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 $ 200,000

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) $ 750,000

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 $ 250,000

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 $ 400,000

Noncontrolling interest March 31

20% of implied fair value of Piero SAA at March 31 $ 850,000

(20% x ($4,000,000 + $250,000))

PIERO SAA AND SUBSIDIARY CONSOLIDATION WORKPAPER FOR THE YEAR ENDED DECEMBER 31,
2014 (IN THOUSANDS)
Adjustments and
Eliminations
Isac Piero Consolidated
Debits Credits
SAA SAA Statements
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 share b. 250 -$ 250
Controlling share of net
income $ 1,950 $ 1,000 $ 1,950
Retained Earnings Statement
Retained earnings - Isac SAA $ 2,500 $ 2,500
Retained earnings - Piero SAA $ 1,800 c. 1800
Controlling share of net $ 1,950 $ 1,000 $ 1,950
income
Dividends -$ 200 -$ 200 a. 140 -$ 200
b. 60

Retained earnings – December 31 $ 4,250 $ 2,600 $ 4,250

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
January 1 c. 400
Noncontrolling interest March
31 c. 850
Noncontrolling interest
December 31 b. 190 $ 1,440.0
Total liabilities and
equities $ 14,040