Reference no: EM132782088
Choco Co. acquired 90% of Allie Co. (Allie has total of 100,000 shares outstanding and Choco acquired 90,000 shares) for $810,000 ($9/share) on December 31, 2018. The market value of Allie's stock was $9/share. Choco uses equity method to report its investment in Allie.
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12/31/2018
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Choco Co.
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Allie Co.
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BV
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BV
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FV
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Current assets
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$1,368,000
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$238,000
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$238,000
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Equipment [8 years]
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164,000
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280,000
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360,000
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Buildinqs 120 years'
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274 000
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210 000
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270 000
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Liabilities $(546,000)
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$(168,000)
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$(168,000)
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Common stock
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(300,000)
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(150,000)
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Additional paid in capital
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(460 000)
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(350 000)
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Retained earnings [12/31/18]
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(500,000)
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(60,000)
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*note: numbers in this table in 1) refer to credit balance.
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During 2019, Allie earned net income of $180,000 and paid dividends of $22,000.
problem a) All excess payment that Choco paid to purchase Allie will be recorded as a patent (NOT goodwill) with useful life of 25 years. Calculate patent and allocated calculated patent between controlling and noncontrolling interest (NCI) on 12/31/2018 (acquisition date)
Current Assets - 238,000
Equipment - 360,000
Building - 270,000
Total Assets - 868,000
Liabilities - 168,000
Net Assets - 868,000-168,000 = 700,000
Consideration given - 810,000, 100,000*90% = 900,000
Patent - 900,000-700,000 = 200,000
Patient NCI - 200,000*10% = 20,000
problem b) Calculate annual amortization excess FV>BV of equipment, building, and patent?
Equipment - (360,000-280,000)/8 = 10,000
Building = (270,000-210,000)?20 = 3000
Patent = 200,000/25 = 8,000
problem c) Calculate "investment in Allie" balance on 12/31/2019.
problem d) Calculate "equity in Allie's income" balance on 12/31/2019.
problem e) Prepare consolidation entry S (journal entry) for consolidated financial statement ending 12/31/2019.
problem f) Prepare consolidation entry A (journal entry) for consolidated financial statement ending 12/31/2019.
problem g) Prepare consolidation entry I (journal entry) for consolidated financial statement ending 12/31/2019.
problem h) Prepare consolidation entry D (journal entry) for consolidated financial statement ending 12/31/2019.
problem i) Prepare consolidation entry E (journal entry) for consolidated financial statement ending 12/31/2019.
problem j) Choco's net income only from its own operation (excluding 90% of Allies ownership as "Equity in Allie's income") in 2019 was $580,000. What is consolidated net income for 2019 attributable to Choco's controlling interest (i.e., NI:Choco in consolidated income statement)?
problem k) What is the noncontrolling interest (NCI)'s share of the Allie's net income for the year ended December 31, 2019 (i.e., i.e., NI:NCI in consolidated income statement)?
problem l) What is the beginning balance of the noncontrolling interest (NCI) in the Allie at December 31, 2019 (i.e., NCI in Cake 1/1)?
problem m) What is the ending balance of the noncontrolling interest (NCI) in the Allie at December 31, 2019 (i.e., NCI in Cake 12/31)?