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Consolidation of wholly-owned with differential

Big Co. bought 100% of Little's voting stock on 1/1/20 for $645
Little had a book value of $338
Little had the following misvalued or unreported assets and/or liabilities:
Little's inventory (FIFO basis) was undervalued by $6
Little's PPE (7 year remaining life) was undervalued by $24
Little had in-process R&D (4year remaining life) valued at $8
Little had bonds payable (3 year remaining life) undervalued by $11
Any remaining differential was attributed to goodwill

At the end of 2020 and 2021 impairment tests were prepared. It was determined that at the end of 2020 the correct goodwill
At the end of 2021 the correct goodwill value was determined to be $244

Trial balances for 1/1/20, 12/31/20, and 12/31/21 are given below.

Required:
Prepare a "differential analysis" to determine the correct amount of goodwill at purchase
Prepare elimination entries and complete the "consolidation at date of acquisition"
Prepare equty method and elimination entries and complete the consolidation worksheet for both 2020 and 2021.
Note that "interest expense" and R&D amortization are included within "other expenses" in the in

Cost of investment 645.00


Book value of Little at acquisition 338.00
Undervalued inventory (FIFO basis) 6.00
Undervalued PPE 24.00
Remaining life of PPE 7.00
In process R&D 8.00
Useful life of R&D 4.00
Bonds payable undervalued by 11.00
Remaining life of bonds 3.00
gw 280.00
12/31/20 correct goodwill 261.00
12/31/21 correct goodwill 244.00

1/1/20 Trial balances Big Little debit credit Consolidated


Cash & receivables 24.00 21.00
Inventory 49.00 47.00
Investment in Little 645.00
PPE, net 290.00 237.00
Intangible assets 64.00 62.00
Goodwill
In-process R&D
Other assets 37.00 161.00
Current liabilities 28.00 22.00
Bonds payable 221.00 168.00
Premium on bonds payable 0.00
Common Stock 30.00 53.00
Retained earnings 830.00 285.00

12/31/20 Trial balance Big Little debit credit Consolidated


Sales 484.00 522.00
Cost of goods sold 226.00 238.00
Depreciation expense 95.00
Amortizaton expense 11.00 14.00
Other expenses 162.24 215.00
Impairment loss
Investment income 28.24
Net Income 18.00 55.00

Beginning R/E 830.00 285.00


Add: Income 18.00 55.00
Less: Dividends declared 30.00 31.00
Ending R/E 818.00 309.00

Cash & Receivables 28.00 28.00


Inventory 49.00 41.00
Investment in Little 642.24
PPE, net 195.00 237.00
Intangible assets 53.00 48.00
Goodwill
In-process R&D
Other assets 125.76 200.00

Current liabilities 24.00 24.00


Bonds payable 221.00 168.00
Premium on bonds payable
Common Stock 30.00 53.00
Retained earnings 818.00 309.00

12/31/21 Trial balance Big Little debit credit Consolidated


Sales 442.00 467.00
Cost of goods sold 239.00 286.00
Depreciation expense 55.00 77.00
Amortizaton expense 10.00 10.00
Other expenses 135.24 63.00
Impairment loss
Investment income 12.24
Net Income 15.00 31.00

Beginning R/E 818.00 309.00


Add: Income 15.00 31.00
Less: Dividends declared 36.00 27.00
Ending R/E 797.00 313.00

Cash & Receivables 20.00 22.00


Inventory 49.00 49.00
Investment in Little 627.48
PPE, net 140.00 160.00
Intangible assets 43.00 38.00
Goodwill
In-process R&D
Other assets 198.52 286.00

Current liabilities 30.00 21.00


Bonds payable 221.00 168.00
Premium on bonds payable
Common Stock 30.00 53.00
Retained earnings 797.00 313.00
end of 2020 the correct goodwill should have been $261

cost

or both 2020 and 2021.


"other expenses" in the income statements