accounting & mis 4200 · accounting & mis 4200 homework 100% acquired subsidiaries problem...

Accounting & MIS 4200 Homework 100% Acquired Subsidiaries PROBLEM I Parent purchased 100% of Sub on 1/1/20x1. The worksheet below was prepared immediately after purchase. The purchase price reflects the following information. All fair and book values are the same except as noted. The fair value of Inventory is $645 (Sub uses LIFO), of Land is $750, of Buildings & Equipment is $2,000 (5 years remain), and of Other Liabilities is $942 (6 years remain). The Sub has a lease with good terms worth $55 (5 years remain), a web domain name worth $60 (indefinite life), and in-process contracts worth $48 (3 year term once signed). Amortizations are done on a straight-line basis. (Note you should be able to compute “Income from Sub” under the equity method for Parts D and E without them being given as they are here.) Part A. REQUIRED: Complete the worksheet, preparing the consolidated statement. At Acquisition 1/1/x1 Parent Sub Adjustments ConsolidatedCash 2,087 500 Accounts Receivable 600 400 Inventory 500 600 Investment in Sub 3,113

Land 500 800 Buildings & Equipment 3,000 3,300 Accumulated Depreciation 1,400 1,800 Lease AssetWeb Domain NameGoodwillAccounts Payable 600 500 Other Liabilities 1,200 900 Common Stock 100 50 Additional PIC 500 950 Retained Earnings 6,000 1,400

9,800 9,800 5,600 5,600

AMIS 4200 Chapters 2 & 4 Homework

David E. Wallin of 34 Copyright 2014, 2015 all rights reserved

PROBLEM I (continued) Part B. Below are the results of the 20x1. Parent uses the cost method. Goodwill (if any) was not impaired. The web domain name was worth $43. REQUIRED: Complete the 20x1 worksheet, preparing the consolidated statement. 12/31/x1 Cost Parent Sub Adjustments ConsolidatedSales 5,000 2,300 Cost of Goods Sold 2,000 900 Depreciation Expense 450 300 Interest Expense 40 65 Other Expenses 1,705 740

Dividend Revenue 100 Net Income 905 295

Retained Earnings, beg 6,000 1,400 Net Income 905 295 Dividends Declared 175 100 Retained Earnings, end 6,730 1,595

Cash 2,867 1,275 Accounts Receivable 500 420 Inventory 400 400 Investment in Sub 3,113


10,780 10,780 6,195 6,195



PROBLEM I (continued) Part C. Below are the results of the 20x2. Parent uses the cost method. Goodwill (if any) lost 20% of their value. The web domain name was worth $54. REQUIRED: Complete the 20x2 worksheet, preparing the consolidated statement. 12/31/x2 Cost Parent Sub Adjustments ConsolidatedSales 5,500 2,200 Cost of Goods Sold 2,200 1,000 Depreciation Expense 500 300 Interest Expense 60 60 Other Expenses 1,800 900

Dividend Revenue 120 Net Income 1,060 60

Retained Earnings, beg 6,730 1,595 Net Income 1,060 60 Dividends Declared 200 120 Retained Earnings, end 7,590 1,415


Land 500 800 Buildings & Equipment 3,600 3,300 Accumulated Depreciation 2,200 2,400

Lease AssetWeb Domain NameGoodwillAccounts Payable 600 550 Other Liabilities 900 900 Common Stock 100 50 Additional PIC 500 950 Retained Earnings 7,590 1,415

11,890 11,890 6,265 6,265



PROBLEM I (continued) Part D. Assume Parent had used the equity method in 20x1. REQUIRED: Complete the 20x1 worksheet, preparing the consolidated statement. 12/31/x1 Equity Parent Sub Adjustments ConsolidatedSales 5,000 2,300 Cost of Goods Sold 2,000 900 Depreciation Expense 450 300 Interest Expense 40 65 Other Expenses 1,705 740

