Exercise 3-3

Part A Investment in Sun Company 192,000

Cash 192,000

Part B PRUNCE COMPANY AND SUBSIDIARY

Consolidated Balance Sheet
January 2, 2014
Assets
Cash ($260,000 + $64,000 – $192,000) $132,000
Accounts Receivable 165,000
Inventory 171,000
Plant and Equipment (net) 484,000
Land ($63,000 + $32,000 + $28,333*) 123,333
Total Assets $1,075,333

Liabilities and Stockholders’ Equity

Accounts Payable $151,000
Mortgage Payable 111,000
Total Liabilities 262,000
Noncontrolling Interest ($192,000/0.9  0.1) $21,333
Common Stock 400,000
Other Contributed Capital 208,000
Retained Earnings 184,000
Total Stockholders’ Equity 813,333
Total Liabilities and Stockholders’ Equity $1,075,333

* [$192,000/0.9 – ($70,000 + $20,000 + $95,000)] = $28,333

 Exercise 3-4

Part A Investment in Swartz Company ($60  1,500) 90,000

Common Stock ($20  1,500) 30,000
Other Contributed Capital ($40  1,500) 60,000

Other Contributed Capital 1,700

Cash 1,700
Part B Computation and Allocation of Difference
Parent Non- Entire
Share Controlling Value
Share
Purchase price and implied value $90,000 0 90,000
Less: Book value of equity acquired 83,000* 0 83,000
Difference between implied and book value 7,000 0 7,000
Goodwill (7,000) (0) (7,000)
Balance -0- -0- -0-
* $40,000 + $24,000 + $19,000 = $83,000

Part C Peach Company and Subsidiary

Consolidated Balance Sheet
January 1, 2010
Assets
Cash ($73,000 + $13,000 - $1,700) $ 84,300
Accounts Receivable 114,000
Inventory 83,000
Plant and Equipment 138,000
Land 48,000
Goodwill* 7,000
Total Assets $ 474,300
Liabilities and Stockholders’ Equity
Accounts Payable $84,000
Notes Payable 103,000
Total Liabilities $187,000
Common Stock ($100,000 + $30,000) $130,000
Other Contributed Capital ($60,000 + $60,000 - $1,700) 118,300
Retained Earnings 39,000
Total Stockholders’ Equity 287,300
Total Liabilities and Stockholders’ Equity $ 474,300

* Cost of investment less fair value acquired equals goodwill or ($90,000 – $83,000 = $7,000).
Recall that the book value of net assets equals the fair value of net assets in this problem.
Exercise 3-6

$37,412 Noncontrolling Interest

Part A = 15% Noncontrolling Interest
$249,412 Implied Value*

* Implied Value = Parent’s value $212,000 + NCI $37,412 = $249,412

Common Stock-Shipley 90,000

Other Contributed Capital-Shipley 90,000
Retained Earnings-Shipley 56,000
Land $249,412 - $236,000 13,412
Investment in Shipley Company 212,000
Noncontrolling Interest 37,412

Part B SHIPLEY COMPANY

Balance Sheet
December 31, 2013

Cash $ 15,900
Accounts Receivable 22,000
Inventory 34,600
Plant and Equipment 147,000
Land ($220,412 - $13,412 - $120,000) 87,000
Total Assets $ 306,500

Accounts Payable $ 70,500

Common Stock 90,000
Other Contributed Capital 90,000
Retained Earnings 56,000
Total Equities $ 306,500