Reyhan Ario Bramantio

041911333106
AKL 1 // A-SP

Exercise 8-2

1. Cost to obtain control over Edma HF $99,000

Implied fair value of Edma HF ($99,000 / 45%) $220,000

The fair value of 15% interest ($220,000 x 15%) $33,000

Cost to obtain 30% of Edma HF’s interest $31,000
($10,000 + $21,000)
Gain from revaluation of investment in Edma HF $ 2,000

2. Income from Edma HF in 2014 $ 9,000

($60,000 x 60% x 3 /12)

3. Cost to purchase 5% interest $10,000

Cost to purchase 10% interest $21,000
Cost to purchase 45% interest $99,000
Gain on revaluation of investment $ 2,000
Income from Edma HF in 2014 $ 9,000
Investment in Edma HF at the end of 2014 $141,000

Exercise 8-7
1. Percentage ownership of Yasmeen BSC in Talal BSC 81,82%
(90,000 / 110,000)

2. Talal BSC equity after issuance of additional shares $900,000

($800,000 + (10,000 x $10)

Yasmeen BSC’s equity in Talal BSC after issuance $736,364

($900,000 x 81.82%)
Yasemeen BSC’s equity in Talal BSC before issuance $800,000
Decrease in Yasemeen BSC’s equity in Talal BSC ($ 63,636)

January 2
Additional paid-in capital (-SE) 63,636
Investment in Talal BSC (-A) 63,636
To adjust investment in Talal BSC after issuance of additional shares

3. January 1, 2014 balance $800,000

Less: adjustment due to issuance of new shares ($63,636)
Investment in Talal BSC after the issuance $736,364
Problem 8-3
Solution P8-3

Preliminary computations:
Price to acquire 90% percent interest of Piero SAA $3,600,000
Implied fair value of Piero SAA ($3,600,000 / 90%) $4,000,000
Piero SAA’s stockholders’ equity at January 1 $3,800,000
Goodwill $ 200,000c

Income from Piero SAA’s for the first quarter $ 225,000

(90% x ($4,500,000 - $2,800,000 - $700,000) x 3 / 12)
Income from Piero SAA’s for the last three quarters $ 525,000
(70% x ($4,500,000 - $2,800,000 - $700,000) x 9 / 12)
Income from Piero SAA for 2014 ($225,000 + $525,000) $ 750,000a

Noncontrolling interest share for the first quarter: $ 25,000

(10% x ($4,500,000 - $2,800,000 - $700,000) x 3 / 12)
Noncontrolling interest share for the last three quarters: $ 225,000
(30% x ($4,500,000 - $2,800,000 - $700,000) x 9 / 12)
Noncontrolling interest share for 2014 $ 250,000b

Investment in Piero SAA before adjustment $2,835,000

Add: Income from Piero SAA for the las three quarters $ 525,000
Adjusted investment in Piero SAA $3,360,000

Noncontrolling interest January 1:

10% of Implied fair value of Piero SAA at January 1 $ 400,000c

Noncontrolling interest March 31

20% of implied fair value of Piero SAA at March 31 $ 850,000c
(20% x ($4,000,000 + $250,000))

PIERO SAA AND SUBSIDIARY CONSOLIDATION WORKPAPER FOR THE YEAR

ENDED DECEMBER 31, 2014 (IN THOUSANDS)
Isac SAA Piero Adjustments and Consolidated
SAA Eliminations Statements
Debits Credits
Income Statement
Sales $ 7,400 $ 4,500 $ 11,900
Income from Piero SAA $ 750 a. 750
Cost of sales -$ 5,800 -$ 2,800 -$ 8,600
Other expenses -$ 400 -$ 700 -$ 1,100
Noncontrolling interest b. 250 -$ 250
share
Controlling share of net $ 1,950 $ 1,000 $ 1,950
income
Retained Earnings
Statement
Retained earnings - Isac $ 2,500 $ 2,500
SAA
Retained earnings - Piero $ 1,800 c. 1800
SAA
Controlling share of net
$ 1,950 $ 1,000 $ 1,950
income
Dividends -$ 200 -$ 200 a. 140 -$ 200
b. 60

Retained earnings - $ 4,250 $ 2,600 $ 4,250

December 31

Balance Sheet
Cash $ 900 $ 400 $ 1,300
Accounts receivable $ 200 $ 700 $ 900
Inventory $ 1,640 $ 700 $ 2,340
Land $ 2,100 $ 2,800 $ 4,900
Equipment $ 3,000 $ 1,400 $ 4,400
Investment in Piero SAA $ 3,360.0 a. 610
c. 2,750
Goodwill c. 200 $ 200
Total Assets $ 11,200 $ 6,000 $ 14,040

Accounts payable $ 1,900 $ 1,400 $ 3,300

Common stock $ 5,000 $ 2,000 c. 2000 $ 5,000
Additional-paid in capital $ 50 $ 50
Retained earnings $ 4,250 $ 2,600 $ 4,250
$ 11,200 $ 6,000
Noncontrolling interest c. 400
January 1
Noncontrolling interest c. 850
March 31
Noncontrolling interest b. 190 $ 1,440.0
December 31
Total liabilities and equities $ 14,040