Income from Sub 159 Net Income 964 295




10,839 10,839 6,195 6,195



PROBLEM I (continued) Part E. Assume Parent had used the equity method in 20x1 and 20x2. REQUIRED: Complete the 20x2 worksheet, preparing the consolidated statement. 12/31/x2 Equity Parent Sub Adjustments ConsolidatedSales 5,500 2,200 Cost of Goods Sold 2,200 1,000 Depreciation Expense 500 300 Interest Expense 60 60 Other Expenses 1,800 900




Land 500 800 Buildings & Equipment 3,600 3,300 Accumulated Depreciation 2,200 2,400

Lease AssetWeb Domain NameGoodwillAccounts Payable 600 550 Other Liabilities 900 900 Common Stock 100 50 Additional PIC 500 950 Retained Earnings 7,336 1,415

11,636 11,636 6,265 6,265



PROBLEM II Parent purchased 100% of Sub on 1/1/20x1 for $2,000 cash. Sub had no unrecorded assets or liabilities on that date. The schedule below represents the balances immediately prior to purchase. Sub uses LIFO. Sub issued the Bonds Payable with a nominal rate of 10% a number of years ago (question to ponder: why don’t you need to know how long exactly?). The market desired 14%, leaded to the issuance at a discount. Sub uses effective interest amortization for the bonds. The fair value on 1/1/20x1 reflects that the market discounted these at 12% on that date. These bonds pay interest every 12/31. Ignore any accrued interest from 12/31/20x0 until 1/1/20x1. (Note you should be able to compute “Income from Sub” under the equity method for Parts E and F without them being given as they are here.) Part A. REQUIRED: Present the entry Parent made when they acquired Sub.

Prior to Acquisition 1/1/x1 Parent SubSub's Fair

Value 1/1/x1Cash 5,200$ 3,822$ 3,822$ Accounts Receivable 600 400 400 Inventory 500 600 645 Land 500 800 800 Buildings & Equipment 3,000 3,300 1,500 Accumulated Depreciation 1,400$ 1,800$ n/a

Accounts Payable 600 500 (500) Bonds Payable 1,200 5,000 (4,589) Discount on B/P 778 n/a

Common Stock 100 50 n/a

Additional PIC 500 950 n/a

Retained Earnings 6,000 1,400 n/a

9,800$ 9,800$ 9,700$ 9,700$ 2,078$



PROBLEM II (continued) Part B. Use the data from Part A. REQUIRED: Complete the worksheet, preparing the consolidated statement on the date of acquisition (1/1/20x1). At Acquisition 1/1/x1 Parent Sub Adjustments ConsolidatedSalesCost of Goods SoldDepreciation ExpenseInterest ExpenseOther ExpensesGain on Purchase of Sub 78 Net Income 78

Retained Earnings, beg 6,000 1,400 Net Income 78 Dividends DeclaredRetained Earnings, end 6,078 1,400


Land 500 800 Buildings & Equipment 3,000 3,300 Accumulated Depreciation 1,400 1,800 Accounts Payable 600 500 Other Liabilities 1,200 Bonds Payable 5,000 Discount on B/P 778 Common Stock 100 50 Additional PIC 500 950 Retained Earnings 6,078 1,400

9,878 9,878 9,700 9,700



PROBLEM II (continued) Part C. Below are the results of the 20x1. Parent uses the cost method. Goodwill was not impaired. REQUIRED: Complete the 20x1 worksheet, preparing the consolidated statement. 12/31/x1 Cost Parent Sub Adjustments ConsolidatedSales 5,000 2,000 Cost of Goods Sold 2,000 800 Depreciation Expense 200 300 Interest Expense 591 Other Expenses 1,340 240 Gain on Purchase of Sub 78 Dividend Revenue 140 Net Income 1,678 69


Cash 4,700 3,842 Accounts Receivable 600 400 Inventory 500 900 Investment in Sub 2,078 Land 500 800 Buildings & Equipment 3,000 3,300 Accumulated Depreciation 1,600 2,100 Accounts Payable 600 500 Other Liabilities 1,200 Bonds Payable 5,000 Discount on B/P 687 Common Stock 100 50 Additional PIC 500 950 Retained Earnings 7,378 1,329

