b
Calculation of goodwill:
Acquisition cost
Fair value of noncontrolling interest
Total fair value
Book value
Plant and equipment revaluation
Identifiable intangibles
Fair value of identifiable net assets
Goodwill
$ 91,700,000
6,300,000
98,000,000
$ 13,000,000
(25,000,000)
40,000,000
28,000,000
$ 70,000,000
$ 70,000,000
66,500,000
$ 3,500,000
40,000,000
70,000,000
25,000,000
80,000,000
5,000,000
2.
c
(R)
Identifiable intangibles
Goodwill
Plant and equipment
Investment in Starfruit (1)
Noncontrolling interest in Starfruit (2)
24,000,000
68,000,000
20,000,000
68,200,000
3,800,000
3.
b
Starfruit net income
Revaluation write-offs:
Plant and equipment depreciation
Identifiable intangibles amortization
Goodwill impairment loss
4.
2,250,000
(7,200,000)
(475,000)
$ 1,325,000
250,000
(800,000)
(25,000)
$ 175,000
c
10% x ($13,000,000 + $40,000,000 $25,000,000) = $2,800,000
5.
c
Noncontrolling interest in net income = $750,000 + $250,000 $800,000 =
Noncontrolling interest in OCI = 10% x $100,000 =
Noncontrolling interest in comprehensive income
6.
$ 200,000
10,000
$ 210,000
d
(E)
Stockholders equity
Investment in Starfruit
Noncontrolling interest in Starfruit
13,000,000
11,700,000
1,300,000
(R)
Identifiable intangibles
Plant and equipment
Investment in Starfruit (1)
Noncontrolling interest in Starfruit (2)
40,000,000
25,000,000
14,300,000
700,000
(1) Investment in Starfruit balance on Pomegranates books is $26,000,000 (= $20,000,000 cost + $6,000,000
gain on acquisition). Elimination of the investment in (R) is the remainder of the investment balance, after
elimination (E).
(2) The credit to noncontrolling interest in (R) brings the noncontrolling interest to fair value, after
elimination (E).
7.
a
There is no goodwill when the acquisition is a bargain purchase.
8.
9.
10.
EXERCISES
E5.5
$ 10,300,000
6,500,000
16,800,000
$ 7,200,000
2,000,000
9,200,000
$ 7,600,000
$ 7,600,000
4,780,000
$ 2,820,000
Total
$ 3,000,000
(400,000)
$ 2,600,000
Equity in NI
$ 1,800,000
(240,000)
$ 1,560,000
Noncontrolling
interest in NI
$ 1,200,000
(160,000)
$ 1,040,000
1,560,000
600,000
960,000
7,200,000
4,320,000
2,880,000
2,000,000
7,600,000
5,980,000
3,620,000
(O)
Amortization expense
Identifiable intangibles
400,000
400,000
(N)
Noncontrolling interest in income of Saddlestone
Dividends Saddlestone
Noncontrolling interest in Saddlestone
E5.6
1,040,000
400,000
640,000
$ 2,910,000
790,000
3,700,000
$1,500,000
(100,000)
(125,000)
(400,000)
200,000
(75,000)
1,000,000
$ 2,700,000
(80%)
b.
January 2012 balance
Change in Suns retained earnings, 2012-2017:
($1,800,000 $800,000), divided 75:25
Write-off of Suns identifiable net asset revaluations,
2012-2017: ($100,000 + $125,000 + $240,000
$200,000 + $60,000), divided 75:25
Goodwill impairment, 2012-2017:
($2,700,000 $2,000,000), divided 80:20
Balance, end of 2017
Investment
$ 2,910,000
Noncontrolling
interest
$
790,000
750,000
250,000
243,750
81,250
(560,000)
$ 3,343,750
(140,000)
981,250
c. (E)
Stockholders equity-Sun
Investment in Sun
Noncontrolling interest in Sun
(R)
Goodwill
Equipment, net (1)
Deferred tax liabilities
Investment in Sun (2)
Noncontrolling interest in Sun (3)
2,500,000
1,875,000
625,000
2,000,000
160,000
15,000
1,468,750
356,250
PROBLEMS
P5.1
$ 1,200
_375
1,575
$ 500
(200)
45
30
25
_ 400
$ 1,175
$ 1,175
900
$ 275
b.
