Chapter 04 - Consolidation of Wholly Owned Subsidiaries

Chapter 04 Consolidation of Wholly Owned Subsidiaries

Multiple Choice Questions

On July 1, 2009, Lin Corporation paid !"40,000 for all of #insel Co$pany%s outstandin& 'o$$on sto' ( On that date, the 'osts and fair )alues of #insel%s re'orded assets and liabilities were as follows*

1( +ased on the pre'edin& infor$ation, the differential refle'ted in a 'onsolidation wor paper to prepare a 'onsolidated balan'e sheet i$$ediately after the business 'o$bination is* ,( !0( +( !2-,000( C( !.0,000( /( !4-,000(

2( +ased on the pre'edin& infor$ation, what a$ount should be allo'ated to &oodwill in the 'onsolidated balan'e sheet, prepared after this business 'o$bination0 ,( !0 +( !2-,000 C( !.0,000 /( !4-,000

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Chapter 04 - Consolidation of Wholly Owned Subsidiaries

On /e'e$ber "1, 2009, ,dd-On Co$pany a'1uired 100 per'ent of 2enus Corporation%s 'o$$on sto' for !"00,000( +alan'e sheet infor$ation 2enus 3ust prior to the a'1uisition is &i)en here*

,t the date of the business 'o$bination, 2enus%s net assets and liabilities appro4i$ated fair )alue e4'ept for in)entory, whi'h had a fair )alue of !50,000, land whi'h had a fair )alue of !12-,000, and buildin&s and e1uip$ent 6net7, whi'h had a fair )alue of !2-0,000(

"( +ased on the infor$ation pro)ided, what a$ount of in)entory will be in'luded in the 'onsolidated balan'e sheet i$$ediately followin& the a'1uisition0 ,( !50,000 +( !.-,000 C( !1-,000 /( !4-,000

4-2

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

4( +ased on the infor$ation pro)ided, what a$ount of &oodwill will be in'luded in the 'onsolidated balan'e sheet i$$ediately followin& the a'1uisition0 ,( !"0,000 +( !1-,000 C( !8-,000 /( !4-,000

-( +ased on the infor$ation pro)ided, what a$ount of differential will be refle'ted in a 'onsolidation wor paper to prepare a 'onsolidated balan'e sheet i$$ediately after the business 'o$bination0 ,( !0 +( !4-,000 C( !1-,000 /( !8-,000

5( +ased on the infor$ation pro)ided, what a$ount will be in'luded as in)est$ent in 2enus Corporation in the 'onsolidated balan'e sheet i$$ediately followin& the a'1uisition0 ,( !0 +( !"9-,000 C( !2--,000 /( !"00,000

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Chapter 04 - Consolidation of Wholly Owned Subsidiaries

9nya Corporation a'1uired 100 per'ent of Celti' Corporation%s 'o$$on sto' on January 1, 2009( Su$$ari:ed balan'e sheet infor$ation for the two 'o$panies i$$ediately after the 'o$bination is pro)ided*

.( +ased on the pre'edin& infor$ation, the a$ount of differential asso'iated with the a'1uisition is* ,( !0( +( !-8,000( C( !22,000( /( !"5,000(

8( +ased on the infor$ation pro)ided, the 'onsolidated balan'e sheet of 9nya and Celti' will refle't &oodwill in the a$ount of* ,( !0( +( !-8,000( C( !22,000( /( !"5,000(

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Chapter 04 - Consolidation of Wholly Owned Subsidiaries

9( On January 1, 2008, +la e Co$pany a'1uired all of ;rost Corporation%s )otin& shares for !280,000 'ash( On /e'e$ber "1, 2009, ;rost owed +la e !-,000 for ser)i'es pro)ided durin& the year( When 'onsolidated finan'ial state$ents are prepared for 2009, whi'h entry is needed to eli$inate inter'o$pany re'ei)ables and payables in the 'onsolidation wor paper0

,( Option , +( Option + C( Option C /( Option /

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Chapter 04 - Consolidation of Wholly Owned Subsidiaries

<a'e Corporation a'1uired 100 per'ent of Spin Co$pany%s 'o$$on sto' on January 1, 2009( +alan'e sheet data for the two 'o$panies i$$ediately followin& the a'1uisition follow*

,t the date of the business 'o$bination, the boo )alues of Spin%s net assets and liabilities appro4i$ated fair )alue e4'ept for in)entory, whi'h had a fair )alue of !50,000, and land, whi'h had a fair )alue of !-0,000( #he fair )alue of land for <a'e Corporation was esti$ated at !80,000 i$$ediately prior to the a'1uisition(

10( +ased on the pre'edin& infor$ation, at what a$ount should total land be reported in the 'onsolidated balan'e sheet prepared i$$ediately after the business 'o$bination0 ,( !1"0,000 +( !10-,000 C( !11-,000 /( !120,000

4-5

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

11( +ased on the pre'edin& infor$ation, what a$ount of total assets will appear in the 'onsolidated balan'e sheet prepared i$$ediately after the business 'o$bination0 ,( !.-5,000 +( !."-,000 C( !.-0,000 /( !542,000

12( +ased on the pre'edin& infor$ation, what is the differential asso'iated with the a'1uisition0 ,( !1-,000 +( !21,000 C( !5,000 /( !10,000

1"( +ased on the pre'edin& infor$ation, what a$ount of &oodwill will be reported in the 'onsolidated balan'e sheet prepared i$$ediately after the business 'o$bination0 ,( !0 +( !21,000 C( !5,000 /( !1-,000

14( +ased on the pre'edin& infor$ation, what a$ount of liabilities will be reported in the 'onsolidated balan'e sheet prepared i$$ediately after the business 'o$bination0 ,( !51-,000 +( !405,000 C( !"00,000 /( !25-,000

1-( +ased on the pre'edin& infor$ation, what a$ount of retained earnin&s will be reported in the 'onsolidated balan'e sheet prepared i$$ediately after the business 'o$bination0 ,( !"00,000 +( !409,000 C( !2-9,000 /( !191,000

4-.

