P3-2

($)
1 Schedule to allocate fair value/book value differential
Cost of investment in Set 350
Implied fair value of Set (350 / 70%) 500
Book value of Set (220)
Excess fair value over book value 280

Excess allocated: Fair Value Book Value Allocation

Inventories 100 60 40
Land 120 100 20
Buildings — net 180 140 40
Equipment — net 60 80 (20)
Other liabilities 80 100 20
Allocated to identifiable net assets 100
Goodwill for the remainder 180
Excess fair value over book value 280

2 Par Corporation and Subsidiary

Consolidated Balance Sheet
at January 1, 2016
Assets
Current assets:
Cash (70 + 40) 110
Receivables — net (160 + 60) 220
Inventories (140 + 60 + 40) 240 570
Property, plant and equipment:
Land (200 + 100 + 20) 320
Buildings — net (220 + 140 + 40) 400
Equipment — net (160 + 80 - 20) 220 940
Goodwill (from consolidation) 180
Total assets 1,690

Liabilities and Stockholders’ Equity

Liabilities:
Accounts payable (180 + 160) 340
Other liabilities (20 + 100 - 20) 100 440
Stockholders’ equity:
Capital stoc 1,000
Retained earnings 100
Equity of controlling stockholders 1,100
Noncontrolling interest * 150 1,250
Total liabilities and stockholders’ equity 1,690

* 70% of implied fair value of 500 = 150

P3-3
Schedule to allocate excess of investment fair value over book value:

TOBIAS AG AND ITS 90%-OWNED SUBSIDIARY MARK AG (IN THOUSANDS) ()

Fair value (purchase price) of 90% interest acquired 8,100
Implied fair value of sad (8,100 / 90%) 9,000
Book value of Mark AG net assets 7,200
Excess of fair value over book value acquired 1,800

Excess allocated: Fair Value Book Value

Inventories 2,000 1,600
Land 4,000 3,000
Buildings — net 2,500 2,800
Equipment — net 4,000 3,900
Notes payable 2,000 1,800
Bonds payable 2,000 2,400
Patents 100 -
Total assigned to identifiable net assetsTotal assigned to identifiable net assets
Remainder assigned to goodwill
Total excess of cost over book value acquired
Allocation
400
1,000
(300)
100
(200)
400
100
1,500
300
1,800
 P3-6
1 Preliminary computations:
($)
Fair value (purchase price) of 80% interest acquired 2,080,000
Implied fair value of David PLC [2,080,000 / 80%] 2,600,000
David PLC stockholders’ equity on January 1 2,500,000
Excess allocated to goodwill 100,000

HARRISON PLC AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET WORKPAPERS
DECEMBER 31, 2014 (IN THOUSANDS $)
Adjustments and Eliminatio
Harrison PLC 80 % David PLC
Debit
Assets
Cash 300 80
Accounts Receivable 400 200
Dividen Receivable 160 -
Equipment-net 1,000 800
Building-net 2,000 1,000
Land 1,600 1,400
Investment in David PLC 2,320
Goodwill a 100
Total Assets 7,780 3,480

Liabilities and Equity

Accounts payable 500 80 c 100
Dividends payable 100 200 b 160
Notes payable 1,000 400
Capital stock 2,000 1,000 a 1,000
Retained earnings 4,180 1,800 a 1,800
7,780 3,480
Noncontrolling interest
Total liabilities andstockholders' equity

a. To eliminate reciprocal subsidiary investment and equity balances, establish noncontrolling interest, and enter
b.To eliminate reciprocal dividends receivable and dividends payable accounts.
c.To eliminate reciprocal accountss receivable and accountss payable accounts.
 PERS
$)
djustments and Eliminations Consolidated
Credit BalanceSheet

380
c 100 500
b 160 -
1,800
3,000
3,000
a 2,320 -
100
8,780

480
140
1,400
2,000
4,180

a 580 580
8,780

trolling interest, and enter goodwill

 P3-7
Preliminary computations
Cost of 80% investment January 3, 2016
Implied total fair value of Son (560 / 80%)
Book value of Son
Excess fair value over book value on January 3 = Goodwill

1 Noncontrolling interest share of income:

Son’s net income 200 x 20% noncontrolling interest

2 Current assets:
Combined current assets (816 + 300)
Less: Dividends receivable (40 x 80%)
Current assets

3 Income from Son: None Investment income is eliminated in consolidation.

4 Capital stock: 2,000 Capital stock of the parent, Pop CorPopation.

5 Investment in Son: None The investment account is eliminated.

6 Excess of fair value over book value 400

7 Controlling share of consolidated net income: Equals Pop’s net income, or:
Consolidated sales
Less: Consolidated cost of goods sold
Less: Consolidated expenses
Consolidated net income
Less: Noncontrolling interest share
Controlling share

8 Consolidated retained earnings December 31, 2016: 808 Equals Pop’s beginning retained earnings.

9 Consolidated retained earnings December 31, 2017

Equal to Pop’s ending retained earnings:
Beginning retained earnings
Add: Controlling share of consolidated net income
Less: Pop’s dividends for 2017
Ending retained earnings

10 Noncontrolling interest December 31, 2017

Son’s capital stock and retained earnings
Add: Net income
Less: Dividends
Son’s equity December 31, 2017 at fair value
Noncontrolling interest percentage
Noncontrolling interest December 31, 2017 using book value
Add: Noncontrolling interest share of Goodwill
Noncontrolling interest December 31, 2017 at fair value
()
1,120
1,400
(1,000)
400

40

1,116
(32)
1,084

3,600
(1,480)
(320)
1,800
(40)
1,760

808
560
(240)
1,128

1,200
200
(100)
1,300
0
260
80
340