CH 03 - Solutions

3-1
Ch. 3Problems
EXERCISE 3-1
Determination and Distribution of Excess Schedule
Company
Implied
Fair Value
Fair value of subsidiary.....................
Less book value of interest acquired:
Common stock ($5 par)...............
Paid-in capital in excess of par....
Retained earnings.......................
Total equity............................
Interest acquired.........................
Book value........................................
Excess of fair value over book
value...........................................
$525,000*
$ 50,000
100,000
150,000
$300,000
$225,000
Parent
Price
(80%)
NCI
Value
(20%)
$420,000
$105,000
$300,000
80%
$240,000
$300,000
20%
$ 60,000
$180,000
$ 45,000
*$420,000/80% = $525,000
Adjustment of identifiable accounts:
Adjustment
Equipment.........................................
Goodwill............................................
Total............................................
(a)
$ 40,000
185,000
$225,000
Worksheet
Key
Life
Amortization
per Year
$8,000
debit D1
debit D2
Event
2015
Subsidiary income of
$50,000 reported to parent
Simple Equity Method

Investment in Huron Company..........
Subsidiary Income.......................
40,000
Dividends of $10,000 paid

by Huron
Cash.................................................
Investment in Huron Company....
8,000
2016

36,000

by Huron
Cash.................................................
8,000
40,000
8,000
36,000
8,000
3-2
Ch. 3Problems
Exercise 3-1, Concluded

(b)
Event
2015
($50,000 $8,000
amortization) 80%
reported to parent

33,600

by Huron
Cash.................................................
8,000

29,600
Cash.................................................
8,000
2016
($45,000 $8,000
amortization) 80%
reported to parent
by Huron
Sophisticated Equity Method

33,600
8,000
29,600
8,000
(c)
Event
2015
Cost Method
No entry

by Huron
Cash.................................................
Dividend Income.........................
2016
No entry

by Huron
Cash.................................................
Dividend Income.........................
8,000
8,000
8,000
8,000
3-3
Ch. 3Problems
EXERCISE 3-2
Company
Implied
Fair Value
Fair value of subsidiary.....................
Common stock ($5 par)...............
Paid-in capital in excess of par....
Retained earnings.......................
Total equity............................
Interest acquired.........................
Book value........................................
value...........................................
$616,667*
$ 50,000
150,000
200,000
$400,000
$216,667
Parent
Price
(75%)
NCI
Value
(25%)
$462,500
$154,167
$400,000
75%
$300,000
$400,000
25%
$100,000
$162,500
$ 54,167
*$462,500/75% = $616,667
Inventory ($50,000 fair $40,000

book value).................................
Buildings and equipment
($300,000 fair $200,000
book value).................................
Patent ($50,000 fair
$30,000 fair value)......................
Goodwill............................................
Total............................................
Adjustment
Worksheet
Key
Life
Amortization
per Year
$ 10,000
debit D1
100,000
debit D2
20
$5,000
20,000
86,667
$216,667
debit D3
debit D4
10
2,000
(a) Simple equity.......................................................................................

+ (75% Increase in Retained Earnings of $78,000*).........................
Balance................................................................................................
$462,500
58,500**
$521,000
(b) Sophisticated equity.............................................................................

