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Perch Co. acquired 80% of the common stock of Float Corp. for $1,600,000. The fair value of Float’s net assets was $1,850,000, and the book value was $1,500,000. The non-controlling interest shares of Float Corp. are not actively traded.

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Perch Co. acquired 80% of the common stock of Float Corp. for $1,600,000.  The fair value of Float’s net assets was $1,850,000, and the book value was $1,500,000.  The non-controlling interest shares of Float Corp. are not actively traded.

  1. Compute the amount of goodwill that will be recognized as of the acquisition date.
  2. Compute the amount of goodwill that will be attributed to Perch at acquisition date?
  3. Compute the amount of goodwill that will be attributed to non-controlling interest  at acquisition date?
  4. Calculate the dollar amount of non-controlling interst that should appear in a consolidated balance sheet at acquisition date.
  5. Calculate the dollar amount of Float Corp’s net assets to be represented in a consolidted balance sheet at the date of acquisition.
  6. Calculate the amount of fair value over book value differences attributed to Perch at acquisition date.
On January 1, 2013, Nichols Company acquired 80% of Smith Company’s common stock and 40% of its non-voting, cumulative preferred stock.  The consideration transferred by Nichols was $1,200,000 for the common and $124,000 for the preferred.  Any excess acquisition-date fair value over book value is considered goodwill.  The capital structure of Smith immediately prior to the acquisition is:
  1. Compute the non-controlling interest in Smith at date of acquisition.
  2. Prepare the consolidation entry S at date of acquisition referring to Smith.
  3. If Smith’s net income is $100,000 in the year following the acquisition, what is the non-controlling interest balance at the end of the year?

Popper Co. acquired 80% of the common stock of Cocker Co. on January 1, 2011, when Cocker had the following stockholders’ equity accounts.

  1. On January 1, 2014, Cocker issued 10,000 additional shares of common stock for $35 per share.  Popper acquired 8,000 of these shares.  How would this transaction affect the additional paid-in capital of the parent company?  Calculate the amount of increase or decrease.
  • On January 1, 2014, Cocker issued 10,000 additional shares of common stock for $21 per share.  Popper did not acquire any of this newly issued stock.  How would this transaction affect the additional paid-in capital of the parent company?  Show your calculations.
  • On January 1, 2014, Cocker reacquired 8,000 of the outstanding shares of its own common stock for $34 per share.  None of these shares belonged to Popper.  How would this transaction have affected the additional paid-in capital of the parent company?  Show your calculations.

Gargiulo Company, a 90% owned subsidiary of Posito Corporation, sells inventory to Posito at a 25% profit on selling price.  The following data is available pertaining to intra-entity purchases.  Gargiulo was acquired on January 1, 2012. 

  2012 2013 2014
Purchases by Posito $8,000 $12,000 $15,000
Ending inventory on Posito’s books 1,200 4,000 3,000

Assume the equity method is used. The following data is available pertaining to Gargiulo’s income and dividends.

  2012 2013 2014
Gargiulo’s net income $70,000 $85,000 $94,000
Dividends paid by Gargiulo 10,000 10,000 15,000
HINT:  Consider the impact of intra-entity inventory transfers and inventory balances to net income.
a. Compute the equity in earnings of Gargiulo reported on Posito’s books for 2012.

Compute the equity in earnings of Gargiulo reported on Posito’s books for 2013.

Compute the equity in earnings of Gargiulo reported on Posito’s books for 2014.

Compute the non-controlling interest in Gargiulo’s net income for 2012.

Compute the non-controlling interest in Gargiulo’s net income for 2013.

Compute the non-controlling interest in Gargiulo’s net income for 2014.

For consolidation purposes, what amount would be debited to January 1 retained earnings for the 2012 consolidation worksheet entry with regard to the unrealized gross profit of the 2012 intra-entity transfer of merchandise?

 
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