11,378 11,378 9,929 9,929



PROBLEM II (continued) Part D. Below are the results of the 20x2. Parent uses the cost method. Goodwill was not impaired. REQUIRED: Complete the 20x2 worksheet, preparing the consolidated statement. 12/31/x2 Cost Parent Sub Adjustments ConsolidatedSales 5,000 2,000 Cost of Goods Sold 2,000 800 Depreciation Expense 200 300 Interest Expense 604 Other Expenses 1,340 240




12,648 12,648 9,855 9,855



PROBLEM II (continued) Part E. Assume Parent had used the equity method in 20x1. REQUIRED: Complete the 20x1 worksheet, preparing the consolidated statement. 12/31/x1 Equity Parent Sub Adjustments ConsolidatedSales 5,000 2,000 Cost of Goods Sold 2,000 800 Depreciation Expense 200 300 Interest Expense 591 Other Expenses 1,340 240 Gain on Purchase of Sub 78 Income from Sub 109 Net Income 1,647 69



11,347 11,347 9,929 9,929



PROBLEM II (continued) Part F. Assume Parent had used the equity method in 20x1 and 20x2. REQUIRED: Complete the 20x2 worksheet, preparing the consolidated statement. 12/31/x2 Equity Parent Sub Adjustments ConsolidatedSales 5,000 2,000 Cost of Goods Sold 2,000 800 Depreciation Expense 200 300 Interest Expense 604 Other Expenses 1,340 240

Income from Sub 88 Net Income 1,548 56



12,497 12,497 9,855 9,855



PROBLEM III Parent purchased 100% of Sub on 1/1/20x1. The worksheet below was prepared immediately after purchase. The purchase price reflects the following information. All fair and book values are the same except as noted. The fair value of Inventory is $204 (Sub uses FIFO), of Land is $750, of Buildings & Equipment is $420 (10 years remain), and of Long-term Debt $208 (6 years remain). The Sub has Patents worth $112 (8 years remain), Jingles worth $40 (indefinite life), and assembled workforce worth $81. Amortizations are done on a straight-line basis. (Note you should be able to compute “Income from Sub” under the equity method for Parts D and E without them being given as they are here.) Part A. REQUIRED: Complete the worksheet, preparing the consolidated statement. At Acquisition 1/1/x1 Parent Sub Adjustments ConsolidatedCash 582 45 Accounts Receivable 160 100 Inventory 300 240 Investment in Sub 1,463

Land 200 500 Buildings & Equipment 900 700

Accumulated Depreciation 340 200 Patents 50 JinglesGoodwillAccounts Payable 140 130 Long-term Debt 400 250 Common Stock 25 5 Retained Earnings 2,750 1,000

3,655 3,655 1,585 1,585



PROBLEM III (continued) Part B. Below are the results of the 20x1. Parent uses the cost method. Goodwill (if any) was not impaired. The Jingles were worth $30. REQUIRED: Complete the 20x1 worksheet, preparing the consolidated statement. 12/31/x1 Cost Parent Sub Adjustments ConsolidatedSales 3,200 1,480 Cost of Goods Sold 1,890 820 Operating Expenses 500 150 Other Expenses 160 140


Retained Earnings, beg 2,750 1,000 Net Income 1,050 370 Dividends Declared 400 Retained Earnings, end 3,800 970

Cash 1,452 95 Accounts Receivable 140 120 Inventory 430 180 Investment in Sub 1,463


Accumulated Depreciation 400 250

Patents 70 JinglesGoodwillAccounts Payable 130 120 Long-term Debt 300 250 Common Stock 25 5 Retained Earnings 3,800 970

