The document contains multiple accounting problems related to acquisitions, goodwill calculations, and non-controlling interests (NCI) for various companies. It includes detailed financial data for Parker, Inc., Park Corporation, Gamma, Patterson Corporation, and Alpha, along with specific questions for each problem that require calculations of goodwill, NCI, amortization, and consolidation entries. The document emphasizes the importance of understanding fair values, book values, and the impact of acquisitions on financial statements.
The document contains multiple accounting problems related to acquisitions, goodwill calculations, and non-controlling interests (NCI) for various companies. It includes detailed financial data for Parker, Inc., Park Corporation, Gamma, Patterson Corporation, and Alpha, along with specific questions for each problem that require calculations of goodwill, NCI, amortization, and consolidation entries. The document emphasizes the importance of understanding fair values, book values, and the impact of acquisitions on financial statements.
The document contains multiple accounting problems related to acquisitions, goodwill calculations, and non-controlling interests (NCI) for various companies. It includes detailed financial data for Parker, Inc., Park Corporation, Gamma, Patterson Corporation, and Alpha, along with specific questions for each problem that require calculations of goodwill, NCI, amortization, and consolidation entries. The document emphasizes the importance of understanding fair values, book values, and the impact of acquisitions on financial statements.
The document contains multiple accounting problems related to acquisitions, goodwill calculations, and non-controlling interests (NCI) for various companies. It includes detailed financial data for Parker, Inc., Park Corporation, Gamma, Patterson Corporation, and Alpha, along with specific questions for each problem that require calculations of goodwill, NCI, amortization, and consolidation entries. The document emphasizes the importance of understanding fair values, book values, and the impact of acquisitions on financial statements.
Download as DOCX, PDF, TXT or read online from Scribd
Download as docx, pdf, or txt
You are on page 1/ 12
Problem 1 (Recommended: review slides 6-12)
Parker, Inc. acquires 70% of Sawyer Company for $420,000. The remaining 30% of Sawyer’s outstanding shares continue to trade at a collective value of $174,000. On the acquisition date, Sawyer has the following accounts: Book Values Fair Values Current Assets $ 210,000 $ 210,000 Land $ 170,000 $ 180,000 Building $ 300,000 $ 330,000 Liabilities $ (280,000) $ (280,000)
The buildings have a 10-year life. In addition, Sawyer holds a patent worth $140,000 that has a five-year life but is not recorded on its financial records.
1) What is the goodwill at the acquisition date? (Provide calculation here)
2) What is the proportion of goodwill assigned to NCI? (Provide calculation here)
Problem 2 (Recommended: review slides 13-15) Hoyle, Schaefer and Doupnik – Chapter 4 Problem 15 On January 1, Park Corporation and Strand Corporation had condensed balance sheets as follows: Park Strand Current Assets $ 70,000 $ 20,000 Noncurrent Assets $ 90,000 $ 40,000 Total Assets $ 160,000 $ 60,000
Current Liabilities $ 30,000 $ 10,000
Long-term Debt $ 50,000 Stockholders' equity $ 80,000 $ 50,000 Total Liabilities and equities $ 160,000 $ 60,000
On January 2, Park borrowed $60,000 and used the proceeds to obtain 80% of the outstanding common shares of Strand. The acquisition price was considered proportionate to Strand’s total fair value. The $60,000 debt is payable in 10 equal annual principal payments, plus interest beginning on December 31. The excess fair value of the investment over the underlying book value of the acquired net assets is allocated to inventory (60%) and to goodwill (40%).
1) What is the goodwill at the acquisition date? (Provide calculation here)
2) What is the proportion of goodwill assigned to NCI? (Provide calculation here)
Problem 3 (Recommended: review slides 16-47) Gamma acquired 60% of Delta’s shares on January 1, 2024 paying $500,000 in cash.
Delta’s balance sheet as of January 1, 2024 and the fair value of Delta’s assets and liabilities were as follows:
BALANCE SHEET DELTA- Book Value DELTA –Fair Value
Jan 1, 2024 Jan 1, 2024
Cash 20,000 20,000
Accounts receivable 30,000 8,000 Inventory 250,000 180,000 PPE net 510,000 550,000 Assets 810,000 758,000
The useful life of the plant equipment is 5 years starting January 1, 2024. The turnover of short- term assets and liabilities is less than one year. Additionally, during the due-diligence process, Gamma found out that Delta has unrecorded liabilities for product warranties for $100,000 that will be likely exercised over 4 years starting January 1, 2024.
During 2024, Delta’s Net Income was $355,000 and Delta paid $50,000 in dividends.
In addition, as of December 31, 2024 Gamma determined a goodwill impairment charge equal to $90,000 related to Delta’s acquisition. Below are Gamma’s and Delta’s Balance Sheets and Income Statements for the year ended December 31, 2024:
BALANCE SHEET GAMMA DELTA
Dec 31, 2024 Dec 31, 2024
Cash 285,000 200,000
Accounts receivable 180,000 385,000 Inventory 520,000 400,000 Investment in Delta 694,400 PPE net 1,200,000 408,000 Assets 2,879,400 1,393,000
Using the information provided above, please answer the following questions: 1) What is the goodwill at the acquisition date? (Provide calculation here)
2) What is the proportion of goodwill assigned to NCI? (Provide calculation here)
3)What is the ECOBV amortization for the year and the ECOBV ending balances as of December 31, 2024? (Provide calculation here)
4) What is the balance sheet NCI on December 31, 2024? (Provide calculation here) 5) What is the NCI share of Net Income for 2024? (Provide calculation here)
6) Prepare the consolidation entries.
