180,000 Other Contributed Capital 40,000 Retained Earnings
4,000
Investment in
Saltez
159,000
Gain
on Purchase of Business –
Prancer
**
13,800
Noncontrolling
Interest (.2) ($198,750) + $3,450
*
43,200
** The ordinary gain to
Prancer
is $159,000 – (.80)($216,000) = $13,800
*
Noncontrolling
interest reflects the
noncontrolling
share of implied value (.20 x $198,750, or $39,750), plus the NCI portion of the bargain (.20 x $17,250)
NOTE: We know this is a bargain acquisition in part c because the investment cost of $159,000 implies a total value of $198,750. Since this value is less than the book value of equity of $216,000 [$180,000+$40,000-$4,000], the difference is a bargain of $17,250. This bargain is allocated between the parent (this portion is reflected as a gain) and the NCI. Slide4Slide5
Part A
Investment in Sun Company 192,000
Cash 192,000 Part B
PRUNCE COMPANY AND SUBSIDIARY
Consolidated Balance Sheet
January 2, 2008
Assets
Cash ($260,000 + $64,000 – $192,000)
$132,000
Accounts Receivable
165,000
Inventory
171,000
Plant and Equipment (net)
484,000
Land ($63,000 + $32,000 + $28,333*)
123,333
Total Assets
$1,075,333
Liabilities and Stockholders’ Equity
Accounts Payable
$
151,000
Mortgage Payable
111,000
Total Liabilities
262,000
Noncontrolling
Interest ($192,000/0.9
0.1)
$
21,333
Common Stock
400,000
Other Contributed
Capital
208,000
Retained Earnings
184,000
Total Stockholders’ Equity
813,333
Total Liabilities and Stockholders’ Equity
$1,075,333
* [$192,000/0.9 – ($70,000 + $20,000 + $95,000)] = $28,333Slide6
Exercise 3-6 Slide7
Part A
$37,412
NCI
= 15%
NCI
$249,412
Implied Value*
Common Stock-Shipley
90,000
Other Contributed Capital-Shipley
90,000
Retained Earnings-Shipley 56,000 Land $249,412 - $236,000 13,412 Investment in Shipley Company 212,000 Noncontrolling Interest 37,412
* Implied Value = Parent’s value $212,000 + NCI $37,412 = $249,412Slide8
Cash
$ 15,900
Accounts Receivable 22,000
Inventory
34,600
Plant and Equipment 147,000
Land ($220,412 - $13,412 - $120,000)
87,000
Total Assets
$ 306,500
Accounts Payable $ 70,500
Common Stock 90,000
Other Contributed Capital 90,000
Retained Earnings 56,000 Total Equities $ 306,500 SHIPLEY COMPANY Balance Sheet December 31, 2007 Part BSlide9
Problem 3-7Slide10
(Part A)
(Part B)
Cash ($700,000 – $594,000 + $ 111,000) $ 217,000 $ 811,000
Accounts Receivable (net) 1,122,000 1,122,000
Inventory 604,000 604,000
Property and Equipment (net) 2,395,000 2,395,000
Land
214,000
214,000
Total Assets
$4,552,000
$5,146,000
Accounts Payable $ 454,000 $ 454,000 Notes Payable 649,000 649,000 Long-term Debt 440,000 440,000 Noncontrolling Interest ($500,000 + $80,000 + $80,000) 0.10) 66,000 66,000 Common Stock (Part B, 1800000+(11880×20) 1,800,000 2,037,600 Other Contributed Capital (Part B, $543,000 + [($50 – $20) 11,880] 543,000 899,400 Retained Earnings 600,000 600,000 Total Equities $4,552,000 $5,146,000