On January 1, 2013, Vacker Co. acquired 70% of Carper Inc. by paying $650,000. T

Question

On January 1, 2013, Vacker Co. acquired 70% of Carper Inc. by paying $650,000. This included a $20,000 control premium. Carper reported common stock on that date of $420,000 with retained earnings of $252,000. A building was undervalued in the company's financial records by $28,000. This building had a ten-year remaining life. Copyrights of $80,000 were to be recognized and amortized over 20 years.

Carper earned income and paid cash dividends as follows:

Net income Dividends paid

2013 105,000 54,600

2014 134,400 61,600

2015 154,000 84,000

On December 31, 2015, Vacker owed $30,800 to Carper. There have been no changes in Carper's common stock account since the acquisition. Required: If the equity method had been applied by Vacker for this acquisition, what were the consolidation entries needed as of December 31, 2015?

Explanation / Answer

Fair Value depreciation schedule Assets FV adjustment Amt useful life FV Depreciation/year Building FV adjustment            28,000               10 2800 Intangible asset-Copy right            80,000               20 4000 Consolidation Entries in the book of Vacker Co, Date Account Dr $ Cr $ Dec 31.2015. FV depreciation Buliding              2,800 Equity in Earning from Caper Inc         2,800 Amortization -Copyright              4,000 Equity in Earning from Caper Inc         4,000 ( FV depreciation & Intangible amortization ) Investment in Caper Inc          154,000 Equity in Earning from Caper Inc 154000 (Profit from subsidiary) Cash            84,000 Investment in Caper Inc 84000 (dividend received from subsidiary)

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