SOLUTIONS TO PROBLEMS

Solution P3-3

1 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

Fair Book Excess

Value Value Allocated
Inventories $2,000 $1,600 $ 400
Land $4,000 $3,000 $ 1,000
Buildings-net $2,500 $2,800 -$ 300
Equipment-net $4,000 $3,900 $ 100
Notes payable $2,000 $1,800 -$ 200
Bonds payable $2,000 $2,400 $ 400
Patents $ 100 $ 0 $ 100
Total assigned to identifiable net assets $ 1,500
Remainder assigned to goodwill $ 300
Total excess of cost over book value
acquired $ 1,800
3-2 An Introduction to Consolidated Financial Statements

Solution P3-6

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
($1,000,000 + $1,800,000 + $200,000 - $500,000)
Excess allocated to goodwill $100,000

HARRISON PLC AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET WORKPAPERS
DECEMBER 31, 2014 (IN THOUSANDS)

Adjustments and Consolidated

Harrison 80 %David Eliminations Balance
  PLC PLC Debits Credits Sheet
Assets          
Cash $ 300 $ 80     $ 380
Accounts receivable $ 400 $ 200   c 100 $ 500
Dividends receivable $ 160     b 160  
Equipment-net $1,000 $ 800     $1,800
Building-net $2,000 $1,000     $3,000
Land $1,600 $1,400     $3,000
Investment in David
PLC $2,320     a 2320  
Goodwill     a 100   $ 100
Total assets $7,780 $3,480     $8,780
           

Liabilities and Equity          

Accounts payable $ 500 $ 80 c 100   $ 480
Dividends payable $ 100 $ 200 b 160   $ 140
Notes payable $1,000 $ 400     $1,400
Capital stock $2,000 $1,000 a 1000   $2,000
Retained earnings $4,180 $1,800 a 1800   $4,180
       
Noncontrolling interest       a 580 $ 580
Total liabilities and  $7,780 $3,480     $8,780
Chapter 3 3-3

stockholders' equity

a. To eliminate reciprocal subsidiary investment and equity balances, establish

noncontrolling interest, and enter goodwill
b.To eliminate reciprocal dividends receivable and dividends payable accounts.
c.To eliminate reciprocal accountss receivable and accountss payable accounts.