4,655 4,655 1,595 1,595



PROBLEM III (continued) Part C. Below are the results of the 20x2. Parent uses the cost method. Goodwill (if any) lost 30% of their value. The Jingles were worth $34. REQUIRED: Complete the 20x2 worksheet, preparing the consolidated statement. 12/31/x2 Cost Parent Sub Adjustments ConsolidatedSales 3,400 1,280 Cost of Goods Sold 1,900 800 Operating Expenses 500 250 Other Expenses 200 190


Retained Earnings, beg 3,800 970 Net Income 1,000 40 Dividends Declared 500 200 Retained Earnings, end 4,300 810


Land 250 500 Buildings & Equipment 1,200 700



5,625 5,625 1,515 1,515



PROBLEM III (continued) Part D. Assume Parent had used the equity method in 20x1. REQUIRED: Complete the 20x1 worksheet, preparing the consolidated statement. 12/31/x1 Equity Parent Sub Adjustments ConsolidatedSales 3,200 1,480 Cost of Goods Sold 1,890 820 Operating Expenses 500 150 Other Expenses 160 140

Income from Sub 383 Net Income 1,033 370

Retained Earnings, beg 2,750 1,000 Net Income 1,033 370 Dividends Declared 400 Retained Earnings, end 3,783 970





4,638 4,638 1,595 1,595



PROBLEM III (continued) Part E. Assume Parent had used the equity method in 20x1 and 20x2. REQUIRED: Complete the 20x2 worksheet, preparing the consolidated statement. 12/31/x2 Equity Parent Sub Adjustments ConsolidatedSales 3,400 1,280 Cost of Goods Sold 1,900 800 Operating Expenses 500 250 Other Expenses 200 190


Retained Earnings, beg 3,783 970 Net Income 788 40 Dividends Declared 500 200 Retained Earnings, end 4,071 810


Land 250 500 Buildings & Equipment 1,200 700



5,396 5,396 1,515 1,515



Answers: Problem I

Acquisition:Acquisition Cost 3,113$ Book value of Sub 2,400 Fair value in excess of book 713$

Assets/Liabilities Fair Value Book ValueIncr (Decr) in

Net AssetPreviously Recorded:

Cash 500$ 500 -$ Accounts Receivable 400 400 - Inventory 645 600 45 Land 750 800 (50) Buildings & Equipment (net) 2,000 1,500 500 Accounts Payable (500) (500) -

Other Liabilities (942) (900) (42) Previously Unrecorded:

Lease Asset 55 - 55 Web Domain Name 60 - 60

Net non-goodwill 568 Goodwill 145$

Account Amount Rem. Life Year 1 Year 2

Inventory 45$ LIFO (15)$ -$

Land (50) Indef.Buildings & Equipment (net) 500 5 (100) (100) Lease Asset 55 5 (11) (11) Web Domain Name 60 Impair (17) - Other Liabilities (42) 6 7 7

568 (136) (104)

Reported Net Inc. Non-GW GW Net

x1 295$ (136)$ -$ 159$ x2 (60) (104) (29) (193)



At Acquisition 1/1/x1 Parent Sub Adjustments ConsolidatedCash 2,087 500 2,587 Accounts Receivable 600 400 1,000 Inventory 500 600 45 1,145 Investment in Sub 3,113 3,113

Land 500 800 50 1,250 Buildings & Equipment 3,000 3,300 500 1,800 5,000 Accumulated Depreciation 1,400 1,800 1,800 1,400 Lease Asset 55 55 Web Domain Name 60 60 Goodwill 145 145 Accounts Payable 600 500 1,100 Other Liabilities 1,200 900 42 2,142 Common Stock 100 50 50 100 Additional PIC 500 950 950 500 Retained Earnings 6,000 1,400 1,400 - 6,000

9,800 9,800 5,600 5,600 5,005 5,005 11,242 11,242



12/31/x1 Cost Parent Sub Adjustments ConsolidatedSales 5,000 2,300 7,300 Cost of Goods Sold 2,000 900 15 2,915 Depreciation Expense 450 300 100 850 Interest Expense 40 65 7 98 Other Expenses 1,705 740 11 2,456 Web Domain Impairment 17 17 Dividend Revenue 100 100

