Intermediate accounting level 4 -cosolidating entry, push down accounting, equity, fair value, cost method

Intermediate accounting level 4 -cosolidating entry, push down accounting, equity, fair value, cost method

Pursuing an inorganic growth strategy, Wilson Company acquired Venus Company’s net assets and assigned them to four separate reporting divisions on January 1st.  Wilson assigned total goodwill of $134,000 to the four reporting divisions at that time.  The following data is from the end of the year:

 

	Alpha	Beta	Gamma	Delta
Carrying Value of the Unit	$200,000	$320,000	$370,000	$300,000
Goodwill in Carrying Value	20,000	34,000	50,000	30,000
Fair Value of Identifiable Assets	150,000	300,000	390,000	290,000
Fair Value of Reporting Unit	180,000	350,000	360,000	285,000

 

Compute the goodwill that should be reported for each unit.  Prepare a journal entry to record any adjustments to goodwill.

 

 

 

#2  (25 Points)

Grant, Inc. acquired 30 percent of South Co.’s voting stock for $300,000 on January 2, 20X4. The net book value of South Co. on that date was $900,000.  The difference between the purchase price and the book value related to depreciable assets with a 5 year remaining life.  During 20X4, South reported earnings of $300,000 and paid dividends of $60,000 on October 1, 20X4.

Provide the journal entries recorded by Wilson for their investment in South under each of these circumstances:

 

1. Wilson can exercise significant influence
2. Wilson cannot exercise significant influence
3. Wilson chooses the fair value option

 

 

 

 

#3  (25 points)

Big Company acquired the following assets and liabilities of Little Company for $470,000 cash:

 

	Book Value	Fair Value
Cash	$30,000	$30,000
Accounts Receivable	10,000	9,000
Inventory	50,000	70,000
Land	50,000	80,000
Buildings and Equipment (net)	260,000	290,000
Accounts Payable	40,000	40,000

 

Prepare the journal entry to record this acquisition of net assets on the books of Big Company.

 

 

 

 

#4  (50 points)

Silver Corporation acquired 100 percent of Bronze Company on January 1, 20X5, for $350,000. Following are selected account balances from Silver and Bronze Corporation as of December 31, 20X5:

Additional Information:

1. On January 1, 20X5 the fair market value of Bronze’s assets equaled their book value with the exception of Plant Assets (with an estimated economic life of 6 years) which had a fair market value in excess in Bronze’s depreciable assets of $33,000.
2. Silver used the equity-method in accounting for its investment in Bronze.
3. Detailed analysis of receivables and payables showed that Bronze owed Silver $10,000 on December 31, 20X5.
 

#5 (20 points)

On January 1, 20X9, Wilton Company acquired all of Sirius Company’s common shares, for $385,000 cash. On that date, Sirius’s balance sheet appeared as follows:

The fair values of all of Sirius’s assets and liabilities were equal to their book values except for inventory that had a fair value of $85,000, land that had a fair value of $60,000, and buildings and equipment that had a fair value of $250,000. Buildings and equipment have a remaining useful life of 10 years with zero salvage value. Wilton Company decided to employ push-down accounting for the acquisition. Subsequent to the combination, Sirius continued to operate as a separate company.

 

Prepare the journal entrie(s) on the books of Wilton to record the acquisition

Prepare the journal entrie(s) on the books of Sirius related to the implementation of push down accounting.

Prepare the consolidation entry immediately after the acquisition on January 1, 20X9.

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