+ (75% Increase in Retained Earnings of $78,000*).........................
2014 Amortization of Excess
75% ($10,000 Inventory + $5,000 Buildings and Equipment +
$2,000 Patent)...............................................................................
2015 Amortization of Excess
75% ($5,000 Buildings and Equipment + $2,000 Patent)............
Balance................................................................................................
$462,500
58,500**
(c) Cost.....................................................................................................
*Shaws ending retained earnings, December 31, 2015.....................
Shaws beginning retained earnings, January 1, 2014..................
Increase in retained earnings...........................................................
**Or 75% ($70,000 $20,000 + $48,000 $20,000)
$462,500
$278,000
200,000
$ 78,000
(12,750)
(5,250)
$503,000
3-4
Ch. 3Problems
EXERCISE 3-3
(1) Determination and Distribution of Excess Schedule
Company
Implied
Fair Value
Fair value of subsidiary..............
Common stock ($10 par)........
Retained earnings..................
Total equity.........................
Interest acquired.....................
Book value.................................
value.......................................
$375,000*
$100,000
150,000
$250,000
$125,000
Parent
Price
(80%)
NCI
Value
(20%)
$300,000
$ 75,000
$250,000
80%
$200,000
$250,000
20%
$ 50,000
$100,000
$ 25,000
*$300,000/80% = $375,000
Adjustment
Fixed assets..............................
Goodwill.....................................
Total......................................
(2) (CY1)
(CY2)
(EL)
(D)
(A)
$ 50,000
75,000
$125,000
Worksheet
Key
Life
Amortization
per Year
10
$5,000
debit D1
debit D2
Subsidiary Income..................................................................
Investment in Sargent Company.......................................
To eliminate parents share of subsidiary earnings
for the current year.
20,000
Investment in Sargent Company ($5,000 80%)...................

Dividends Declared...........................................................
To eliminate parents share of dividends for the
current year.
4,000
Common StockSargent ($100,000 80%)..........................

Retained EarningsSargent ($150,000 80%).....................
To eliminate pro rata share of the beginning-ofyear Sargent equity balances.
80,000
120,000
Depreciable Fixed Assets.......................................................

Goodwill..................................................................................
Retained EarningsSargent (NCI adjustment).................
To distribute excess per determination and
distribution of excess schedule.
50,000
75,000
Depreciation Expense.............................................................
Accumulated Depreciation................................................
To amortize excess for the current year.
5,000
20,000
4,000
200,000
100,000
25,000
5,000
3-5
Ch. 3Problems
Exercise 33, Continued

(3)
Parker Company and Sargent Company

Consolidated Income Statement
For Year Ended December 31, 2015
Sales...............................................................................................................
Less expenses (add $5,000 adjustment).........................................................
Consolidated net income.................................................................................
$250,000
190,000
$ 60,000
Distributed to noncontrolling interest...............................................................

Distributed to controlling interest.....................................................................
4,000
$ 56,000
Subsidiary Sargent Company Income Distribution

Depreciation adjustment........
$5,000
Internally generated net

income..................................
$25,000
Adjusted income.........................
NCI share...................................
NCI.............................................
$20,000
20%
$ 4,000
Parent Parker Company Income Distribution

income..................................
80% Sargent adjusted
income of $20,000................
Controlling interest.....................
(4)
$40,000
16,000
$56,000
Parker Company and Subsidiary Sargent Company

Consolidated Statement of Retained Earnings
For the Year Ended December 31, 2015
Retained earnings, January 1, 2015.................

Consolidated net income...................................
Dividends declared...........................................
Retained earnings, December 31, 2015............
Noncontrolling
Interest
$30,000
4,000
(1,000)
$33,000
Controlling
Retained Earnings
$200,000
56,000
$256,000
3-6
Ch. 3Problems
Exercise 33, Concluded

(5)

Consolidated Balance Sheet
December 31, 2015
Assets
Current assets..........................................................................
Depreciable fixed assets..........................................................
Less accumulated depreciation................................................
Goodwill...................................................................................
Total assets..............................................................................
Liabilities and Stockholders Equity
Current liabilities.......................................................................
Stockholders equity:
Controlling interest:
Common stock ($10 par)................................................
Retained earnings..........................................................
Noncontrolling interest........................................................
$140,000
a
$650,000
131,000b
519,000
75,000
$734,000
$100,000
$300,000
256,000
Total liabilities and stockholders equity....................................
556,000
78,000c
$734,000
$400,000 + $200,000 + $50,000 = $650,000

$106,000 + $20,000 + $5,000 = $131,000
c
$75,000 fair value at acquisition + $4,000 share of income $1,000 dividends = $78,000
b
EXERCISE 3-4
(1) (CY1)
(CY2)
(EL)
(D)
Subsidiary Income..................................................................
To eliminate parents share of subsidiary earnings
12,000
Investment in Sargent Company.............................................