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

15( +ased on the pre'edin& infor$ation, what a$ount of total sto' holder%s e1uity will be reported in the 'onsolidated balan'e sheet prepared i$$ediately after the business 'o$bination0 ,( !"00,000 +( !4.9,000 C( !"1-,000 /( !"-0,000

On /e'e$ber "1, 2008, =er'ury Corporation a'1uired 100 per'ent ownership of Saturn Corporation( On that date, Saturn reported assets and liabilities with boo )alues of !"00,000 and !100,000, respe'ti)ely, 'o$$on sto' outstandin& of !-0,000, and retained earnin&s of !1-0,000( #he boo )alues and fair )alues of Saturn%s assets and liabilities were identi'al e4'ept for land whi'h had in'reased in )alue by !10,000 and in)entories whi'h had de'reased by !-,000(

1.( +ased on the pre'edin& infor$ation, what a$ount of differential will appear in the eli$inatin& entries re1uired to prepare a 'onsolidated balan'e sheet i$$ediately after the business 'o$bination, if the a'1uisition pri'e was !240,0000 ,( !0 +( !40,000 C( !2-,000 /( !-,000

18( +ased on the pre'edin& infor$ation, what a$ount of &oodwill will be reported if the a'1uisition pri'e was !240,0000 ,( !0 +( !40,000 C( !1-,000 /( !"-,000

4-8

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

19( +ased on the pre'edin& infor$ation, whi'h of the followin& will pertain to the differential that will appear in the eli$inatin& entries re1uired to prepare a 'onsolidated balan'e sheet i$$ediately after the business 'o$bination, if the a'1uisition pri'e was !19-,0000 ,( /ebit balan'e of !1-,000 +( Credit balan'e of !1-,000 C( Credit balan'e of !-,000 /( /ebit balan'e of !-,000

20( +ased on the pre'edin& infor$ation, what a$ount of &oodwill will be reported if the a'1uisition pri'e was !19-,0000 ,( !0 +( !40,000 C( !1-,000 /( !"-,000

West, >n'( holds 100 per'ent of the 'o$$on sto' of Coast Co$pany, an in)est$ent a'1uired for !580,000( >$$ediately followin& the 'o$bination, West%s net assets ha)e a boo )alue of !1,1-0,000 and a fair )alue of !1,"90,000( #he boo )alue and the fair )alue of Coast%s net assets on the date of 'o$bination are !400,000 and !--0,000, respe'ti)ely( >$$ediately followin& the 'o$bination, a 'onsolidated balan'e sheet is prepared(

21( +ased on the infor$ation &i)en abo)e, what will be the a$ount of net assets reported in the 'onsolidated balan'e sheet, prepared i$$ediately followin& the 'o$bination0 ,( !1,1-0,000 +( !1,--0,000 C( !1,.00,000 /( !1,8"0,000

22( +ased on the infor$ation &i)en abo)e, &oodwill will be reported in the 'onsolidated balan'e sheet in the a$ount of* ,( !240,000( +( !1"0,000( C( !1-0,000( /( !2.0,000(

4-9

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

2"( +ased on the infor$ation &i)en abo)e, what will be the a$ount of total 'onsolidated sto' holders% e1uity be reported in the 'onsolidated balan'e sheet prepared i$$ediately followin& the 'o$bination0 ,( !1,"90,000 +( !1,--0,000 C( !1,.00,000 /( !1,1-0,000

24( +ased on the infor$ation &i)en abo)e, at what a$ount will West%s in)est$ent in Coast sto' be reported in the 'onsolidated balan'e sheet0 ,( !0 +( !400,000 C( !440,000 /( !480,000

4-10

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

On January 1, 2009, Wilton Co$pany a'1uired all of Sirius Co$pany%s 'o$$on shares, for !"5-,000 'ash( On that date, Sirius%s balan'e sheet appeared as follows*

#he fair )alues of all of Sirius%s assets and liabilities were e1ual to their boo )alues e4'ept for in)entory that had a fair )alue of !8-,000, land that had a fair )alue of !50,000, and buildin&s and e1uip$ent that had a fair )alue of !2-0,000( +uildin&s and e1uip$ent ha)e a re$ainin& useful life of 10 years with :ero sal)a&e )alue( Wilton Co$pany de'ided to e$ploy push-down a''ountin& for the a'1uisition( Subse1uent to the 'o$bination, Sirius 'ontinued to operate as a separate 'o$pany(

2-( +ased on the pre'edin& infor$ation, what a$ount will be present in the re)aluation 'apital a''ount, when eli$inatin& entries are prepared0 ,( !0 +( !5-,000 C( !50,000 /( !1-,000

4-11

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

25( +ased on the pre'edin& infor$ation, what a$ount of differential will arise in the 'onsolidation pro'ess0 ,( !0 +( !-,000 C( !1-,000 /( !5-,000

2.( +ased on the pre'edin& infor$ation, the write-up of buildin&s and e1uip$ent will* ,( in'rease Sirius%s reported net in'o$e for 2009 by !-,000( +( de'rease Sirius%s reported net in'o$e for 2009 by !-,000( C( in'rease Sirius%s reported net in'o$e for 2009 by !-0,000( /( ha)e no affe't on Sirius%s reported net in'o$e for 2009(

4-12

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

Lea Co$pany a'1uired all of #en:in& Corporation%s sto' on January 1, 2005 for !1-0,000 'ash( On /e'e$ber "1, 2008, the trial balan'es of the two 'o$panies were as follows*

#en:in& Corporation reported retained earnin&s of !.-,000 at the date of a'1uisition( #he differen'e between the a'1uisition pri'e and underlyin& boo )alue is assi&ned to buildin&s and e1uip$ent with a re$ainin& e'ono$i' life of fi)e years fro$ the date of a'1uisition( ,t /e'e$ber "1, 2008, #en:in& owed Lea !4,000 for ser)i'es pro)ided(

4-1"

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

28( +ased on the pre'edin& infor$ation, all of the followin& are eli$inatin& entries re1uired on /e'e$ber "1, 2008, to prepare 'onsolidated finan'ial state$ents, e4'ept*

