Question

Plaza, Inc., acquires 80 percent of the outstanding common stock of Stanford Corporation on January 1, 2018, in exchange for $1,007100 cash. At the acquisition date, Stanford's total fair value, including the noncontrolling interest, was assessed at $1,258,875 Also at the acquisition date, Stanford's book value was $533,800. Several individual items on Stanford's financial records had fair values that differed from their book values as follows: Book Value Fair Value Tradenames (indefinite life) Property and equipment (net, 8-year remaining life) Patent (14-year remaining life) 272,600 405,100 225,600 130,400 244,800 161,200 For internal reporting purposes, Plaza, Inc., employs the equity method to account for this investment. The following account balances are for the year end ing December 31, 2018, for both companies. Plaza Stanford (829,600) 458,600 194,400 (681,100) 300,000 28,200 21,300 Revenues Cost of goods sold Depreciation expense Amortization expense Equity in income of Stanford (261,600) 0 Net income $ (438,200) $(331,600) (401,300) (331,600) 24,000 Retained earnings, 1/1/18 (966,500) (438,200) 227,400 Net income Dividends declared (1,177,300) $(708,900) Retained earnings, 12/31/18 652,000 1,249,500 182,000 781,100 $327,300 Current assets Investment in Stanford 272,600 197,400 109,100 $ 906,400 Tradenames Property and equipment (net) 0 Patents $ 2,864,600 Total assets $ (65,000) (118,000) (14,500) (708,900) Accounts payable (107,700) (227,500) (1,352,100) Common stock Additional paid-in capital Retained earnings (above) (1,177,300) Total liabilities and equities (2,864,600) (906,400) At year-end, there were no intra-entity receivables or payables. Prepare a worksheet to consolidate the financial statements of Plaza, Inc. and its subsidiary Stanford. (For account consolidation entries are required, combine all debit entries into one amount and enter this amount in the deb worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of Amounts in the Debit and Credit columns should be entered as positive. Negative amounts for the Noncontrol Consolidated Totals columns should be entered with a minus sign.) Consolidation Entries Noncontrolling Consolidated Interest Accounts Plaza Stanford Debit Credit Totals $ (829,600) (681,100) $(1,510,700) Revenues Cost of goods sold 458,600 300,000 758,600 Depreciation expense 194,400 28,200 2,400 225,000 Amortization expense Equity in income of Stanford Net income 21,300 2,200 23,500 261,600 (261,600) 0 $ (438,200) (331,600) Consolidated net income (503,600) NCI share of CNI Plaza share of CN Retained earnings, 1/1 Net income Dividends declared 65,400 $ (438,200) (966,500) (401,300) (966,500) (438,200) 401,300 (438,200) (331,600) 24,000 227,400 19,200 227,400 4,800 S Retained earnings, 12/31 $(1,177,300) $(708,900) (1,177,300) Current assets Investment in Stanford Tradenames Property and equipment (net) $ 652,000 327,300 979,300 1,249,500 19,200 0 272,600 132,500 0 182,000 587,100 19,200 995,300 781,100 197,400 2,400 Patents 109,100 30,800 2,200 Goodwill $ 2,864,600 $ 906,400 2,561,700 Total assets Accounts payable Common stock Additional paid-in capital Noncontrolling interest Retained earnings, 12/31 (107,700) (65,000) (227,500) (118,000) (14,500) (1,352,100) (708,900) (1,177,300) EA