Consolidation Working Paper
Accounts Taken
From Books
Eliminations
(in millions)
Current assets
PP&E, net
Investment in Bagota
Patents and trademarks
Customer-related intangs
Goodwill
Current liabilities
Long-term liabilities
Common stock, par value
Additional paid-in capital
Retained earnings
Treasury stock
Accumulated OCL
Noncontrolling interest
Total liabilities and equity
Hershey
Dr (Cr)
$ 1,500
1,600
1,200
Bagota
Dr (Cr)
$ 325
600
--
1,300
--
75
(1,600)
(1,900)
(300)
(1,950)
(3,900)
4,000
50
(100)
(400)
(10)
(200)
(300)
-10
______
$
0
______
$
0
Dr
Cr
200 (R)
375 (E)
825 (R)
(R)
45
(R)
30
(R) 1,175
(R)
(E)
(E)
(E)
25
10
200
300
______
$ 1,785
10 (E)
125 (E)
250 (R)
$ 1,785
Consolidated
Balances
Dr (Cr)
$ 1,825
2,000
-1,420
30
1,175
(1,700)
(2,275)
(300)
(1,950)
(3,900)
4,000
50
(375)
0
c.
Consolidated Balance Sheet, July 1, 2016
Assets
Current assets
Property, plant and equipment, net
Goodwill
Identifiable intangibles
Total assets
Liabilities and stockholders equity
Current liabilities
Long-term liabilities
Total liabilities
Stockholders equity
Hersheys stockholders equity:
Common stock
Additional paid-in capital
Retained earnings
Treasury stock
Accumulated other comprehensive loss
Total Hershey stockholders equity
Noncontrolling interest
Total stockholders equity
Total liabilities and stockholders equity
$
$
1,825
2,000
1,175
1,450
6,450
1,700
2,275
3,975
300
1,950
3,900
(4,000)
(50)
2,100
375
2,475
$ 6,450
P5.3
8,800
300
8,300
800
500
3,000
2,625
875
(R)
In-process research and development
Goodwill (1)
Noncurrent liabilities
Cash and receivables
Inventories
Plant assets, net
Intangibles
Lawsuit liability
Investment in Summer (2)
Noncontrolling interest (3)
(1) Calculation of goodwill:
Acquisition cost
Fair value of noncontrolling interest
Total fair value
Book value of Summer
Revaluations:
Cash and receivables
Inventories
Plant assets, net
Intangibles
Noncurrent liabilities
IPR&D
Lawsuit liability
Goodwill
1,500
9,300
100
200
500
1,000
1,000
400
6,175
1,625
$ 8,800
2,500
11,300
$ 3,500
(200)
(500)
(1,000)
(1,000)
100
1,500
(400)
2,000
$ 9,300
(3) [25% x ($100 + $1,500 $200 $500 $1,000 $1,000 $400)] + $2,000 = $1,625
P5.6
Total
Emerald Safari Resort reported loss ($2,200 +
$300 + $200 $1,800 $1,000) = $(100)
Equity
in NL
Noncontrolling
interest in NL
$ (100)
$ (70)
$ (30)
( 10)
(7)
(3)
$ (110)
$ (77)
$ (33)
Revaluation write-offs:
Identifiable intangibles
b.
Consolidation Working Paper, December 31, 2015
Trial Balances
Taken From Books
Dr (Cr)
Harrahs
Entertainment
Current assets
1,400
Land, buildings,
riverboats and
equipment, net
17,844.7
Intangible assets
2,500
Investment in Emerald
Eliminations
Emerald
Safari Resort
$
Dr
Cr
200
20,263.7
800
(R)
60
--
(C)
80.5
10
(O)
3,350
436.8 (E)
42
Long-term liabilities
1,600
2,419
398.3
Current liabilities
Consolidated
Balances
Dr (Cr)
(R)
--
(1,500)
(300)
(1,800)
(14,000)
(2,600)
(16,600)
(5,520)
(324)
(E)
324
(5,520)
(900)
(300)
(E)
300
(900)
Capital stock
Retained earnings, Jan. 1
Noncontrolling interest
--
--
(N)
34.5
187.2 (E)
18
Dividends
100
(R)
(170.7)
3.5 (C)
1.5 (N)
100
Casino revenues
(6,600)
(2,200)
(8,800)
(1,400)
(300)
(1,700)
Rooms revenues
(1,000)
(200)
(1,200)
77
--
7,200
1,800
9,000
General and
administrative expenses
1,400
1,000
2,400
Impairment losses
--
--
Noncontrolling interest in
net loss
--
--
_____
33
$ 809
$ 809
77
(O)
(C)
--
10
10
(N)
(33)
$