Kelompok 2

Alma Sukma W F1319003

Auliya Rachmawati F1319010
Mustika Khairi F1319040
Triani Febrianti F1319060

CASE SOLUTION

E3-1

1. B
2. C
3. D
4. D
5. B
6. A

E 3-2

1. D
2. B
3. D
4. D
5. A
6. A
7. B

E3-3

1. C Advance to Hill $75,000 + receivable from Ward $200,000 = $275,000

2. A Zero, goodwill has an indeterminate life and is not amortized.
3. A Pow accounts for Sap using the equity method, therefore, consolidated retained
earnings is equal to Pow’s retained earnings, or $2,480,000.
4. D Zero, all intercompany receivables and payables are eliminated.
E3-4

(in thousands)
1. Implied fair value of San ($1,800 / 90%) $2,000
Less: Book value of San (1,800)
Excess fair value over book value $ 200
Equipment undervalued $ (60)
Goodwill at January 1, 2011 $ 140
Goodwill at Dec 31, 2011 = Goodwill from consolidation $ 140
Since goodwill is not amortized
2. Consolidated net income
Pin’s reported net income $980
Less: Correction to income from San for depreciation on excess
allocated to equipment [($60,000/3 years)x 90%] $ (18)
Controlling share of consolidated net income $962
Noncontrolling share of consolidated net income
[$200,000 - $20,000 depreciation] x 10% $ 18
Controlling share of consolidated net income $ 962
Consolidated net income $980

E 3-6
Investment in Patricia 450,000
Capital Stock 100,000
Paid in Capital 350,000
Inventories 30,000
Plant Assets 50,000
Accounts Payable 10,000
Goodwill 270,000
Accounts Receivable 10,000
Push-Down Capital 350,000
1. The amount of goodwill will be shown in the balance sheet of Patricia NV is
$270,000.
2. The amount that will push-down capital be shown in the balance sheet of Patricia
NV is $350,000.
E3-7
1. Pasture Corporation and Subsidiary
Consolidated Income Statement
for the year 2007

Sales ($1,000,000 + $400,000) $1,400,000

Less: Cost of sales ($600,000 + $200,000) (800,000)

Gross profit 600,000

Less: Depreciation expense ($50,000 + $40,000) (90,000)
Other expenses ($199,000 + $90,000) (289,000)

Total consolidated income 221,000

Less: Noncontrolling interest income ($70,000  30%) (21,000)

Consolidated net income $ 200,000

2 Pasture Corporation and Subsidiary
Consolidated Income Statement
for the year 2007

Sales ($1,000,000 + $400,000) $1,400,000

Less: Cost of sales ($600,000 + $200,000) (800,000)

Gross profit 600,000

Less: Depreciation expense ($50,000 + $40,000 - $2,000) (88,000)
Other expenses ($199,000 + $90,000) (289,000)

Total consolidated income 223,000

Less: Noncontrolling interest income ($70,000  30%) (21,000)

Consolidated net income $ 202,000

 Supporting computations
Depreciation of excess allocated to overvalued equipment:
$10,000/5 years = $2,000
E3-8
1 Capital stock
The capital stock appearing in the consolidated balance sheet at December 31, 2006 is
$1,800,000, the capital stock of Poball,
the parent company.
2 Goodwill at December 31, 2006
Investment cost at January 2, 2006 $700,000

Book value acquired ($600,000  80%) (480,000)

Excess (considered goodwill since no fair value information is given) $220,000

3 Consolidated retained earnings at December 31, 2006
Poball’s retained earnings January 2, 2006 (equal to
beginning consolidated retained earnings $800,000
Add: Net income of Poball (equal to consolidated net 300,000
income)
Less: Dividends declared by Poball (180,000)
Consolidated retained earnings December 31, 2006 $920,000
4 Noncontrolling interest at December 31, 2006
Capital stock and retained earnings of Softcan on
January 2, 2006 $600,000
Add: Softcan’s net income 90,000
Less: Dividends declared by Softcan (50,000)
Softcan’s stockholders’ equity December 31, 2006 640,000
Noncontrolling interest percentage 20%
Noncontrolling interest December 31, 2006 $128,000
5 Dividends payable at December 31, 2006
Dividends payable to stockholders of Poball $ 90,000