7) Prepare a consolidated balance sheet as of December 31, 2024 (Using the provided consolidation worksheet) Consolidation Entries Accounts Gamma Delta Debit Credit Noncontrolling Interest Consolidated Totals Revenues (1,000,000) (910,000) Cost of Goods Sold 800,000 408,000 Depreciation Expenses 120,000 102,000 Expenses 50,000 45,000 Investment Income (224,400) 0 Separate company Net Income (254,400) (355,000) Consolidated Net Income Noncontrolling Interest in Delta Income Net Income to Controlling Interest
Retained Earnings 1/1 (735,000) 100,000
Net Income (above) (254,400) (355,000) Dividend paid 60,000 50,000 Retained Earnings 12/31 (929,400) (205,000)
Cash 285,000 200,000
Account Receivables 180,000 385,000 Inventory 520,000 400,000 PPE net 1,200,000 408,000 Investment in Delta 694,400 0
Retained Earnings 12/31 (929,400) (205,000) Total Liabilities and Equities (2,879,400) (1,393,000) Problem 4 (Recommended: review slides 48-64) On January 1, Patterson Corporation acquired 80% of the 100,000 outstanding voting shares of Soriano, Inc. in exchange for $31.25 per share cash. The remaining 20% of Soriano’s shares continued to trade for $30.00 both before and after Patterson’s acquisition. At January 1, Soriano’s book and fair values were as follows: Book Values Fair Values Remaining Life (years)
Long-term notes payable $ 1,500,000 $ 1,500,000 Common Stock $ 50,000 Additional Paid in capital $ 500,000 Retained earnings $ 740,000 $ 2,970,000
In addition, Patterson assigned a $600,000 value to certain unpatented technologies recently
developed by Soriano. These technologies were estimated to have a 3-year remaining life.
During the year, Soriano paid a $30,000 dividend to its shareholders. The companies reported the following revenues and expenses from their separate operations for the year ending December 31: Patterson Soriano Revenues 3,000,000 1,400,000 Expenses 1,750,000 600,000
What is the noncontrolling interest amount reported in the December 31 consolidated balance sheets? Problem 5 (Recommended: review slides 65-70) Alpha acquired 70% of Beta’s shares on July 1, 2025 paying $750,000 in equity securities. The remaining 30% of Beta’s shares traded closely near an average price that totaled $320,000 both before and after Alpha’s acquisition. In reviewing the acquisition, Alpha assigned a $100,000 fair value to a patent recently developed by Beta, even though it was not recorded within the financial records of the subsidiary. This patent is anticipated to have a remaining life of five years. Also, Buildings recorded in Beta’s book were undervalued by $30,000 with remaining life of 10 years. Alpha uses the equity method to account for the Investment in Beta. The following financials are available for these two companies for 2025. In addition, the subsidiary’s income was earned uniformly thought the year. Subsidiary dividend payments were made quarterly.
BALANCE SHEET Alpha Beta
Dec 31, 2025 Dec 31, 2025
Current Assets 481,000 390,000
Investment in Beta ? Land 388,000 200,000 Building 701,000 630,000 Assets ? 1,220,000
Liabilities 816,000 360,000
Common stock 95,000 300,000 APIC 405,000 20,000 Retained earnings 1/1 853,000 500,000 Net Income ? 120,000 Dividend Paid (145,000) (80,000) Liabilities + Equity ? 1,220,000
INCOME STATEMENT Alpha Beta
2025 2025
Revenue 670,000 400,000
Income in Beta ? 0 Operating Expenses (402,000) (280,000) Net income ? 120,000
Using the information provided above, please answer the following questions: 1. What is the goodwill at the acquisition date?
2. What is the proportion of goodwill assigned to NCI?
3. What is the ECOBV amortization for 2025?
4. What is the balance sheet NCI on December 31, 2025?
5. Complete the following consolidation worksheet.
Consolidation Entries Noncontrolling Consolidated Accounts Alpha Beta Debit Credit Interest Totals Revenues (670,000) (400,000) Operating Expenses 402,000 280,000 Investment Income 0 Separate company net income (120,000) Consolidated Net Income Noncontrolling Interest in Beta Income Net Income to Controlling Interest
Retained Earnings 1/1 (853,000) (500,000)
Net Income (above) (120,000) Dividend paid 145,000 80,000
Retained Earnings 12/31 (540,000)
Current Assets 481,000 390,000
Land 388,000 200,000 Building 701,000 630,000 Investment in Beta 0
Total Assets 1,220,000
Liabilities (816,000) (360,000) Common Stock (95,000) (300,000) APIC (405,000) (20,000)
Noncontrolling Interest in Beta 1/1
Noncontrolling Interest in Beta 12/31
Retained Earnings 12/31 (540,000) Total Liabilities and Equities (1,220,000)