To eliminate parents share of dividends for the
current year.
8,000
Common StockSargent.......................................................
Retained EarningsSargent ($170,000 80%).....................
80,000
136,000

Goodwill..................................................................................
50,000
75,000
12,000
8,000
216,000
100,000
25,000
3-7
Ch. 3Problems
Exercise 34, Concluded

(A)
(2)
Retained EarningsParker (80% $5,000)...........................
Retained EarningsSargent (20% $5,000).........................
Accumulated Depreciation (2 years $5,000)..................
To amortize excess for the prior and current years.
5,000
4,000
1,000
10,000

Consolidated Income Statement
Sales...............................................................................................................
Less expenses (add $5,000 adjustment).........................................................
Consolidated net income.................................................................................
$300,000
250,000
$ 50,000
Distributed to noncontrolling interest...............................................................

Distributed to controlling interest.....................................................................
2,000
$ 48,000
Subsidiary Sargent Company Income Distribution

Depreciation adjustment...... (A)
5,000

income.....................................
$15,000
Adjusted income............................
NCI share......................................
NCI................................................
$10,000
20%
$ 2,000
Parent Parker Company Income Distribution

income.....................................
80% Sargent adjusted
income of $10,000...................
Controlling interest.........................
$40,000
8,000
$48,000
3-8
Ch. 3Problems
EXERCISE 3-7
(1) Same as Exercise 3, part (1).
(2) (CY2)
(EL)
(D)
(A)
Dividend Income.....................................................................
To eliminate parents share of subsidiary dividends
4,000
Retained EarningsSargent..................................................
80,000
120,000

Goodwill..................................................................................
50,000
75,000
Accumulated Depreciation................................................
To amortize excess for the current year.
5,000

4,000
200,000
100,000
25,000
5,000
3-9
Ch. 3Problems
EXERCISE 3-8
(1) (CV)
(CY2)
(EL)
(D)
(A)
Investment in Sargent Company.............................................

Retained EarningsParker..............................................
Convert from cost to equity method by adding to
investment account parents share of subsidiary
equity increase. [80% ($170,000 $150,000)]
16,000
Dividend Income.....................................................................
To eliminate parents share of subsidiary dividends
8,000
Retained EarningsSargent..................................................
80,000
136,000

Goodwill..................................................................................
50,000
75,000
Retained EarningsParker (80% $5,000)...........................
Retained EarningsSargent (20% $5,000).........................
Accumulated Depreciation (2 years $5,000)..................
To amortize excess for the prior and current years.
5,000
4,000
1,000
16,000
8,000
216,000
100,000
25,000
10,000