Net Income 905 295 243 7 964

Retained Earnings, beg 6,000 1,400 1,400 6,000 Net Income 905 295 243 7 964 Dividends Declared 175 100 100 175 Retained Earnings, end 6,730 1,595 1,643 107 6,789

Cash 2,867 1,275 4,142 Accounts Receivable 500 420 920 Inventory 400 400 45 15 830 Investment in Sub 3,113 3,113

Land 500 800 50 1,250 Buildings & Equipment 3,400 3,300 500 1,800 5,400 Accumulated Depreciation 1,800 2,100 1,800 100 2,200 Lease Asset 55 11 44 Web Domain Name 60 17 43 Goodwill 145 145 Accounts Payable 650 600 1,250 Other Liabilities 1,000 900 7 42 1,935 Common Stock 100 50 50 100 Additional PIC 500 950 950 500 Retained Earnings 6,730 1,595 1,643 107 6,789

10,780 10,780 6,195 6,195 5,255 5,255 12,774 12,774



12/31/x2 Cost Parent Sub Adjustments ConsolidatedSales 5,500 2,200 7,700 Cost of Goods Sold 2,200 1,000 3,200 Depreciation Expense 500 300 100 900 Interest Expense 60 60 7 113 Other Expenses 1,800 900 11 2,711 Goodwill Impair. Loss 29 29 Dividend Revenue 120 120

Net Income 1,060 60 260 7 747

Retained Earnings, beg 6,730 1,595 1,536 6,789 Net Income 1,060 60 260 7 747 Dividends Declared 200 120 120 200 Retained Earnings, end 7,590 1,415 1,796 127 7,336

Cash 3,757 1,265 5,022 Accounts Receivable 540 400 940 Inventory 380 500 30 910 Investment in Sub 3,113 3,113

Land 500 800 50 1,250 Buildings & Equipment 3,600 3,300 500 1,800 5,600 Accumulated Depreciation 2,200 2,400 1,800 100 3,000

100

Lease Asset 44 11 33 Web Domain Name 43 43 Goodwill 145 29 116 Accounts Payable 600 550 1,150 Other Liabilities 900 900 7 35 1,828 Common Stock 100 50 50 100 Additional PIC 500 950 950 500 Retained Earnings 7,590 1,415 1,796 127 7,336

11,890 11,890 6,265 6,265 5,365 5,365 13,914 13,914



12/31/x1 Equity Parent Sub Adjustments ConsolidatedSales 5,000 2,300 7,300 Cost of Goods Sold 2,000 900 15 2,915 Depreciation Expense 450 300 100 850 Interest Expense 40 65 7 98 Other Expenses 1,705 740 11 2,456 Web Domain Impairment 17 17 Income from Sub 159 159

Net Income 964 295 302 7 964


Cash 2,867 1,275 4,142 Accounts Receivable 500 420 920 Inventory 400 400 45 15 830 Investment in Sub 3,172 3,113

59

Land 500 800 50 1,250 Buildings & Equipment 3,400 3,300 500 1,800 5,400 Accumulated Depreciation 1,800 2,100 1,800 100 2,200 Lease Asset 55 11 44 Web Domain Name 60 17 43 Goodwill 145 145 Accounts Payable 650 600 1,250 Other Liabilities 1,000 900 7 42 1,935 Common Stock 100 50 50 100 Additional PIC 500 950 950 500 Retained Earnings 6,789 1,595 1,702 107 6,789

10,839 10,839 6,195 6,195 5,314 5,314 12,774 12,774



12/31/x2 Equity Parent Sub Adjustments ConsolidatedSales 5,500 2,200 7,700 Cost of Goods Sold 2,200 1,000 3,200 Depreciation Expense 500 300 100 900 Interest Expense 60 60 7 113 Other Expenses 1,800 900 11 2,711 Goodwill Impair. Loss 29 29 Income from Sub 193 193

