Reference no: EM132910491

Miller Company acquired an 80 percent interest in Taylor Company on January 1, 2019. Miller paid $744,000 in cash to the owners of Taylor to acquire these shares. In addition, the remaining 20 percent of Taylor shares continued to trade at a total value of $186,000 both before and after Miller's acquisition.

On January 1, 2019, Taylor reported a book value of $464,000 (Common Stock = $232,000; Additional Paid-In Capital = $69,600; Retained Earnings = $162,400). Several of Taylor's buildings that had a remaining life of 20 years were undervalued by a total of $61,900.

During the next three years, Taylor reports income and declares dividends as follows:

Year             Net Income            Dividends
2019             $54,400                    $7,800
2020             70,200                     11,700
2021            78,000                      15,600

Problem 1: What amount of excess depreciation expense should be recognized in the consolidated financial statements for the initial years following this acquisition?

Problem 2: If a consolidated balance sheet is prepared as of January 1, 2019, what amount of goodwill should be recognized?

Problem 3: If a consolidation worksheet is prepared as of January 1, 2019, what Entry S and Entry A should be included?