EXERCISE 3-9
Amortization Schedule
Account Adjustments
Inventory........................................
Amortization:
Investments..............................
Buildings (net)..........................
Equipment (net)........................
Patent.......................................
Trademark................................
Discount on Bonds Payable.....
Total.........................................
Life
Annual
Amount
2015
$ 6,250
$ 6,250
3
20
5
10
10
5
5,000
12,500
34,500
2,250
2,000
2,500
5,000
12,500
34,500
2,250
2,000
2,500
$65,000
2016
2017
2018
$ 5,000
12,500
34,500
2,250
2,000
2,500
$58,750
$ 5,000
12,500
34,500
2,250
2,000
2,500
$58,750
$
0
12,500
34,500
2,250
2,000
2,500
$53,750
3-10
Ch. 3Problems
EXERCISE 3-11
Calculation of book value of Subsidiary:
Fair value at purchase......................................................................................
Add $200,000 increase in Barker retained earnings ........................................
Deduct amortization of excess (5 years $10,000 per year)............................
Book value balance..........................................................................................
$1,062,500
200,000
(50,000)
$1,212,500
Fair value of Barker Company, December 31, 2019 (given)..............................
$1,000,000
Since the adjusted (for acquisition) book value ($1,212,500) exceeds the fair value balance
($1,000,000), goodwill is impaired.
Impairment loss:
Fair value of Barker Company..........................................................................
Fair value of Barker Company identifiable assets.............................................
Estimated goodwill............................................................................................
Existing goodwill...............................................................................................
Impairment loss................................................................................................
$1,000,000
900,000
$ 100,000
262,500
$ 162,500
3-11
Ch. 3Problems
Problem 3-2
(1)
Value Analysis Schedule
Company fair value...........................................
Fair value of net assets excluding goodwill.......
Goodwill............................................................
Company
Implied
Fair Value
$400,000
340,000
$ 60,000
Parent
Price
(80%)
NCI
Value
(20%)
$320,000
272,000
$ 48,000
$80,000
68,000
$12,000

Company
Implied
Fair Value
Common stock......................
Paid-in capital in excess of par
Retained earnings.................
Total equity......................
Interest acquired....................
Book value.................................
value.....................................
$400,000
$ 50,000
100,000
150,000
$300,000
$100,000
Parent
Price
(80%)
NCI
Value
(20%)
$320,000
$ 80,000
$300,000
80%
$240,000
$300,000
20%
$ 60,000
$ 80,000
$ 20,000

Adjustment
Inventory....................................
Buildings....................................
Goodwill.....................................
Total......................................
$ 10,000
30,000
60,000
$100,000
Worksheet
Key
debit D1
debit D2
debit D3
Life
Amortization
per Year
10
$3,000
Ch. 3Problems
312
Problem 3-2, Continued

(2)
Paro Company and Solar Company

Worksheet for Consolidated Financial Statements
Trial Balance
Paro
Solar
Inventory..........................................................
Other Current Assets.......................................
Investment in Solar..........................................
Land.................................................................
Buildings and Equipment.................................
Accumulated Depreciation...............................
Goodwill...........................................................
Other Intangible Assets....................................
Current Liabilities.............................................
Bonds Payable.................................................
Other Long-Term Liabilities..............................
Common StockSolar....................................
Other Paid-In Capital in
Excess of ParSolar...................................
Retained EarningsSolar...............................
Common StockParo.....................................
Other Paid-In Capital in
Excess of ParParo...................................
Retained EarningsParo................................
100,000
136,000
400,000
............
............
............
50,000
350,000
(100,000)
............
20,000
(120,000)
............
(200,000)
............
50,000
180,000
............
............
............
............
50,000
320,000
(60,000)
............
............
(40,000)
(100,000)
............
(50,000)
............
............
............
............
............
(100,000)
(190,000)
............
............
............
(200,000)
............
Eliminations
Dr.
(CY2)
(D2)
(D3)
(EL)
(EL)
(EL)
(D1)
(A2)
............
............
............
24,000
............
............
............
30,000
............
60,000
............
............
............
............
40,000
80,000
152,000
............
2,000
600
............
Cr.
(CY1)
(EL)
(D)
(A2)
(NCI)
Consolidated
Net
Income
NCI
Controlling
Retained
Earnings
Consolidated
Balance
Sheet
............
............
72,000
............
272,000
80,000
............
............
6,000
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
(10,000)
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
150,000
316,000
............
............
............
............
100,000
700,000
(166,000)
60,000
20,000
(160,000)
(100,000)
(200,000)
............
............
............
20,000
............
............
............
............
............
............
............
(20,000)
(55,400)
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
(200,000)
(100,000)
............
............
............
............
............
............
(214,000)
............
............
............
............
............
............
............
............
(D1)
8,000
............
............
............
............
............
............
(A2)
2,400
............
............
............
............
............
............
............
............
............
............
(203,600)
Sales................................................................
(520,000)
(450,000)
............
............
(970,000)
............
............
Cost of Goods Sold..........................................
300,000
260,000
............
............
560,000
............
............
Operating Expenses........................................
120,000
100,000
(A2)
3,000
............
223,000
............
............
Subsidiary Income...........................................
(72,000)
............
(CY1)
72,000
............
............
............
............
Dividends DeclaredSolar.............................
............
30,000
............
(CY2)
24,000
............
6,000
............
Dividends DeclaredParo..............................
50,000
............
............
.............
............
............
50,000
Totals............................................................
0
0
474,000
474,000
............
............
............
Consolidated Net Income.......................................................................................................................................................
(187,000)
............
............
NCI Share...............................................................................................................................................................................
17,400
(17,400)
............
Controlling Share....................................................................................................................................................................
(169,600)
...........
(169,600)
NCI..................................................................................................................................................................................................................
(96,800)
.............
Controlling Retained Earnings.................................................................................................................................................................................................
(323,200)
Totals............................................................................................................................................................................................................................................................
(100,000)
............
............
............
............
............
............
............
............
............
............
............
............
............
............
(96,800)
(323,200)
0
3-13
Ch. 3Problems
Problem 3-2, Concluded

