29 Jun Question On January 1, 2011, Por
Question
On January 1, 2011, Porter Company purchased an 90% interest in the capital stock of Salem Company for $850,000. The fair value of the noncontrolling interest was proportionate to the consideration paid by the controlling interest. At that time, Salem Company had capital stock of $550,000 and retained earnings of $80,000. Differences between the fair value and the book value of the identifiable assets of Salem Company were as follows: Equipment Land Inventory In-Process Research & Development Bonds payable The book values of all other assets and liabilities of Salem Company were equal to their fair values on January 1, 20011 The inventory was sold in 2011 and the equipment has a 5-year remaining life as of January 1, 2011. The bonds payable mature in 5 years from January 1, 2011 At 12/31/13, Salem owes Porter $25000 Required for the year ended December 31, 2013: 1. Prepare the analysis as of acquisition date including unamortized differential at 1/1/11. 2. Prepare the journal entries Porter recorded with respect to its investment in Porter for the year ended 12/31/13. 3. Calculate Net income to controlling interest and Net income to non controlling interest for the year 2013. 4. Prepare all necessary elimination entries for the year ended 2013. 5. Complete the consolidated workpapers for the year ended 12/31/13. Use formulas in all calculations. INCOME STATEMENT P CO. S CO. ELIMINATIONS CONS.TOT. 12/31/2013 (000’s) DR. CR. Sales 2,100.00 450.00 2,550.000 Dividend Income 54.00 54.000 0.000 Total revenues 2,154.00 450.00 2,604.00 Cost of goods sold 950.00 200.00 1,150.00 Depreciation exp 50.00 30.00 80.00 Other Expenses 60.00 50.00 110.00 0.00 Total expenses 1,060.00 280.00 1,340.00 Total Net income 1,094.00 170.00 1,264.00 Less net income to noncontrolling interest 0.00 Net income to controlling interest 1,264.00 RETAINED EARNINGS STATEMENT Retained Earnings 1/1/13 500.00 230.00 730.000 Net income 1,094.00 170.00 1,264.00 Dividends declared 90.00 60.00 150.00 Retained Earnings 12/31/13 1,504.00 340.00 1,844.00 BALANCE SHEET Cash 76.00 65.00 141.00 Accounts receivable 445.00 190.00 635.00 Inventory 780.00 175.00 955.00 Investment in Sub 850.00 850.00 Land 215.00 320.00 535.00 IPR&D 0.00 Plant and Equipment 360.00 280.00 640.00 Goodwill 0.00 Total assets 2,726.00 1,030.00 3,756.00 Accounts payable 132.00 110.00 242.000 bonds payable 90.00 30.00 120.000 Common stock 1,000.00 550.00 1,550.000 Paid in capital 0.000 Retained earnings 1,504.00 340.00 1,844.000 Noncontrolling interest in sub 0.000 Total liabilities and equity 2,726.00 1,030.00 0.00 0.00 3,756.00 0.00 0.00 0.00
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