Question

Miller Company acquired an 80 percent interest in Taylor Company on January 1, 2019. Miller paid $800,000 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 $200,000 both before and after Miller’s acquisition.

On January 1, 2019, Taylor reported a book value of $674,000 (Common Stock = $337,000; Additional Paid-In Capital = $101,100; Retained Earnings = $235,900). Several of Taylor’s buildings that had a remaining life of 20 years were undervalued by a total of $89,800.

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

Year	Net Income			Dividends
2019	$	79,000		$	11,500
2020		103,500			17,400
2021		115,900			23,300

Determine the appropriate answers for each of the following questions:

1. On the parent company’s separate financial records, what would be the December 31, 2021, balance for the Investment in Taylor Company account under each of the following accounting methods?

• The equity method.
• The partial equity method.
• The initial value method.

2. As of December 31, 2020, Miller’s Buildings account on its separate records has a balance of $932,000 and Taylor has a similar account with a $349,500 balance. What is the consolidated balance for the Buildings account?

3. What is the balance of consolidated goodwill as of December 31, 2021?

4. Assume that the parent company has been applying the equity method to this investment. On December 31, 2021, the separate financial statements for the two companies present the following information:

	Miller Company				Taylor Company
Common stock	$	582,500			$	337,000
Additional paid-in capital		326,200				101,100
Retained earnings, 12/31/21		722,300				482,100

What will be the consolidated balance of each of these accounts?

* Please explain how you got to your answers with stated formulas.

Answer 1

A (1).. depreciation as per IAS 16 Machine. Cost 10.8 million /24 years= 450000 per annum depreciation expense Year 2 deprication=450000 Year 3, revaluation made ad ias 16 allow to revalued the machine upto fair value So revaluation = fair value 12100000 Carrying amount. 9900000 So revalued by 22 lac Depreciation of 3 year 12100000/22 yr So deprication is 550000 Depreciation of 4 year.. 550000 (2) deprication in aspe method ..in this revaluation not allow.so no revaluation is not allow Depreciation is for every year 10800000/24 yr. So deprication is 450000 B carrying amount of machine 2 January year 3 31 December year 3 31 December year 4 Aspe 97.20lac (108 lac-9 lac) 94.5 lac (108 lac - 13.5lac) 90lac (108 lac- 18 lac) IAS 16 121 lac 115.50 lac 110 lac

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