Net Income 747 60 140 200 747


Cash 3,757 1,265 5,022 Accounts Receivable 540 400 940 Inventory 380 500 30 910 Investment in Sub 2,859 313 3,172

Land 500 800 50 1,250 Buildings & Equipment 3,600 3,300 500 1,800 5,600 Accumulated Depreciation 2,200 2,400 1,800 100 3,000

100

Lease Asset 44 11 33 Web Domain Name 43 43 Goodwill 145 29 116 Accounts Payable 600 550 1,150 Other Liabilities 900 900 7 35 1,828 Common Stock 100 50 50 100 Additional PIC 500 950 950 500 Retained Earnings 7,336 1,415 1,735 320 7,336

11,636 11,636 6,265 6,265 5,617 5,617 13,914 13,914



Answers: Problem II

Acquisition:Acquisition Cost 2,000$ Book value of Sub 2,400 Fair value in excess of book (400)$



Cash 3,822$ 3,822 -$ Accounts Receivable 400 400 - Inventory 645 600 45 Land 800 800 - Buildings & Equipment (net) 1,500 1,500 -

Accounts Payable (500) (500) -

Bonds Payable (net) (4,589) (4,222) (367) Previously Unrecorded:

- - - -

Net non-goodwill (322) Bargain Purchase (78)$

Investment In Sub 2078 Gain on Purchase of Sub 78 Cash 2000


Inventory 45$ LIFO (15)$ -$

Land (50) Indef.Buildings & Equipment (net) 500 5 (100) (100) Lease Asset 55 5 (11) (11) Web Domain Name 60 Impair (17) - Other Liabilities (42) 6 7 7

568 (136) (104)


x1 295$ (136)$ -$ 159$ x2 (60) (104) 16 (148)



At Acquisition 1/1/x1 Parent Sub Adjustments ConsolidatedCash 3,200 3,822 7,022 Accounts Receivable 600 400 1,000 Inventory 500 600 45 1,145 Investment in Sub 2,078 2,078

Land 500 800 1,300 Buildings & Equipment 3,000 3,300 1,800 4,500 Accumulated Depreciation 1,400 1,800 1,800 1,400 Accounts Payable 600 500 1,100 Other Liabilities 1,200 1,200 Bonds Payable 5,000 5,000 Discount on B/P 778 367 411 Common Stock 100 50 50 100 Additional PIC 500 950 950 500 Retained Earnings 6,078 1,400 1,400 - 6,078

9,878 9,878 9,700 9,700 4,245 4,245 15,378 15,378



12/31/x1 Cost Parent Sub Adjustments ConsolidatedSales 5,000 2,000 7,000 Cost of Goods Sold 2,000 800 2,800 Depreciation Expense 200 300 500 Interest Expense 591 40 551 Other Expenses 1,340 240 1,580 Gain on Purchase of Sub 78 78 Dividend Revenue 140 140

Net Income 1,678 69 140 40 1,647

Retained Earnings, beg 6,000 1,400 1,400 6,000 Net Income 1,678 69 140 40 1,647 Dividends Declared 300 140 140 300 Retained Earnings, end 7,378 1,329 1,540 180 7,347

Cash 4,700 3,842 8,542 Accounts Receivable 600 400 1,000 Inventory 500 900 45 1,445 Investment in Sub 2,078 2,078

Land 500 800 1,300 Buildings & Equipment 3,000 3,300 1,800 4,500 Accumulated Depreciation 1,600 2,100 1,800 1,900 Accounts Payable 600 500 1,100 Other Liabilities 1,200 1,200 Bonds Payable 5,000 5,000 Discount on B/P 687 40 367 360 Common Stock 100 50 50 100 Additional PIC 500 950 950 500 Retained Earnings 7,378 1,329 1,540 180 7,347

