TACCT 500 Fall 2019 Final Exam- Take Home Problem Pop Corporation acquired 80% of Soda Company’s common stock for $32,800 on January 1, XXXXXXXXXXThe reported equity of Soda on January 1, 2017 was...

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TACCT 500 Fall 2019 Final Exam- Take Home Problem Pop Corporation acquired 80% of Soda Company’s common stock for $32,800 on January 1, 2017. The reported equity of Soda on January 1, 2017 was $3,000 in common stock and $7,000 in retained earnings. The fair value of the noncontrolling interest was $8,200. Soda’s assets and liabilities were reported at fair value at the date of acquisition, except for these items: Book Value Fair Value Land $2,000 $8,000 Buildings (Accumulated Depreciation was $200) 8,000 1,000 Identifiable intangibles 0 7,000 The buildings had a remaining useful life of 7 years, and the identifiable intangibles are amortized over 5 years as of the date of acquisition, both straight-line. Goodwill was impaired by $2,000 in 2017 and is unimpaired in 2018. The land, buildings, and identifiable intangibles are still held by Soda. It is now December 31, 2018 (two years since the acquisition took place). The trial balances of Pop and Soda are in the consolidation working paper below. Soda reported net income of $3,100 and dividends of $400 during 2018. Information on intercompany transactions is as follows: 1.On January 2, 2017, Pop sold Soda equipment for a price of $800. The equipment had a book value of $300 (cost of 400 less accumulated depreciation of $100) at the time of sale, and a remaining life of 5 years, straight-line. 2.Soda sells merchandise to Pop on a continuing basis, at a markup of 20% on cost. Pop’s 2018 beginning inventory contains $90 in goods purchased from Soda (cost was $75). Pop’s 2018 ending inventory contains $120 in goods purchased from Soda (cost was $100). Total intercompany sales for 2018 were $3,000. Pop uses the complete (full) equity method of accounting. Required a. Calculate the total goodwill arising from this acquisition. b. Prepare a schedule roll forwarding the excess of fair value over book value items. b.Present a schedule computing Pop’s equity in net income of Soda for 2018, and the noncontrolling interest in net income for 2018. Pop uses the who c.Prepare the equity entries On Pop’s books for 2018 d.Present all consolidation entries that would appear in a three-part consolidation worksheet as of December 31, 2018. Note: Below (and included as a separate excel file) is the worksheet for this problem. You do not have to complete it. If you fill it in, it is not a substitute for requirement d. Consolidation working paper, December 31, 2018 PopSodaConsolidated Dr (Cr)Dr (Cr)DrCrDr (Cr) Current assets17,380 6,000 Land8,000 5,000 Buildings & equipment (net) Identifiable intangibles Goodwill Current liabilities(9,000)(4,500) Long-term debt(158,048)(15,900) Capital stock(10,000)(3,000) Retained earnings, Jan. 1(19,680)(10,000) AOCI, Jan. 1(2,000) Revenues(155,000)(40,100) Net Income of Soda(2,256) Operating expenses OCI(200) NCI in Net Income of Soda Total0 0 145,200 25,100 Investment in Soda34,804 32,000 9,000 NCI in Net Assets of Soda Dividends800 400 Cost of goods sold118,000 28,000
Answered Same DayDec 07, 2021

Answer To: TACCT 500 Fall 2019 Final Exam- Take Home Problem Pop Corporation acquired 80% of Soda Company’s...

Kushal answered on Dec 09 2021
159 Votes
tables and entries
    A.    Goodwill Calculation
        AP        32,800
        Value of NCI        8,200
                41,000
        Book Value of Equity        10,000
        Excess Value of Net Identifiable Assets        6,000
        Goodwill        25,000
        pare
nts gw        20,000
        nci goodwill        5,000
        Sub's Net Income Calculation
        Sales revenues        40,100
        Other revenues        0
        Cost of goods sold        28,000
        Operating expenses        9,000
         Net income of Sub        3,100
        EQUITY NI and NCI in Income of Sub Calculation            0.8    0.2
                Total     Parent %    NCI %
        Subs NI        3,100    2,480    620
        Adjust for intercompany
    item 3    Recognize PY DownStream deferred gross profit on Inventory Sales        0    0
        Defer CY DownStream deferred gross profit on Inventory Sales        0    0
    item 4    Recognize PY UpStream deferred gross profit on Inventory Sales        500    400    100
        Defer CY UpStream deferred gross profit on Inventory Sales        0    0    0
    Item 5    Reversal of Gain on Downstream Sale of Equipment (10 year life)        0    0
         Sub total         3,600    2,880    720
        Adjsut for Current Year write offs of Excess of FV over BV
        Amortization of Leasehold        0    0    0
        Equity Net Income and NCI in Income of Sub        3,600    2,880    720
        Investment Calculation
        First Let's calculate Investment account balance and NCI in Net Assets
                ParentI +    NCI =    CS + APIC    APIC+    RE
        Beginning Book Value        32,800    8,200
        NI        2,880    720
        Div         320    80
         Ending Book Value from Sub's Books        36,000    9,000
        Equity Adjustments to Current Period Income of Sub
    item 3    Recognize PY DownStream deferred gross profit on Inventory Sales        0
        Defer CY DownStream deferred gross profit on Inventory Sales        0
    item 4    Recognize PY UpStream deferred gross profit on Inventory Sales        400    0
        Defer CY UpStream deferred gross profit on Inventory Sales        0    0
        Deferred Loss on Upstream Sale of Equipment
        Reversal of gain/Loss on Downstream Sale of Equipment (10 year life)        0
         Adjusted Book Value of invetments including Equity Intercompany adj        0    9,000    Note this is the nuber the book uses
        Write-off/Amortization of Excess of FV over...
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