,( Option , +( Option + C( Option C /( Option /

29( +ased on the pre'edin& infor$ation, what a$ount will be reported as total assets in the 'onsolidated balan'e sheet for 20080 ,( !555,000 +( !.4.,000 C( !5-1,000 /( !945,000

"0( +ased on the pre'edin& infor$ation, what a$ount will be reported for total a''ounts payable in the 'onsolidated balan'e sheet for the year 20080 ,( !-5,000 +( !45,000 C( !50,000 /( !42,000

4-14

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

"1( +ased on the pre'edin& infor$ation, what a$ount of total liabilities will be reported in the 'onsolidated balan'e sheet for 20080 ,( !22-,000 +( !221,000 C( !21.,000 /( !1".,000

"2( +ased on the pre'edin& infor$ation, what a$ount of total retained earnin&s will be reported in the 'onsolidated balan'e sheet for the year 20080 ,( !""0,000 +( !4-0,000 C( !4"0,000 /( !".0,000

""( #anner Co$pany, a subsidiary a'1uired for 'ash, owned e1uip$ent with a fair )alue hi&her than the boo )alue as of the date of 'o$bination( , 'onsolidated balan'e sheet prepared i$$ediately after the a'1uisition would in'lude this differen'e in* ,( &oodwill( +( retained earnin&s( C( deferred 'har&es( /( e1uip$ent(

"4( Whi'h ter$ refers to the pra'ti'e of re)aluin& an a'1uired subsidiary%s assets and liabilities to their fair )alues dire'tly on that subsidiary%s boo s at the date of a'1uisition0 ,( ;air )alue a''ountin& +( <ush-down a''ountin& C( ;ully ad3usted $ethod /( ?e'ipro'al ownership

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Chapter 04 - Consolidation of Wholly Owned Subsidiaries

"-( Whi'h of the followin& obser)ations is @O# 'onsistent with the use of push-down a''ountin&0 ,( #he re)aluation 'apital a''ount is part of the subsidiary%s sto' holders% e1uity( +( @o differential arises in the 'onsolidation pro'ess( C( ?e)aluation Capital a''ount is eli$inated in preparin& 'onsolidated state$ents( /( 9li$inatin& entries related to the differential are needed in the wor papers(

"5( When 'o$panies e$ploy push-down a''ountin&* ,( the 'onsolidated finan'ial state$ents will appear e4a'tly as if push-down a''ountin& had not been used( +( a spe'ial a''ount 'alled ?e)aluation Capital will appear in the 'onsolidated balan'e sheet( C( all 'onsolidation eli$ination entries are $ade on the boo s of the subsidiary rather than in 'onsolidated wor papers( /( it $eans that the subsidiary is not substantially wholly owned by the parent(

".( Whi'h of the followin& help e4plain the differen'es between the total debit and 'redit balan'es appearin& on the balan'e sheet and those that appear in the wor paper0 ,( Contra asset a''ounts +( >n)est$ent balan'es C( <ush-down a''ountin& /( ?eportin& $ethods

"8( Co$pany A a'1uires 100 per'ent of the )otin& shares of Co$pany B for !2.-,000 on /e'e$ber "1, 2008( #he fair )alue of the net assets of Co$pany A at the date of a'1uisition was !"00,000( #his is an e4a$ple of a6n7* ,( positi)e differential( +( bar&ain pur'hase( C( e4traordinary loss( /( re)aluation ad3ust$ent(

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Chapter 04 - Consolidation of Wholly Owned Subsidiaries

"9( What portion of the balan'es of subsidiary sto' holders% e1uity a''ounts are eli$inated in preparin& the 'onsolidated balan'e sheet0 ,( Co$$on sto' +( ,dditional paid-in 'apital C( ?etained 9arnin&s /( ,ll of the balan'es are eli$inated

40( Whi'h of the followin& obser)ations is @O# true0 ,( #he differential a''ount is a 'learin& a''ount( +( , 'learin& a''ount 'an redu'e the 'han'e of error in preparin& 'onsolidated state$ents( C( 9li$inatin& entries re$o)e the balan'e in the in)est$ent a''ount fro$ the parent%s boo s( /( #he differential 'ontinues to be a part of the in)est$ent a''ount balan'e until fully a$orti:ed(

41( Consolidated finan'ial state$ents are bein& prepared for +ehe$oth Corporation and its two wholly-owned subsidiaries that ha)e inter'o$pany loans of !-0,000 and inter'o$pany profits of !100,000( Cow $u'h of these inter'o$pany loans and profits should be eli$inated0 ,( inter'o$pany loans - !0D inter'o$pany profits - !0 +( inter'o$pany loans - !-0,000D inter'o$pany profits - !0 C( inter'o$pany loans - !-0,000D inter'o$pany profits - !100,000 /( inter'o$pany loans - !0D inter'o$pany profits - !100,000

4-1.

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

On January 1, 2008, Chariot Co$pany a'1uired 100 per'ent of Stryder Co$pany for !220,000 'ash( #he trial balan'es for the two 'o$panies on /e'e$ber "1, 2008, in'luded the followin& a$ounts*

On the a'1uisition date, Stryder reported net assets with a boo )alue of !1.0,000( , total of !10,000 of the a'1uisition pri'e is applied to &oodwill, whi'h was not i$paired in 2008( Stryder%s depre'iable assets had an esti$ated e'ono$i' life of 10 years on the date of 'o$bination( #he differen'e between fair )alue and boo )alue of tan&ible assets is related entirely to buildin&s and e1uip$ent( Chariot used the e1uity $ethod in a''ountin& for its in)est$ent in Stryder( ,nalysis of re'ei)ables and payables re)ealed that Stryder owed Chariot !10,000 on /e'e$ber "1, 2008(

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Chapter 04 - Consolidation of Wholly Owned Subsidiaries

42( +ased on the infor$ation pro)ided, the differential asso'iated with this a'1uisition is* ,( !"5,000( +( !40,000( C( !10,000( /( !-0,000(

4"( +ased on the infor$ation pro)ided, the be&innin& differential assi&ned to buildin&s and e1uip$ent is* ,( !-0,000( +( !40,000( C( !10,000( /( !"5,000(