Eliminations and Adjustments:
(CY1)
Current-year subsidiary income.
(CY2)
Current-year dividend.
(EL)
Eliminate controlling interest in the subsidiary equity.
(D)/(NCI) Distribute excess and adjust NCI.
(D1)
Inventory (retained earnings).
(D2)
Buildings and equipment.
(D3)
Goodwill.
(A2)
Amortize excess.
Income Distribution Schedules
Solar Company
Amortizations.................................
$3,000

income.....................................
$90,000
Adjusted income............................
NCI share......................................
NCI................................................
$87,000
20%
$17,400
Paro Company
Internally generated
net income............................... $100,000
Controlling share of subsidiary......
69,600
Controlling interest........................ $169,600
Ch. 3Problems
314
PROBLEM 3-13
(1)
Company
Implied
Fair Value
Value Analysis Schedule

Company fair value...........................................
Fair value of net assets excluding goodwill.......
Goodwill............................................................
$600,000
464,000
$136,000
Parent
Price
(70%)
NCI
Value
(30%)
$420,000
324,800
$ 95,200
$180,000
139,200
$ 40,800

Company
Implied
Fair Value
Common stock ($1 par)..........
Paid-in capital in excess of par
Retained earnings..................
Total equity.........................
Interest acquired.....................
Book value.................................
value.......................................
$600,000
$ 10,000
90,000
112,000
$212,000
$388,000
Parent
Price
(70%)
NCI
Value
(30%)
$420,000
$180,000
$212,000
70%
$148,400
$212,000
30%
$ 63,600
$271,600
$116,400
Inventory ($38,000 fair

$40,000 book value)..............
Land ($150,000 fair $60,000
book value)............................
Bonds payable ($96,000 fair
$100,000 book value)............
Buildings ($280,000 fair
$150,000 book value)............
Equipment ($100,000 fair
$70,000 book value)..............
Goodwill.....................................
Total......................................
Adjustment
Worksheet
Key
Life
$ (2,000)
credit D1
Amortization
per Year
90,000
debit D2
4,000
debit D3
$ 800
130,000
debit D4
20
6,500
30,000
136,000
$388,000
debit D5
debit D6
6,000
3-15
Ch. 3Problems

