Question & Answer: B. Prepare a worksheet to arrive at consolidated figures for external reporting purposes. There…..

2. On Jamuary 1,2013, Plymouth Corporation acquired 80 percent of the outstanding voting stock of Sander Company in exchange for $1,200,000 cash At that time athough Sandrs book value was $925,000, Plymouth assessed Sanders total basiness fair vaboe at $1,500,000. Since that time, Sander has neither issued nor reacquired any shares of its own stock LO 5-2, 5-3, 5-4, 55 eXcel The book values of Sanders imdividual assets and liabilities approximated their acquisition-date fair values except for the patent account, which was undervalsed by $350,000 The unden-valsed patrets had a S-year remaining life at the acquisition date Amy remaining excess fair value was attributed to goodwall No goodwill impairments have occured Sander regularly sells imventory to Plymouth Below are details of the intra-entity investory sales for the past three years Intra Entity Ending Inventory at Transfer Prike ventory Transfers Gross Profit Rate on Intra-Entity Intra-Entity Sales Year 2013 2014 2015 $125,000 220,000 300,000 80,000 125,000 160,000 25% 28 25 Separate financial statements for these two companies as of December 31 2015, ollew Plymouth 11,740,000) (950,000 00,000 85,000 120,000 15,000 820,000 104,000 20,000 20,000 Cost of goods sold Depreciation expense Interest expense Equity in earnings of Sander (124,000)0000 2,800,000) 45,000 ー25,000 1(200000130. Net income Retained earnings 1/1/15 Net income Dividenh dedlared (700,000) 230,000) Retained eamings 12/31 246 Advanced Accounting

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A. Prepare a schedule that calculates Equity of earnings of sander account balance.

B. Prepare a worksheet to arrive at consolidated figures for external reporting purposes. There are no intro-equity payables or receivables.

. On Jamuary 1,2013, Plymouth Corporation acquired 80 percent of the outstanding voting stock of Sander Company in exchange for $1,200,000 cash At that time athough Sandr’s book value was $925,000, Plymouth assessed Sander’s total basiness fair vaboe at $1,500,000. Since that time, Sander has neither issued nor reacquired any shares of its own stock LO 5-2, 5-3, 5-4, 55 eXcel The book values of Sander’s imdividual assets and liabilities approximated their acquisition-date fair values except for the patent account, which was undervalsed by $350,000 The unden-valsed patrets had a S-year remaining life at the acquisition date Amy remaining excess fair value was attributed to goodwall No goodwill impairments have occured Sander regularly sells imventory to Plymouth Below are details of the intra-entity investory sales for the past three years Intra Entity Ending Inventory at Transfer Prike ventory Transfers Gross Profit Rate on Intra-Entity Intra-Entity Sales Year 2013 2014 2015 $125,000 220,000 300,000 80,000 125,000 160,000 25% 28 25 Separate financial statements for these two companies as of December 31 2015, ollew Plymouth 11,740,000) (950,000 00,000 85,000 120,000 15,000 820,000 104,000 20,000 20,000 Cost of goods sold Depreciation expense Interest expense Equity in earnings of Sander (124,000)0000 2,800,000) 45,000 ー25,000 1(200000130. Net income Retained earnings 1/1/15 Net income Dividenh dedlared (700,000) 230,000) Retained eamings 12/31 246 Advanced Accounting

Expert Answer

a. 2015 net income reported by Sander $230,000

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Question & Answer: B. Prepare a worksheet to arrive at consolidated figures for external reporting purposes. There…..

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Excess patent fair value amortization ($350,000 ÷ 5 years) (70,000)

Deferred gross profit for 12/31/15 intra-entity inventory (160,000 × 25%) (40,000)

Recognized gross profit for 1/1/15 intra-entity inventory (125,000 × 28%) 35,000

Sander’s net income adjusted $155,000

To controlling interest (80%) $124,000

To noncontrolling interest (20%) $31,000

			*Adjustments*
b.	*Plymouth*	*Sander*	*& Eliminations*		*NCI*	*Consolidated*
Revenues	(1,740,000)	(950,000)	(TI) 300,000			(2,390,000)
Cost of goods sold	820,000	500,000	(G) 40,000	(TI)300,000		1,025,000
				*(G) 35,000**
Depreciation expense	104,000	85,000				189,000
Amortization expense	220,000	120,000	(E) 70,000			410,000
Interest expense	20,000	15,000				35,000
Equity in earnings of Sander	(124,000)		(I) 124,000			0
Separate company net income	(700,000)	(230,000)
Consolidated net income						(731,000)
to noncontrolling interest					(31,000)	31,000
to Plymouth Corp.						(700,000)

Retained earnings 1/1	(2,800,000)	(345,000)	(S) 310,000			(2,800,000)
			*(G) 35,000**
Net income	(700,000)	(230,000)				(700,000)
Dividends declared	200,000	25,000		(D) 20,000	5,000	200,000
Retained earnings 12/31	(3,300,000)	(550,000)				(3,300,000)

Cash	535,000	115,000				650,000
Accounts receivable	575,000	215,000				790,000
Inventory	990,000	800,000		(G) 40,000		1,750,000
Investment in Sander	1,420,000		(D) 20,000	(S)968,000
				(A)348,000		0
				(I) 124,000
Buildings and equipment	1,025,000	863,000				1,888,000
Patents	950,000	107,000	(A) 210,000	(E) 70,000		1,197,000
Goodwill			(A) 225,000			225,000
Total Assets	5,495,000	2,100,000				6,500,000

Accounts payable	(450,000)	(200,000)				(650,000)
Notes payable	(545,000)	(450,000)				(995,000)
Noncontrolling interest 1/1				(S)242,000
				(A) 87,000	(329,000)
Noncontrolling interest 12/31					(355,000)	(355,000)
Common stock	(900,000)	(800,000)	(S) 800,000			(900,000)
APIC	(300,000)	(100,000)	(S) 100,000			(300,000)
Retained earnings 12/31	(3,300,000)	(550,000)				(3,300,000)
Total liab. and SE	(5,495,000)	(2,100,000)	2,234,000	2,234,000		(6,500,000)

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