44( +ased on the infor$ation pro)ided, the a$ount of differential assi&ned to buildin&s and e1uip$ent that is a$orti:ed for the year is* ,( !-,000( +( !4,000( C( !10,000( /( !",500(

4-( +ased on the infor$ation pro)ided, what a$ount of retained earnin&s will be reported in the 'onsolidated finan'ial state$ents for the year0 ,( !""1,000 +( !110,000 C( !441,000 /( !4-5,000

45( +ased on the infor$ation pro)ided, what a$ount of net in'o$e will be reported in the 'onsolidated finan'ial state$ents for the year0 ,( !225,000 +( !--,000 C( !2"0,000 /( !1.1,000

4-19

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

4.( +ased on the infor$ation pro)ided, what a$ount of total assets will be reported in the 'onsolidated balan'e sheet for the year0 ,( !89-,000 +( !801,000 C( !.2",000 /( !1,111,000

Essay Questions

48( <a'o Co$pany a'1uired 100 per'ent of the sto' of Earland Corp( on /e'e$ber "1, 2008( #he sto' holder%s e1uity se'tion of Earland%s balan'e sheet at that date is as follows*

<a'o finan'ed the a'1uisition by usin& !880,000 'ash and &i)in& a note payable for !400,000( +oo )alue appro4i$ated fair )alue for all of Earland%s assets and liabilities e4'ept for buildin&s whi'h had a fair )alue !50,000 $ore than its boo )alue and a re$ainin& useful life of 10 years( ,ny re$ainin& differential was related to &oodwill( <a'o has an a''ount payable to Earland in the a$ount of !"0,000( ?e1uired* 17 <resent all eli$inatin& entries needed to prepare a 'onsolidated balan'e sheet i$$ediately followin& the a'1uisition( 27 What additional eli$inatin& entry $ust be prepared at /e'e$ber "1, 20090

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Chapter 04 - Consolidation of Wholly Owned Subsidiaries

49( /ear Corporation a'1uired 100 per'ent of the )otin& shares of #herry >n'( by issuin& 10,000 new shares of !- par )alue 'o$$on sto' with a !"0 $ar et )alue( ?e1uired* 17 Whi'h 'o$pany is the parent and whi'h is the subsidiary0 27 /efine a subsidiary 'orporation( "7 /efine a parent 'orporation( 47 Whi'h entity prepares 'onsolidated wor papers0 -7 Why are eli$ination entries used0

4-21

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

-0( On /e'e$ber "1, 2009, #hessaly Corporation a'1uired all of >onian Co$pany%s 'o$$on shares, for !-.0,000 'ash( On that date, >onian%s balan'e sheet appeared as follows*

#he fair )alues of all of >onian%s assets and liabilities were e1ual to their boo )alues e4'ept for the followin&*

?e1uired* 17 ?e'ord the a'1uisition of >onian%s sto' on #hessaly%s boo s on /e'e$ber "1, 2009( 27 ?e'ord any entries that would be $ade on /e'e$ber "1, 2009, on >onian%s boo s related to the business 'o$bination if push-down a''ountin& is e$ployed( "7 <resent all eli$inatin& entries that would appear in the wor paper to prepare a 'onsolidated balan'e sheet i$$ediately after the 'o$bination(

4-22

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

-1( On January 1, 2009, Fi&$a Corporation a'1uired 100 per'ent of Standard Co$pany%s 'o$$on shares at underlyin& boo )alue( Fi&$a uses the e1uity $ethod in a''ountin& for its ownership of Standard( On /e'e$ber "1, 2009, the trial balan'es of the two 'o$panies are as follows*

?e1uired* <repare the eli$inatin& entries needed as of /e'e$ber "1, 2009, to 'o$plete a 'onsolidation wor paper( <repare a three-part 'onsolidation wor paper as of /e'e$ber "1, 2009(

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Chapter 04 - Consolidation of Wholly Owned Subsidiaries

-2( Lea Co$pany a'1uired all of #en:in& Corporation%s sto' on January 1, 2005 for !1-0,000 'ash( On /e'e$ber "1, 200., the balan'e sheets of the two 'o$panies showed the followin& a$ounts*

#en:in& Corporation reported retained earnin&s of !.-,000 at the date of a'1uisition( #he differen'e between the a'1uisition pri'e and underlyin& boo )alue is assi&ned to buildin&s and e1uip$ent with a re$ainin& e'ono$i' life of fi)e years fro$ the date of a'1uisition( ?e1uired* 17 Ei)e the appropriate eli$inatin& entry or entries needed to prepare a 'onsolidated balan'e sheet as of /e'e$ber "1, 200.( 27 <repare a 'onsolidated balan'e sheet wor paper as of /e'e$ber "1, 200.(

4-24

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

Chapter 04 Consolidation of Wholly Owned Subsidiaries ,nswer Gey

Multiple Choice Questions

On July 1, 2009, Lin Corporation paid !"40,000 for all of #insel Co$pany%s outstandin& 'o$$on sto' ( On that date, the 'osts and fair )alues of #insel%s re'orded assets and liabilities were as follows*

1( +ased on the pre'edin& infor$ation, the differential refle'ted in a 'onsolidation wor paper to prepare a 'onsolidated balan'e sheet i$$ediately after the business 'o$bination is* ,( !0( +( !2-,000( C. !.0,000( /( !4-,000(

AACSB: Analytic AICPA: Measurement

4-2-

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

2( +ased on the pre'edin& infor$ation, what a$ount should be allo'ated to &oodwill in the 'onsolidated balan'e sheet, prepared after this business 'o$bination0 ,( !0 B. !2-,000 C( !.0,000 /( !4-,000

AACSB: Analytic AICPA: Measurement

On /e'e$ber "1, 2009, ,dd-On Co$pany a'1uired 100 per'ent of 2enus Corporation%s 'o$$on sto' for !"00,000( +alan'e sheet infor$ation 2enus 3ust prior to the a'1uisition is &i)en here*

,t the date of the business 'o$bination, 2enus%s net assets and liabilities appro4i$ated fair )alue e4'ept for in)entory, whi'h had a fair )alue of !50,000, land whi'h had a fair )alue of !12-,000, and buildin&s and e1uip$ent 6net7, whi'h had a fair )alue of !2-0,000(