11,378 11,378 9,929 9,929 4,425 4,425 17,147 17,147



12/31/x2 Cost Parent Sub Adjustments ConsolidatedSales 5,000 2,000 7,000 Cost of Goods Sold 2,000 800 15 2,815 Depreciation Expense 200 300 500 Interest Expense 604 47 557 Other Expenses 1,340 240 1,580

Dividend Revenue 130 130

Net Income 1,590 56 145 47 1,548


Cash 5,970 4,372 10,342 Accounts Receivable 600 400 1,000 Inventory 500 400 45 15 930 Investment in Sub 2,078 2,078


12,648 12,648 9,855 9,855 4,397 4,397 18,375 18,375



12/31/x1 Equity Parent Sub Adjustments ConsolidatedSales 5,000 2,000 7,000 Cost of Goods Sold 2,000 800 2,800 Depreciation Expense 200 300 500 Interest Expense 591 40 551 Other Expenses 1,340 240 1,580 Gain on Purchase of Sub 78 78 Income from Sub 109 109

Net Income 1,647 69 109 40 1,647


Cash 4,700 3,842 8,542 Accounts Receivable 600 400 1,000 Inventory 500 900 45 1,445 Investment in Sub 2,047 31 2,078


11,347 11,347 9,929 9,929 4,425 4,425 17,147 17,147



12/31/x2 Equity Parent Sub Adjustments ConsolidatedSales 5,000 2,000 7,000 Cost of Goods Sold 2,000 800 15 2,815 Depreciation Expense 200 300 500 Interest Expense 604 47 557 Other Expenses 1,340 240 1,580

Income from Sub 88 88

Net Income 1,548 56 103 47 1,548


Cash 5,892 4,372 10,264 Accounts Receivable 600 400 1,000 Inventory 500 400 45 15 930 Investment in Sub 2,005 42 2,047


12,497 12,497 9,855 9,855 4,366 4,366 18,297 18,297



Answers: Problem III

Acquisition:Acquisition Cost 1,463$ Book value of Sub 1,005 Fair value in excess of book 458$



Cash 45$ 45 -$ Accounts Receivable 100 100 - Inventory 204 240 (36) Land 750 500 250 Buildings & Equipment (net) 420 500 (80) Accounts Payable (130) (130) -

Long-term Debt (208) (250) 42 Previously Unrecorded:

Patents 112 - 112 Jingles 40 - 40

Net non-goodwill 328 Goodwill 130$


Inventory (36)$ FIFO 36$ -$

Land 250 Indef.Buildings & Equipment (net) (80) 10 8 8 Patents 112 8 (14) (14) Jingles 40 Impair (10) - Long-term Debt 42 6 (7) (7)

328 13 (13)


x1 370$ 13$ -$ 383$ x2 40 (13) (39) (12)



At Acquisition 1/1/x1 Parent Sub Adjustments ConsolidatedCash 582 45 627 Accounts Receivable 160 100 260 Inventory 300 240 36 504 Investment in Sub 1,463 1,463

Land 200 500 250 950 Buildings & Equipment 900 700 80 1,320

200

Accumulated Depreciation 340 200 200 340 Patents 50 112 162 Jingles 40 40 Goodwill 130 130 Accounts Payable 140 130 270 Long-term Debt 400 250 42 608 Common Stock 25 5 5 25 Retained Earnings 2,750 1,000 1,000 - 2,750

3,655 3,655 1,585 1,585 1,779 1,779 3,993 3,993



12/31/x1 Cost Parent Sub Adjustments ConsolidatedSales 3,200 1,480 4,680 Cost of Goods Sold 1,890 820 36 2,674 Operating Expenses 500 150 14 8 656 Other Expenses 160 140 7 307 Jingle Impair. Loss 10 10 Dividend Revenue 400 400

Net Income 1,050 370 431 44 1,033

Retained Earnings, beg 2,750 1,000 1,000 2,750 Net Income 1,050 370 431 44 1,033 Dividends Declared 400 400

