Reference no: EM132755533

Questions -

Q1. On January 1, 2012, Porter Company purchased an 80% interest in Salem Company for $260,000. On this date, Salem Company had common stock of $207,000 and retained earnings of $130,500.

An examination of Salem Company's balance sheet revealed the following comparisons between book and fair values:

Required:

1. Determine the amounts that should be allocated to Salem Company's assets on the consolidated financial statements workpaper on January 1, 2012.

2. Prepare the January 1, 2012, consolidated financial statements workpaper entries to eliminate the investment account and to allocate the difference between book value and the value implied by the purchase price.

Q2. On January 1, 2011, P Company purchased an 80% interest in S Company for $600,000, at which time S Company had retained earnings of $300,000 and capital stock of $350,000. Any difference between book value and the value implied by the purchase price was entirely attributable to a patent with a remaining useful life of 10 years.

Assume that P and S Companies reported net incomes from their independent operations of $200,000 and $100,000, respectively.

Required: Prepare a t-account calculation of the controlling interest and noncontrolling interest in consolidated net income for the year ended December 31, 2011.

Q3. Park Company acquires an 85%interest in Sunland Company on January 2, 2012. The resulting difference between book value and the value implied by the purchase price in the amount of $120,000 is entirely attributable to equipment with an original life of 15 years and a remaining useful life, on January 2, 2012, of 10 years.

Required: Prepare the December 31 consolidated financial statements workpaper entries for 2012 and 2013 to allocate and depreciate the difference between book value and the value implied by the purchase price, recording accumulated depreciation as a separate balance.

Q4. On January 1, 2011, Packard Company purchased an 80% interest in Sage Company for $600,000. On this date Sage Company had common stock of $150,000 and retained earnings of $400,000.

Sage Company's equipment on the date of Packard Company's purchase had a book value of $400,000 and a fair value of $600,000. All equipment had an estimated useful life of 10 years on January 2, 2006.

Required: Prepare the December 31 consolidated financial statements workpaper entries for 2011 and 2012 to allocate and depreciate the difference between book value and the value implied by the purchase price, recording accumulated depreciation as a separate balance.