4-25

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

"( +ased on the infor$ation pro)ided, what a$ount of in)entory will be in'luded in the 'onsolidated balan'e sheet i$$ediately followin& the a'1uisition0 A. !50,000 +( !.-,000 C( !1-,000 /( !4-,000

AACSB: Analytic AICPA: Measurement

4( +ased on the infor$ation pro)ided, what a$ount of &oodwill will be in'luded in the 'onsolidated balan'e sheet i$$ediately followin& the a'1uisition0 ,( !"0,000 +( !1-,000 C( !8-,000 . !4-,000

AACSB: Analytic AICPA: Measurement

-( +ased on the infor$ation pro)ided, what a$ount of differential will be refle'ted in a 'onsolidation wor paper to prepare a 'onsolidated balan'e sheet i$$ediately after the business 'o$bination0 ,( !0 +( !4-,000 C( !1-,000 . !8-,000

AACSB: Analytic AICPA: Measurement

4-2.

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

5( +ased on the infor$ation pro)ided, what a$ount will be in'luded as in)est$ent in 2enus Corporation in the 'onsolidated balan'e sheet i$$ediately followin& the a'1uisition0 A. !0 +( !"9-,000 C( !2--,000 /( !"00,000

AACSB: Analytic AICPA: Measurement

9nya Corporation a'1uired 100 per'ent of Celti' Corporation%s 'o$$on sto' on January 1, 2009( Su$$ari:ed balan'e sheet infor$ation for the two 'o$panies i$$ediately after the 'o$bination is pro)ided*

4-28

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

.( +ased on the pre'edin& infor$ation, the a$ount of differential asso'iated with the a'1uisition is* ,( !0( B. !-8,000( C( !22,000( /( !"5,000(

AACSB: Analytic AICPA: Measurement

8( +ased on the infor$ation pro)ided, the 'onsolidated balan'e sheet of 9nya and Celti' will refle't &oodwill in the a$ount of* ,( !0( +( !-8,000( C. !22,000( /( !"5,000(

AACSB: Analytic AICPA: Measurement

4-29

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

9( On January 1, 2008, +la e Co$pany a'1uired all of ;rost Corporation%s )otin& shares for !280,000 'ash( On /e'e$ber "1, 2009, ;rost owed +la e !-,000 for ser)i'es pro)ided durin& the year( When 'onsolidated finan'ial state$ents are prepared for 2009, whi'h entry is needed to eli$inate inter'o$pany re'ei)ables and payables in the 'onsolidation wor paper0

A. Option , +( Option + C( Option C /( Option /

AACSB: Analytic AICPA: Measurement

4-"0

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

<a'e Corporation a'1uired 100 per'ent of Spin Co$pany%s 'o$$on sto' on January 1, 2009( +alan'e sheet data for the two 'o$panies i$$ediately followin& the a'1uisition follow*

,t the date of the business 'o$bination, the boo )alues of Spin%s net assets and liabilities appro4i$ated fair )alue e4'ept for in)entory, whi'h had a fair )alue of !50,000, and land, whi'h had a fair )alue of !-0,000( #he fair )alue of land for <a'e Corporation was esti$ated at !80,000 i$$ediately prior to the a'1uisition(

10( +ased on the pre'edin& infor$ation, at what a$ount should total land be reported in the 'onsolidated balan'e sheet prepared i$$ediately after the business 'o$bination0 ,( !1"0,000 +( !10-,000 C. !11-,000 /( !120,000

AACSB: Analytic AICPA: Measurement

4-"1

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

11( +ased on the pre'edin& infor$ation, what a$ount of total assets will appear in the 'onsolidated balan'e sheet prepared i$$ediately after the business 'o$bination0 A. !.-5,000 +( !."-,000 C( !.-0,000 /( !542,000

AACSB: Analytic AICPA: Measurement

12( +ased on the pre'edin& infor$ation, what is the differential asso'iated with the a'1uisition0 ,( !1-,000 B. !21,000 C( !5,000 /( !10,000

AACSB: Analytic AICPA: Measurement

1"( +ased on the pre'edin& infor$ation, what a$ount of &oodwill will be reported in the 'onsolidated balan'e sheet prepared i$$ediately after the business 'o$bination0 ,( !0 +( !21,000 C. !5,000 /( !1-,000

AACSB: Analytic AICPA: Measurement

4-"2

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

14( +ased on the pre'edin& infor$ation, what a$ount of liabilities will be reported in the 'onsolidated balan'e sheet prepared i$$ediately after the business 'o$bination0 ,( !51-,000 B. !405,000 C( !"00,000 /( !25-,000

AACSB: Analytic AICPA: Measurement

1-( +ased on the pre'edin& infor$ation, what a$ount of retained earnin&s will be reported in the 'onsolidated balan'e sheet prepared i$$ediately after the business 'o$bination0 A. !"00,000 +( !409,000 C( !2-9,000 /( !191,000

AACSB: Analytic AICPA: Measurement

15( +ased on the pre'edin& infor$ation, what a$ount of total sto' holder%s e1uity will be reported in the 'onsolidated balan'e sheet prepared i$$ediately after the business 'o$bination0 ,( !"00,000 +( !4.9,000 C( !"1-,000 . !"-0,000

AACSB: Analytic AICPA: Measurement

On /e'e$ber "1, 2008, =er'ury Corporation a'1uired 100 per'ent ownership of Saturn Corporation( On that date, Saturn reported assets and liabilities with boo )alues of !"00,000 and !100,000, respe'ti)ely, 'o$$on sto' outstandin& of !-0,000, and retained earnin&s of !1-0,000( #he boo )alues and fair )alues of Saturn%s assets and liabilities were identi'al e4'ept for land whi'h had in'reased in )alue by !10,000 and in)entories whi'h had de'reased by !-,000(

4-""

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

1.( +ased on the pre'edin& infor$ation, what a$ount of differential will appear in the eli$inatin& entries re1uired to prepare a 'onsolidated balan'e sheet i$$ediately after the business 'o$bination, if the a'1uisition pri'e was !240,0000 ,( !0 B. !40,000 C( !2-,000 /( !-,000

