The fair value of the non-controlling interest

Reference no: EM131055151

ASSIGNMENT

Master Corporation acquired 80 percent ownership of Stanley Wood Products Company on January 1, 20X1, for $160,000. On that date, the fair value of the non-controlling interest was $40,000, and Stanley reported retained earnings of $50,000 and had $100,000 of common stock outstanding. Master has used the equity method in accounting for its investment in Stanley.

Trial balance data for the two companies on December 31, 20X5, are as follows:

Additional Information:

1. On the date of combination, the fair value of Stanley's depreciable assets was $50,000 more than book value. The differential assigned to depreciable assets should be written off over the following 10-year period.

2. There was $10,000 of intercorporate receivables and payables at the end of 20X5.

Your Portfolio Project paper should be 8 to 10 pages in length, and address thoroughly Parts A, B and C below. Be sure to incorporate instructor feedback and suggestions into your final submission, in terms of any changes or additions to Parts A and B that you received during the course. Be sure to examine the Portfolio Project rubric to guide your project writing and presentation.

1. Give all journal entries that Master recorded during 20X5 related to its investment in Stanley.

2. Give all eliminating entries needed to prepare consolidated statements for 20X5.

3. Prepare a three-part worksheet as of December 31, 20X5. Include this in table format in the Word document. Following your worksheet, in two or three pages analyze the process, specifically addressing how the transactions impact the financial statements, and how an outside user of the financial statements would use the information provided.

1. Give all journal entries that Master recorded during 20X5 related to its investment in Stanley.

Cash	8,000
Investment in Stanley Wood		8,000
(To Record Dividends from Stanley Wood)
Investment in Stanley Wood	24,000
Income From Stanley Wood		24,000
(To Record Income Under Equity Method)
Income From Stanley Wood	4,000
Investment in Stanley Wood		4,000

2. Give all eliminating entries needed to prepare consolidated statements for 20X5.

Income from Subsidiary	20,000
Dividends Declared		8,000
Investment in SW Products Stock		12,000
(Eliminate Income from Subsidiary)
Income to Non-Controlling Interest	5,000
Dividends Declared		2,000
Non-Controling Interest		3,000
Common Stock - SW Products	100,000
Retained Earnings	90,000
Differential	30,000
Investment in SW Products Stock		176,000
Non-Controling Interest		44,000
Building and Equipment	50,000
Accumulated Depreciation		20,000
Differential		30,000
(Assign Beginning Differential)
Depreciation Expense	5,000
Accumulated Depreciation		5,000
(Amortise Differential)
Accounts Payable	10,000
Cash and Receivables		10,000
(Eliminate Inter-Corporate Recivables and Payables)

3. Prepare a three-part worksheet as of December 31, 20X5.

	Master	Stanley Wood	Elimination Entries
	Corporation	Company	Debit	Credit	Consolidated
Income Statement
Sales	200,000	100,000			300,000
Cost of Goods Sold	(120,000)	(50,000)			(170,000)
Depreciation Expense	(25,000)	(15,000)	5,000		(45,000)
Inventory Losses	(15,000)	(5,000)			(20,000)
Income from Stanley Wood	20,000		24,000	4,000	-
Non-Controlling Interest in Net Income			6,000	1,000	(5,000)
Controlling Interest in Net Income	60,000	30,000	35,000	5,000	60,000


Statement of Retained Earnings
Beginning Balance	314,000	90,000	90,000		314,000
Net Income	60,000	30,000	35,000	5,000	60,000
Dividend Declared	(30,000)	(10,000)		10,000	(30,000)
Ending Balance	344,000	110,000	125,000	15,000	344,000


Balance Sheet
Cash and Receivables	81,000	65,000		10,000	136,000
Inventory	260,000	90,000			350,000
Land	80,000	80,000			160,000
Buildings and Equipment	500,000	150,000	50,000		700,000
Accumulated Depreciation	(205,000)	(105,000)		25,000	(335,000)
Investment in Stanley Wood	188,000			168,000
				20,000
Total Assets	904,000	280,000	50,000	223,000	1,011,000

Accounts Payable	60,000	20,000	10,000		70,000
Notes Payable	200,000	50,000			250,000
Common Stock	300,000	100,000	100,000		300,000
Retained Earnings	344,000	110,000	125,000	15,000	344,000
Non-Controlling Interest				42,000	47,000
				5,000
Total Liabilities & Equity	904,000	280,000	235,000	62,000	1,011,000

Reference no: EM131055151

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