(2)
Account Adjustments
Inventory........................
Subject to amortization:
Bonds payable...............
Buildings........................
Equipment......................
Total amortizations.....
To NCI........................
To controlling interest.
Life
1
5
20
5
Annual
Amount
Current
Year
$ (2,000) $
$
800
6,500
6,000
$13,300
800
6,500
6,000
$13,300
Prior
Years
Total
Key
$ (2,000) $ (2,000)
(D1)
$ 1,600
13,000
12,000
$26,600
7,980
18,620
(A3)
(A4)
(A5)
Cost-to-Equity Conversion:
Subsidiary retained earnings, worksheet..................................
Subsidiary retained earnings, purchase date...........................
Increase (decrease).................................................................
Ownership interest...................................................................
Adjust investment.....................................................................
$ 2,400
19,500
18,000
$39,900
$182,000
112,000
$ 70,000
70%
$ 49,000
Subsidiary Switzer Corporation Income Distribution

Current-year amortizations............
$13,300

income..................................
$35,000
Adjusted income.........................
NCI share...................................
NCI.............................................
$21,700
30%
$ 6,510
Parent Paulcraft Corporation Income Distribution

income..................................
Controlling share of subsidiary. . .
$165,000
15,190
Controlling interest.....................
$180,190
Ch. 3Problems
316

Paulcraft Corporation and Subsidiary Switzer Corporation
Worksheet for Consolidated Financial Statements
Trial Balance
Paulcraft
Switzer
Cash.................................................................
Accounts Receivable.......................................
Inventory..........................................................
Land.................................................................
Investment in Switzer.......................................
Eliminations
and Adjustments
Dr.
Cr.
Consolidated
Income
Statement
NCI
157,000
110,000
............
............
............
............
90,000
55,000
............
............
............
............
120,000
86,000
............
............
............
............
100,000
60,000
(D2)
90,000
............
............
............
420,000
............
(CV)
49,000
(CY1)
7,000
............
............
............
............
(CY2)
7,000
............
............
............
............
............
............
(EL)
197,400
............
............
............
............
............
(D)
271,600
............
............
Buildings..........................................................
800,000
250,000
(D4)
130,000
............
............
............
(220,000)
(80,000)
............
(A4)
19,500
............
............
Equipment........................................................
150,000
100,000
(D5)
30,000
............
............
............
(90,000)
(72,000)
............
(A5)
18,000
............
............
Goodwill...........................................................
............
............
(D6)
136,000
............
............
............
Current Liabilities.............................................
(60,000)
(102,000)
............
............
............
............
Bonds Payable.................................................
............
(100,000)
............
............
............
............
Discount (Premium).........................................
............
............
(D3)
4,000
............
............
............
............
............
............
(A3)
2,400
............
............
Common Stock ($1 par)Switzer ..................
............
(10,000)
(EL)
7,000
............
............
(3,000)
Paid-In Capital in Excess of ParSwitzer......
............
(90,000)
(EL)
63,000
............
............
(27,000)
Retained EarningsSwitzer............................
............
(182,000)
(EL)
127,400
............
............
(163,620)
............
............
............
(NCI)
116,400
............
............
............
............
............
(D1)
600
............
............
............
............
(A3A5)
7,980
............
............
............
Common Stock ($1 par)Paulcraft.................
(100,000)
............
............
............
............
............
Paid-In Capital in Excess of ParPaulcraft....
(900,000)
............
............
............
............
............
Retained EarningsPaulcraft.........................
(315,000)
............
............
(CV)
49,000
............
............
............
............
............
(D1)
1,400
............
............
............
............
(A3A5)
18,620
............
............
............
............
............
............
............
............
............
Sales................................................................
(800,000)
(350,000)
............
............
(1,150,000)
............
Cost of Goods Sold..........................................
450,000
210,000
............
............
660,000
............
Depreciation ExpenseBuildings...................
30,000
15,000
(A4)
6,500
............
51,500
............
Depreciation ExpenseEquipment.................
15,000
14,000
(A5)
6,000
............
35,000
............
Other Expenses...............................................
140,000
68,000
............
............
208,000
............
Interest Expense..............................................
............
8,000
(A3)
800
............
8,800
............
............
............
............
............
............
............
Subsidiary (Dividend) Income..........................
(7,000)
............
(CY1)
7,000
............
............
............
Dividends DeclaredSwitzer..........................
............
10,000
............
(CY2)
7,000
............
3,000
Dividends DeclaredPaulcraft........................
20,000
............
............
............
............
............
Total.................................................................
0
0
690,300
690,300
............
............
Consolidated Net Income.......................................................................................................................................................
(186,700)
............
To Noncontrolling Interest (see distribution schedule).......................................................................................................
6,510
(6,510)
To Controlling Interest (see distribution schedule).............................................................................................................
180,190
Total NCI.........................................................................................................................................................................................................
(197,130)
Retained EarningsControlling Interest, December 31, 2017...............................................................................................................................................
Controlling
Retained
Earnings
Consolidated
Balance
Sheet
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
(346,780)
................
................
................
................
................
................
................
................
................
20,000
............
............
............
(180,190)
............
(506,970)
267,000
145,000
206,000
250,000
............
............
............
............
1,180,000
(319,500)
280,000
(180,000)
136,000
(162,000)
(100,000)
............
1,600
............
............
............
............
............
............
(100,000)
(900,000)
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
............
(197,130)
(506,970)
0
3-17
Ch. 3Problems
Problem 3-13, Concluded