AACSB: Analytic AICPA: Measurement

18( +ased on the pre'edin& infor$ation, what a$ount of &oodwill will be reported if the a'1uisition pri'e was !240,0000 ,( !0 +( !40,000 C( !1-,000 . !"-,000

AACSB: Analytic AICPA: Measurement

19( +ased on the pre'edin& infor$ation, whi'h of the followin& will pertain to the differential that will appear in the eli$inatin& entries re1uired to prepare a 'onsolidated balan'e sheet i$$ediately after the business 'o$bination, if the a'1uisition pri'e was !19-,0000 ,( /ebit balan'e of !1-,000 +( Credit balan'e of !1-,000 C( Credit balan'e of !-,000 . /ebit balan'e of !-,000

AACSB: Analytic AICPA: Measurement

4-"4

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

20( +ased on the pre'edin& infor$ation, what a$ount of &oodwill will be reported if the a'1uisition pri'e was !19-,0000 A. !0 +( !40,000 C( !1-,000 /( !"-,000

AACSB: Analytic AICPA: Measurement

West, >n'( holds 100 per'ent of the 'o$$on sto' of Coast Co$pany, an in)est$ent a'1uired for !580,000( >$$ediately followin& the 'o$bination, West%s net assets ha)e a boo )alue of !1,1-0,000 and a fair )alue of !1,"90,000( #he boo )alue and the fair )alue of Coast%s net assets on the date of 'o$bination are !400,000 and !--0,000, respe'ti)ely( >$$ediately followin& the 'o$bination, a 'onsolidated balan'e sheet is prepared(

21( +ased on the infor$ation &i)en abo)e, what will be the a$ount of net assets reported in the 'onsolidated balan'e sheet, prepared i$$ediately followin& the 'o$bination0 A. !1,1-0,000 +( !1,--0,000 C( !1,.00,000 /( !1,8"0,000

AACSB: Analytic AICPA: Measurement

22( +ased on the infor$ation &i)en abo)e, &oodwill will be reported in the 'onsolidated balan'e sheet in the a$ount of* ,( !240,000( B. !1"0,000( C( !1-0,000( /( !2.0,000(

AACSB: Analytic AICPA: Measurement

4-"-

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

2"( +ased on the infor$ation &i)en abo)e, what will be the a$ount of total 'onsolidated sto' holders% e1uity be reported in the 'onsolidated balan'e sheet prepared i$$ediately followin& the 'o$bination0 ,( !1,"90,000 +( !1,--0,000 C( !1,.00,000 . !1,1-0,000

AACSB: Analytic AICPA: Measurement

24( +ased on the infor$ation &i)en abo)e, at what a$ount will West%s in)est$ent in Coast sto' be reported in the 'onsolidated balan'e sheet0 A. !0 +( !400,000 C( !440,000 /( !480,000

AACSB: Analytic AICPA: Measurement

4-"5

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

On January 1, 2009, Wilton Co$pany a'1uired all of Sirius Co$pany%s 'o$$on shares, for !"5-,000 'ash( On that date, Sirius%s balan'e sheet appeared as follows*

#he fair )alues of all of Sirius%s assets and liabilities were e1ual to their boo )alues e4'ept for in)entory that had a fair )alue of !8-,000, land that had a fair )alue of !50,000, and buildin&s and e1uip$ent that had a fair )alue of !2-0,000( +uildin&s and e1uip$ent ha)e a re$ainin& useful life of 10 years with :ero sal)a&e )alue( Wilton Co$pany de'ided to e$ploy push-down a''ountin& for the a'1uisition( Subse1uent to the 'o$bination, Sirius 'ontinued to operate as a separate 'o$pany(

2-( +ased on the pre'edin& infor$ation, what a$ount will be present in the re)aluation 'apital a''ount, when eli$inatin& entries are prepared0 ,( !0 B. !5-,000 C( !50,000 /( !1-,000

AACSB: Analytic AICPA: Measurement

4-".

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

25( +ased on the pre'edin& infor$ation, what a$ount of differential will arise in the 'onsolidation pro'ess0 A. !0 +( !-,000 C( !1-,000 /( !5-,000

AACSB: Analytic AICPA: Measurement

2.( +ased on the pre'edin& infor$ation, the write-up of buildin&s and e1uip$ent will* ,( in'rease Sirius%s reported net in'o$e for 2009 by !-,000( B. de'rease Sirius%s reported net in'o$e for 2009 by !-,000( C( in'rease Sirius%s reported net in'o$e for 2009 by !-0,000( /( ha)e no affe't on Sirius%s reported net in'o$e for 2009(

AACSB: Analytic AICPA: Measurement

4-"8

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

Lea Co$pany a'1uired all of #en:in& Corporation%s sto' on January 1, 2005 for !1-0,000 'ash( On /e'e$ber "1, 2008, the trial balan'es of the two 'o$panies were as follows*

#en:in& Corporation reported retained earnin&s of !.-,000 at the date of a'1uisition( #he differen'e between the a'1uisition pri'e and underlyin& boo )alue is assi&ned to buildin&s and e1uip$ent with a re$ainin& e'ono$i' life of fi)e years fro$ the date of a'1uisition( ,t /e'e$ber "1, 2008, #en:in& owed Lea !4,000 for ser)i'es pro)ided(

4-"9

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

28( +ased on the pre'edin& infor$ation, all of the followin& are eli$inatin& entries re1uired on /e'e$ber "1, 2008, to prepare 'onsolidated finan'ial state$ents, e4'ept*

A. Option , +( Option + C( Option C /( Option /

AACSB: Analytic AICPA: Measurement

29( +ased on the pre'edin& infor$ation, what a$ount will be reported as total assets in the 'onsolidated balan'e sheet for 20080 ,( !555,000 +( !.4.,000 C. !5-1,000 /( !945,000

AACSB: Analytic AICPA: Measurement

4-40

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

"0( +ased on the pre'edin& infor$ation, what a$ount will be reported for total a''ounts payable in the 'onsolidated balan'e sheet for the year 20080 A. !-5,000 +( !45,000 C( !50,000 /( !42,000

