Rifda Amalia

041911333165
AKL 1 A1-SP

Solution E3-8 (in thousands)

1 Capital stock

The capital stock appearing in the consolidated balance sheet at December 31, 2016 is
$3,600, the capital stock of Pop,the parent company.

2 Goodwill at December 31, 2016

Investment cost at January 2, 2016 (80% interest) $1,400

Implied total fair value of Son ($1,400 / 80%) $1,750
Book value of Son(100%) (1,200)
Excess is considered goodwill since no other fair value information is
given. $ 550

3 Consolidated retained earnings at December 31, 2016

Pop’s retained earnings January 2 (equal to

beginning consolidated retained earnings $1,600
Add: Net income of Pop (equal to controlling share of consolidated net
income) 600
Less: Dividends declared by Pop (360)
Consolidated retained earnings December 31 $1,840

4 Noncontrolling interest at December 31, 2016

Capital stock and retained earnings of Son on

January 2 $1,200
Add: Son’s net income 180
Less: Dividends declared by Son (100)
Son’s stockholders’ equity December 31 1,280
Noncontrolling interest percentage 20%
Noncontrolling interest at book value $ 256
Add: 20% Goodwill 110
Noncontrolling interest December 31 $ 366

5 Dividends payable at December 31, 2016

Dividends payable to stockholders of Pop $ 180

Dividends payable to noncontrolling stockholders ($50 20%) 10
Dividends payable to stockholders outside the
Consolidated entity $ 190
Solution E3-10

Pop Corporation and Subsidiary

Consolidated Income Statement
for the year ended December 31, 2018
(in thousands)
Sales $4,200
Cost of goods sold 2,200
Gross profit 2,000
Deduct: Operating expenses 1,110
Consolidated net income 890
Deduct: Noncontrolling interest share 29
Controlling interest share $ 861

Supporting computations

Investment cost January 1, 2016 (90% interest) $ 1,620

Implied total fair value of Son ($1,620 / 90%) $ 1,800
Son’s Book value acquired (100%) (1,400)
Excess of fair value over book value $ 400

Excess allocated to:

Inventories (sold in 2016) $ 60
Equipment (4 years remaining useful life) 40
Goodwill 300
Excess of fair value over book value $ 400

Operating expenses:
Combined operating expenses of Pop and Son $1,100
Add: Depreciation on excess allocated to equipment
($40/4 years) 10
Consolidated operating expenses $1,110

Solution P3-2 (in thousands)

1 Schedule to allocate fair value/book value differential

Cost of investment in Son $ 350

Implied fair value of Son ($350 / 70%) $ 500
Book value of Son (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 Pop 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 stock $1,000
Retained earnings 100
Equity of controlling stockholders 1,100
Noncontrolling interest * 150 1,250
Total liabilities and stockholders’ equity $1,690

* 30% of implied fair value of $500 = $150.