Dividends payable to noncontrolling stockholders ($25,000  20%) 5,000

Dividends payable to stockholders outside the

consolidated entity $ 95,000

E3-9

Patta Corporation and Subsidiary

Partial Balance Sheet
at December 31, 2016

Stockholders’ equity:

Capital stock, $10 par $300,000

Additional paid-in capital 50,000

Retained earnings 65,000

Equity of majority stockholders 415,000

Noncontrolling interest* 41,000

Total stockholders’ equity $456,000

* Some students may not classify noncontrolling interest as stockholders’ equity.

Supporting computations

Computation of consolidated retained earnings:

Patta’s December 31, 2015 retained earnings $ 35,000

Add: Patta’s reported income for 2016 55,000

Less: Patta’s dividends (25,000)

Consolidated retained earnings December 31, 2016 $ 65,000

Computation of noncontrolling interest at December 31, 2016:

Qira’s December 31, 2015 stockholders’ equity $200,000

Income less dividends for 2016 ($20,000 - $15,000) 5,000

Qira’s December 31, 2016 stockholders’ equity 205,000

Noncontrolling interest percentage 20%

Noncontrolling interest December 31, 2016 $ 41,000

P3-2

(in thousands)
1. Schedule to allocate fair value/book value differential
Cost of investment in Set $350
Implied fair value of Set ($350 / 70%) $500
Book value of Set (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. Par Corporation and Subsidiary Consolidated Balance Sheet at January 1, 2011

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

* 70% of implied fair value of $500 = $150

P 3-3
Cost of investment in Softback Books January 1, 2006 $ 2,700,000
Book value acquired ($2,500,000 x 80%) 2,000,000
Excess cost over book value acquired $ 700,000
Schedule to Allocate Cost – Book Value Differential
Fair Value – Initial Final
Percent Reallocation
Book Value Allocation Allocation
Current Assets $500,000 80% $400,000 $ $400,000
Equipment 1,000,000 80% 800,000 (375,000) 425,000
Other Plant Assets (125,000) (125,000)
Negative Goodwill (500,000) 500,000 -
Excess cost over book value acquired $700,000 0 $700,000

Reallocation of negative goodwill to plant asset:

Equipment $3,000,000/$4,000,000 x $500,000 = $375,000
Other plant assets $1,000,000/$4,000,000 x $500,000 = $125,000

P3-6

Perry Corporation and Subsidiary

Consolidated Balance Sheet Working Papers

at December 31, 2006

Perry Sim Adjustments and Consolidated

per books per books Eliminations Balance Sheet

Cash $ 42,000 $ 20,000 $ 62,000

Receivables — net 50,000 130,000 b 9,000 171,000
Inventories 400,000 50,000 450,000
Land 150,000 200,000 350,000
Equipment — net 600,000 100,000 700,000
Investment in Sim 409,000 a 409,000
Goodwill a 40,000 40,000
Total assets $1,651,000 $ 500,000 $1,773,000
Accounts payable $ 410,000 $ 80,000 $ 490,000
Dividends payable 60,000 10,000 b 9,000 61,000
Capital stock 1,000,000 300,000 a 300,000 1,000,000
Retained earnings 181,000 110,000 a 110,000 181,000
Noncontrolling interest a 41,000 41,000
Total equities $1,651,000 $ 500,000 $1,773,000

a To eliminate reciprocal investment and equity accounts, record unamortized goodwill

($40,000), and enter the noncontrolling interest ($410,000  10%).

b To eliminate reciprocal dividends receivable (included in receivables — net) and

dividends payable amounts ($10,000 dividends  90%).