AACSB: Analytic AICPA: Measurement

"1( +ased on the pre'edin& infor$ation, what a$ount of total liabilities will be reported in the 'onsolidated balan'e sheet for 20080 ,( !22-,000 B. !221,000 C( !21.,000 /( !1".,000

AACSB: Analytic AICPA: Measurement

"2( +ased on the pre'edin& infor$ation, what a$ount of total retained earnin&s will be reported in the 'onsolidated balan'e sheet for the year 20080 A. !""0,000 +( !4-0,000 C( !4"0,000 /( !".0,000

AACSB: Analytic AICPA: Measurement

4-41

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

""( #anner Co$pany, a subsidiary a'1uired for 'ash, owned e1uip$ent with a fair )alue hi&her than the boo )alue as of the date of 'o$bination( , 'onsolidated balan'e sheet prepared i$$ediately after the a'1uisition would in'lude this differen'e in* ,( &oodwill( +( retained earnin&s( C( deferred 'har&es( . e1uip$ent(

AACSB: Reflective Thinking AICPA: Reporting

"4( Whi'h ter$ refers to the pra'ti'e of re)aluin& an a'1uired subsidiary%s assets and liabilities to their fair )alues dire'tly on that subsidiary%s boo s at the date of a'1uisition0 ,( ;air )alue a''ountin& B. <ush-down a''ountin& C( ;ully ad3usted $ethod /( ?e'ipro'al ownership

AACSB: Reflective Thinking AICPA: Reporting

"-( Whi'h of the followin& obser)ations is @O# 'onsistent with the use of push-down a''ountin&0 ,( #he re)aluation 'apital a''ount is part of the subsidiary%s sto' holders% e1uity( +( @o differential arises in the 'onsolidation pro'ess( C( ?e)aluation Capital a''ount is eli$inated in preparin& 'onsolidated state$ents( . 9li$inatin& entries related to the differential are needed in the wor papers(

AACSB: Reflective Thinking AICPA: Reporting

4-42

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

"5( When 'o$panies e$ploy push-down a''ountin&* A. the 'onsolidated finan'ial state$ents will appear e4a'tly as if push-down a''ountin& had not been used( +( a spe'ial a''ount 'alled ?e)aluation Capital will appear in the 'onsolidated balan'e sheet( C( all 'onsolidation eli$ination entries are $ade on the boo s of the subsidiary rather than in 'onsolidated wor papers( /( it $eans that the subsidiary is not substantially wholly owned by the parent(

AACSB: Reflective Thinking AICPA: Decision Making

".( Whi'h of the followin& help e4plain the differen'es between the total debit and 'redit balan'es appearin& on the balan'e sheet and those that appear in the wor paper0 A. Contra asset a''ounts +( >n)est$ent balan'es C( <ush-down a''ountin& /( ?eportin& $ethods

AACSB: Reflective Thinking AICPA: Decision Making

"8( Co$pany A a'1uires 100 per'ent of the )otin& shares of Co$pany B for !2.-,000 on /e'e$ber "1, 2008( #he fair )alue of the net assets of Co$pany A at the date of a'1uisition was !"00,000( #his is an e4a$ple of a6n7* ,( positi)e differential( B. bar&ain pur'hase( C( e4traordinary loss( /( re)aluation ad3ust$ent(

AACSB: Reflective Thinking AICPA: Decision Making

4-4"

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

"9( What portion of the balan'es of subsidiary sto' holders% e1uity a''ounts are eli$inated in preparin& the 'onsolidated balan'e sheet0 ,( Co$$on sto' +( ,dditional paid-in 'apital C( ?etained 9arnin&s . ,ll of the balan'es are eli$inated

AACSB: Reflective Thinking AICPA: Decision Making

40( Whi'h of the followin& obser)ations is @O# true0 ,( #he differential a''ount is a 'learin& a''ount( +( , 'learin& a''ount 'an redu'e the 'han'e of error in preparin& 'onsolidated state$ents( C. 9li$inatin& entries re$o)e the balan'e in the in)est$ent a''ount fro$ the parent%s boo s( /( #he differential 'ontinues to be a part of the in)est$ent a''ount balan'e until fully a$orti:ed(

AACSB: Reflective Thinking AICPA: Decision Making

41( Consolidated finan'ial state$ents are bein& prepared for +ehe$oth Corporation and its two wholly-owned subsidiaries that ha)e inter'o$pany loans of !-0,000 and inter'o$pany profits of !100,000( Cow $u'h of these inter'o$pany loans and profits should be eli$inated0 ,( inter'o$pany loans - !0D inter'o$pany profits - !0 +( inter'o$pany loans - !-0,000D inter'o$pany profits - !0 C. inter'o$pany loans - !-0,000D inter'o$pany profits - !100,000 /( inter'o$pany loans - !0D inter'o$pany profits - !100,000

AACSB: Reflective Thinking AICPA: Decision Making

4-44

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

On January 1, 2008, Chariot Co$pany a'1uired 100 per'ent of Stryder Co$pany for !220,000 'ash( #he trial balan'es for the two 'o$panies on /e'e$ber "1, 2008, in'luded the followin& a$ounts*

On the a'1uisition date, Stryder reported net assets with a boo )alue of !1.0,000( , total of !10,000 of the a'1uisition pri'e is applied to &oodwill, whi'h was not i$paired in 2008( Stryder%s depre'iable assets had an esti$ated e'ono$i' life of 10 years on the date of 'o$bination( #he differen'e between fair )alue and boo )alue of tan&ible assets is related entirely to buildin&s and e1uip$ent( Chariot used the e1uity $ethod in a''ountin& for its in)est$ent in Stryder( ,nalysis of re'ei)ables and payables re)ealed that Stryder owed Chariot !10,000 on /e'e$ber "1, 2008(

4-4-

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

42( +ased on the infor$ation pro)ided, the differential asso'iated with this a'1uisition is* ,( !"5,000( +( !40,000( C( !10,000( . !-0,000(

