Advanced Accounting

Ch 4 Hw 11th Edition
MC 1-14, 19, 20, 24, 34, 36
1.
2.
3.
4.
5.
6.
7.

A
B
A
D
A
B
D

8. B
9. B
10. A
11. C
12. B
13. C
14. C

P19.
a.

(in thousands)
Sand Dollar
Salty Dog
Baytowne

b.

Sand Dollar FV
FV of Id net Assets
TangibleAssets
Customer List
Trademark
Liabilities
IV of Goodwill
CV of Goodwill
Impairment Loss
Salty Dog FV
FV of Id net assets
Tangible assets
Unpatened Tech
Licenses
IV of Goodwill
CV of Goodwill
No Impairment

c.

P20.

FV
510
580
560

CV
530
610
280

Impairment
Y
Y
N

$510
$190
$100
$150
($30)

$410
$100
$120
$20
$580

$200
$125
$100

$425
$155
$150
0

No changes in the valuation of Destin's tangible assets and identified intangible assets.

ntangible assets.

Advanced Accounting
Ch 4 Hw 11th Edition
MC 1-14, 19, 20, 24, 34, 36

Student Name:
Class:
Problem 03-36

a. Investment in Jasmine Company

Schedule 1 - Acquisition-Date Fair Value Allocation and Amortization
Jasmine's acquisition-date fair value
Book value of Jasmine
Fair value in excess of book value
$
Allocation to specific accounts
based on individual fair values:
Equipment
Buildings (overvalued)
Goodwill
Total

$206,000
(140,000)
66,000

Correct!

Life
(years)
54,400
(10,000)
$

8
20

21,600
Correct!

Investment in Jasmine Company - 12/31/15

Jasmine's acquisition-date fair value
2013 Increase in book value of subsidiary
2013 Excess amortizations
2014 Increase in book value of subsidiary
2014 Excess amortizations
2015 Increase in book value of subsidiary
2015 Excess amortizations
Investment in Jasmine Company 12/31/15

206,600
40,000
(6,300)
20,000
(6,300)
10,000
(6,300)
257,100

Correct!

Student Name:
Class:
Problem 03-36
b. Equity in subsidiary earnings

30,000
(6,300)
23,700

Correct!

414,400
(272,000)
(6,300)
135,700

Correct!

370,000
54,400
(20,400)
404,000

Correct!

288,000
(10,000)
1,500
279,500

Correct!

f. Allocation of excess fair value to goodwill

21,600

Correct!

g. Consolidated common stock

290,000

Correct!

h. Consolidated retained earnings

410,000

Correct!

Income accrual
Excess amortizations
Equity in subsidiary earnings

$
$

c. Consolidated net income

Consolidated revenues
Consolidated expenses
Excess amortization expenses
Consolidated net income

d. Consolidated equipment
Book values added together
Acquisition-date fair value allocation
Excess depreciation
Consolidated equipment

e. Consolidated buildings
Book values added together
Acquisition-date fair value allocation
Excess depreciation
Consolidated buildings

Annual
Excess
Amortizations
$
6,800
(500)

6,300
Correct!

Student Name:
Class:
Problem 03-38
a. Relevant initial test to determine whether goodwill could be impaired
12/31 Carrying value (equity method balance)
12/31 Fair value

$
$

120,070,000
110,000,000
10,070,000
Correct!

Result:
Further testing is required due to the CV being more than the FV.

b. Calculation of Lydia reporting unit loss for the year

12/31 Fair value for Lydia
Fair value of assets and liabilities
Cash
Receivables (net)
Movie library
Broadcast licenses
Equipment
Current liabilities
Long-term debt
Total net fair value
Implied fair value for goodwill
Carrying value for goodwill
Impairment loss

110,000,000

93,106,000
16,894,000
50,000,000
33,106,000

109,000
897,000
60,000,000
20,000,000
19,000,000
(650,000)
(6,250,000)

Correct!

Journal entry by Prine:

goodwill impairment loss
Investment in Lydia

33,106,000
33,106,000
Correct!

c. Consolidated net income for the year:

Combined revenues
Combined Expenses
Income before impairment loss
Goodwill Impairment loss
Net Loss

30,000,000
22,200,000
7,800,000
(33,106,000)
(25,306,000)
Correct!

d.
12/31 Consolidated goodwill:

16,894,000
Correct!

e.
12/31 Consolidated broadcast licenses

14,364,000
Correct!

f. Consolidated Worksheet
PRINE and LYDIA
Consolidated Worksheet
December 31

Accounts
Revenues
Expenses
Equity in Lydia earnings
Impairment loss
Net loss (income)
Retained earnings, 1/1
Dividends declared
Net Income
Retained earnings, 12/31

Cash
Receivables (net)
Investment in Lydia Co.

Broadcast licenses
Movie library
Equipment (net)
Goodwill
Total assets
Current liabilities
Long-term debt
Common stock
Retained earnings, 12/31
Total liabilities and equity
Parentheses indicate a credit balance.

Prine, Inc.
(18,000,000)
10,350,000
(150,000)
33,106,000
25,306,000

Lydia Co.
(12,000,000)
11,800,000
(200,000)

(52,000,000)
300,000
25,306,000
(26,394,000)

(2,000,000)
80,000
(200,000)
(2,120,000)

260,000
210,000
86,964,000

109,000
897,000
-

350,000
365,000
136,000,000
224,149,000

14,014,000
45,000,000
17,500,000
77,520,000

(755,000)
(22,000,000)
(175,000,000)
(26,394,000)
(224,149,000)

(650,000)
(7,250,000)
(67,500,000)
(2,120,000)
(77,520,000)

Adjusting Entries
Debit
50,000
150,000

Adjusting Entries
Credit

Consolidated
Totals
(30,000,000)

Correct!