Answer 1

Excess Value of Assests and Liabilities acquired at the time of acquisition Difference of Fair value over book Book Value Fair Value Value Tradenames (indefinite life) Property and equipment (net, 8 year remaining life) 272,600 405,100 132,500 244,800 225,600 19,200 Patent (14- year remaining life) 130,400 161,200 30,800 Total 628,600 811,100 182,500 Noncontrolling Parent 80% Total Interest 20% Purchase price Less: Book Value 251,775 1,007,100 1,258,875 427,040 106,760 533,800 Excess Value paid Over Book Value 580,060 145,015 725,075 Excess value assigned over book value Tradenames (indefinite life) Property and equipment (net, 8 year remaining life) 106,000 26,500 132,500 15,360 3,840 19,200 Patent (14- year remaining life) 6,160 30,800 24,640 Goodwill (Balance) 434,060 108,515 542,575 Depreciation, amortization and Interest expenses on excess value acquired Original Value 1/1/18 Depreciation and Amortization during the year Remainig life as on Tradenames (indefinite life) 132,500 Property and equipment (net, 8 year remaining life) Patent (14- year remaining life) Goodwill 19,200 8 2,400 30,800 14 2,200 542,575 Total 725,075 4,600

PLAZA CORPORATION AND STANDFORD CORPORATION Consolidation Worksheet At December 31, 2018 Adjustment Entries Standford Credit Plaza Debit Consolidated NCI Revenues (829,600) (681,100) (1,510,700) Cost of goods sold Depreciation expense Amortization expense 458,600 300,000 758,600 28,200 E 21,300 E 194,400 2,400 225,000 2,200 23,500 Equity income in Sierra (261,600) 261,600 (331,600) (438,200) Net Income Consolidatied Net Income To Non-Controlling Interest (503,600) (65,400) (65,400) Consolidated Net Income (438,200) (401,300) S] Retained earnings, 1/1/18 Net Income(Above) (966,500) (438,200) (966,500) (438,200) 401,300 (331,600) 19,200 D Dividends declared 24,000 227,400 227,400 4,800 Retained earnings, 12/31/18 (1,177,300) (708,900) (1,177,300) 652,000 979,300 Current Assets 327,300 1,268,700 w.n] Investment in Standford 1,249,500 [D] 19,200 Tradenames Property and equipment (net) 272,600 [A] 197,400 [A] 109,100 A 132,500 182,000 587,100 2,400 E 2,200 E 995,300 781,100 19,200 30,800 137,700 Patents Goodwill [A] 542,575 542,575 Total Assets 2,864,600 906,400 3,241,975

Accounts Payable (65,000) (118,000) [S] (14,500) S] (107,700) (172,700) (227,500) (1,352,100) (312,375) (227,500) Common Stock 118,000 Additional paid in capital Non Controlling Interest Retained earnings 12/31 Total Liabilities and equity (1,352,100) 14,500 251,775 w.n] (251,775) (1,177,300) (708,900) (1,177,300) (2,864,600) (906,400) (3,241,975) 1,544,275 1,544,275 Working Notes Non Controlling Interest on Total Subsidiary's Income Net Income (331,600) 2,400 Depreciation Amortization Adjusted Net Income 2,200 (327,000) (65,400) Share of NCI Entries Explanation ] it is to eliminate the equity investment balance from equity income [D] is to eliminate the intercompany dividend between parent and Noncontrolling interest Total Dividend paid by subsidiary Parent Share (24,000 x 80%) NCI Share (24,000 x 20%) [S] it is to eliminate the equity investment from the share in the book value of Standford as on 1/1/18 Common Stock- Standford Additional Paid in Capital- Standford Retained Earnings 1/1 - Standford Total Stockholders' Equity 24,000 19,200 4,800 118,000 14,500 401,300 533,800 Parent Share (533,800 x 80%) 427,040 NCI Share (533,800 x 20%) 106,760

[A] it is to record the excess value of assets acquired on the date of acquisition as on 1/1/18 Total Assets Tradenames 132,500 Property and equipment (net) 19,200 Patents 30,800 Goodwill 542,575 Total 725,075 Parent Share (725,075 x 80%) NCI Share (725,075 x 20%) 580,060 145,015 [E] it is to record amortization of excess value assets and liabilities during the year 2018 Total Adjustment to Investment in Standford and Noncontrolling Interest Investment in Noncontrolling| Standford Interest Equity Income [I 261,600 Assets in excess value [A] 580,060 145,015 Stockholders' equity balance [S] Total 427,040 106,760 1,268,700 251,775