Retained Earnings, end 3,800 970 1,431 444 3,783

Cash 1,452 95 1,547 Accounts Receivable 140 120 260 Inventory 430 180 36 36 610 Investment in Sub 1,463 1,463


200

Accumulated Depreciation 400 250 200 442 8

Patents 70 112 14 168 Jingles 40 10 30 Goodwill 130 130 Accounts Payable 130 120 250 Long-term Debt 300 250 42 7 515 Common Stock 25 5 5 25 Retained Earnings 3,800 970 1,431 444 3,783

4,655 4,655 1,595 1,595 2,254 2,254 5,015 5,015



12/31/x2 Cost Parent Sub Adjustments ConsolidatedSales 3,400 1,280 4,680 Cost of Goods Sold 1,900 800 2,700 Operating Expenses 500 250 14 8 756 Other Expenses 200 190 7 397 Goodwill Impair. Loss 39 39 Dividend Revenue 200 200

Net Income 1,000 40 260 8 788

Retained Earnings, beg 3,800 970 987 3,783 Net Income 1,000 40 260 8 788 Dividends Declared 500 200 200 500 Retained Earnings, end 4,300 810 1,247 208 4,071

Cash 2,157 125 2,282 Accounts Receivable 200 100 300 Inventory 300 90 390 Investment in Sub 1,463 1,463

Land 250 500 250 1,000 Buildings & Equipment 1,200 700 80 1,620

200


8

Patents 55 98 14 139 Jingles 30 30 Goodwill 130 39 91 Accounts Payable 150 150 300 Long-term Debt 500 250 35 7 722 Common Stock 25 5 5 25 Retained Earnings 4,300 810 1,247 208 4,071

5,625 5,625 1,515 1,515 2,011 2,011 5,852 5,852



12/31/x1 Equity Parent Sub Adjustments ConsolidatedSales 3,200 1,480 4,680 Cost of Goods Sold 1,890 820 36 2,674 Operating Expenses 500 150 14 8 656 Other Expenses 160 140 7 307 Jingle Impair. Loss 10 10 Income from Sub 383 383

Net Income 1,033 370 414 44 1,033

Retained Earnings, beg 2,750 1,000 1,000 2,750 Net Income 1,033 370 414 44 1,033 Dividends Declared 400 400

Retained Earnings, end 3,783 970 1,414 444 3,783

Cash 1,452 95 1,547 Accounts Receivable 140 120 260 Inventory 430 180 36 36 610 Investment in Sub 1,446 17 1,463


200


Patents 70 112 14 168 Jingles 40 10 30 Goodwill 130 130 Accounts Payable 130 120 250 Long-term Debt 300 250 42 7 515 Common Stock 25 5 5 25 Retained Earnings 3,783 970 1,414 444 3,783

4,638 4,638 1,595 1,595 2,254 2,254 5,015 5,015



12/31/x2 Equity Parent Sub Adjustments ConsolidatedSales 3,400 1,280 4,680 Cost of Goods Sold 1,900 800 2,700 Operating Expenses 500 250 14 8 756 Other Expenses 200 190 7 397 Goodwill Impair. Loss 39 39 Income from Sub 12 12

Net Income 788 40 60 20 788

Retained Earnings, beg 3,783 970 970 3,783 Net Income 788 40 60 20 788 Dividends Declared 500 200 200 500 Retained Earnings, end 4,071 810 1,030 220 4,071

Cash 2,157 125 2,282 Accounts Receivable 200 100 300 Inventory 300 90 390 Investment in Sub 1,234 212 1,446

Land 250 500 250 1,000 Buildings & Equipment 1,200 700 80 1,620

200


8

Patents 55 98 14 139 Jingles 30 30 Goodwill 130 39 91 Accounts Payable 150 150 300 Long-term Debt 500 250 35 7 722 Common Stock 25 5 5 25 Retained Earnings 4,071 810 1,030 220 4,071

5,396 5,396 1,515 1,515 2,006 2,006 5,852 5,852



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