Eliminations and Adjustments:
(CV)
Conversion to equity.
(CY1)
Current-year subsidiary income.
(CY2)
Current-year dividend.
(EL)
Eliminate controlling interest in subsidiary equity.
(D)/(NCI) Distribute excess according to D&D schedule (goodwill and inventory go to Paulcraft and
to Switzers retained earnings).
(A)
Amortize excess using amortization schedule (prior years to Paulcraft and to Switzers
retained earnings).

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3-1

Simple Equity Method

Dividends of $10,000 paid

Investment in Huron Company..........

Dividends of $10,000 paid

Exercise 3-1, Concluded

Investment in Huron Company..........

Dividends of $10,000 paid

Investment in Huron Company..........

Sophisticated Equity Method

Dividends of $10,000 paid

Dividends of $10,000 paid

Inventory ($50,000 fair $40,000

(a) Simple equity.......................................................................................

(b) Sophisticated equity.............................................................................

Investment in Sargent Company ($5,000 80%)...................

Common StockSargent ($100,000 80%)..........................

Depreciable Fixed Assets.......................................................

Exercise 33, Continued

Parker Company and Sargent Company

Distributed to noncontrolling interest...............................................................

Subsidiary Sargent Company Income Distribution

Internally generated net

Parent Parker Company Income Distribution

Parker Company and Subsidiary Sargent Company

Retained earnings, January 1, 2015.................

Exercise 33, Concluded

Parker Company and Sargent Company

Total liabilities and stockholders equity....................................

$400,000 + $200,000 + $50,000 = $650,000

Investment in Sargent Company.............................................

Depreciable Fixed Assets.......................................................

Exercise 34, Concluded

Parker Company and Sargent Company

Distributed to noncontrolling interest...............................................................

Subsidiary Sargent Company Income Distribution

Internally generated net

Parent Parker Company Income Distribution

Depreciable Fixed Assets.......................................................

(3) Same as Exercise 3, part (3).

Investment in Sargent Company.............................................

Depreciable Fixed Assets.......................................................

(2) Same as Exercise 4, part (2).

Fair value of Barker Company, December 31, 2019 (given)..............................

Determination and Distribution of Excess Schedule

Adjustment of identifiable accounts:

Problem 3-2, Continued

Paro Company and Solar Company

Problem 3-2, Concluded

Internally generated net

Value Analysis Schedule

Determination and Distribution of Excess Schedule

Adjustment of identifiable accounts:

Inventory ($38,000 fair

Problem 3-13, Continued

Subsidiary Switzer Corporation Income Distribution

Internally generated net

Parent Paulcraft Corporation Income Distribution