AACSB: Analytic AICPA: Measurement

4"( +ased on the infor$ation pro)ided, the be&innin& differential assi&ned to buildin&s and e1uip$ent is* ,( !-0,000( B. !40,000( C( !10,000( /( !"5,000(

AACSB: Analytic AICPA: Measurement

44( +ased on the infor$ation pro)ided, the a$ount of differential assi&ned to buildin&s and e1uip$ent that is a$orti:ed for the year is* ,( !-,000( B. !4,000( C( !10,000( /( !",500(

AACSB: Analytic AICPA: Measurement

4-45

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

4-( +ased on the infor$ation pro)ided, what a$ount of retained earnin&s will be reported in the 'onsolidated finan'ial state$ents for the year0 A. !""1,000 +( !110,000 C( !441,000 /( !4-5,000

AACSB: Analytic AICPA: Measurement

45( +ased on the infor$ation pro)ided, what a$ount of net in'o$e will be reported in the 'onsolidated finan'ial state$ents for the year0 ,( !225,000 +( !--,000 C( !2"0,000 . !1.1,000

AACSB: Analytic AICPA: Measurement

4.( +ased on the infor$ation pro)ided, what a$ount of total assets will be reported in the 'onsolidated balan'e sheet for the year0 ,( !89-,000 +( !801,000 C. !.2",000 /( !1,111,000

AACSB: Analytic AICPA: Measurement

Essay Questions

4-4.

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

48( <a'o Co$pany a'1uired 100 per'ent of the sto' of Earland Corp( on /e'e$ber "1, 2008( #he sto' holder%s e1uity se'tion of Earland%s balan'e sheet at that date is as follows*

<a'o finan'ed the a'1uisition by usin& !880,000 'ash and &i)in& a note payable for !400,000( +oo )alue appro4i$ated fair )alue for all of Earland%s assets and liabilities e4'ept for buildin&s whi'h had a fair )alue !50,000 $ore than its boo )alue and a re$ainin& useful life of 10 years( ,ny re$ainin& differential was related to &oodwill( <a'o has an a''ount payable to Earland in the a$ount of !"0,000( ?e1uired* 17 <resent all eli$inatin& entries needed to prepare a 'onsolidated balan'e sheet i$$ediately followin& the a'1uisition( 27 What additional eli$inatin& entry $ust be prepared at /e'e$ber "1, 20090 17

27 ,s of /e'e$ber "1, 2009 there is a need for a /epre'iation eli$ination entry(

4-48

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

AACSB: Analytic AICPA: Measurement

49( /ear Corporation a'1uired 100 per'ent of the )otin& shares of #herry >n'( by issuin& 10,000 new shares of !- par )alue 'o$$on sto' with a !"0 $ar et )alue( ?e1uired* 17 Whi'h 'o$pany is the parent and whi'h is the subsidiary0 27 /efine a subsidiary 'orporation( "7 /efine a parent 'orporation( 47 Whi'h entity prepares 'onsolidated wor papers0 -7 Why are eli$ination entries used0 17 /ear is the parent and #herry is the subsidiary( 27 , subsidiary is an entity in whi'h another entity, the parent 'o$pany, holds a 'ontrollin& finan'ial interest( "7 , parent 'o$pany holds a 'ontrollin& finan'ial interest in another 'o$pany( 47 #he parent, /ear, prepares the 'onsolidated wor papers( -7 9li$ination entries are used to ad3ust the a$ounts reported by the parent and all of the subsidiaries to refle't the a$ounts that would be reported if the separate le&al entities were a sin&le 'o$pany(

AACSB: Reflective Thinking AICPA: Decision Making

4-49

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

-0( On /e'e$ber "1, 2009, #hessaly Corporation a'1uired all of >onian Co$pany%s 'o$$on shares, for !-.0,000 'ash( On that date, >onian%s balan'e sheet appeared as follows*

#he fair )alues of all of >onian%s assets and liabilities were e1ual to their boo )alues e4'ept for the followin&*

?e1uired* 17 ?e'ord the a'1uisition of >onian%s sto' on #hessaly%s boo s on /e'e$ber "1, 2009( 27 ?e'ord any entries that would be $ade on /e'e$ber "1, 2009, on >onian%s boo s related to the business 'o$bination if push-down a''ountin& is e$ployed( "7 <resent all eli$inatin& entries that would appear in the wor paper to prepare a 'onsolidated balan'e sheet i$$ediately after the 'o$bination(

4--0

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

17

27

"7

AACSB: Analytic AICPA: Measurement

4--1

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

-1( On January 1, 2009, Fi&$a Corporation a'1uired 100 per'ent of Standard Co$pany%s 'o$$on shares at underlyin& boo )alue( Fi&$a uses the e1uity $ethod in a''ountin& for its ownership of Standard( On /e'e$ber "1, 2009, the trial balan'es of the two 'o$panies are as follows*

?e1uired* <repare the eli$inatin& entries needed as of /e'e$ber "1, 2009, to 'o$plete a 'onsolidation wor paper( <repare a three-part 'onsolidation wor paper as of /e'e$ber "1, 2009(

4--2

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

1(

2(

4--"

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

AACSB: Analytic AICPA: Measurement

4--4

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

-2( Lea Co$pany a'1uired all of #en:in& Corporation%s sto' on January 1, 2005 for !1-0,000 'ash( On /e'e$ber "1, 200., the balan'e sheets of the two 'o$panies showed the followin& a$ounts*

#en:in& Corporation reported retained earnin&s of !.-,000 at the date of a'1uisition( #he differen'e between the a'1uisition pri'e and underlyin& boo )alue is assi&ned to buildin&s and e1uip$ent with a re$ainin& e'ono$i' life of fi)e years fro$ the date of a'1uisition( ?e1uired* 17 Ei)e the appropriate eli$inatin& entry or entries needed to prepare a 'onsolidated balan'e sheet as of /e'e$ber "1, 200.( 27 <repare a 'onsolidated balan'e sheet wor paper as of /e'e$ber "1, 200.(

4---

Chapter 04 - Consolidation of Wholly Owned Subsidiaries

17

27

AACSB: Analytic AICPA: Measurement

4--5