Workpapers (determine ownership interest, year after acquisition, excess assigne

Question

Workpapers (determine ownership interest, year after acquisition, excess assigned to land and patents) Separale company financial statements for Pen Corporation and its subsidiary, Syn Company, at and for the year ended December 31,2012, are summarized as follows (in thousands): Pen Syn Combined Income and Relained Earnings Statements Jor the Year Ended December 31 S 800 (500) 34.8 200 Income from Syn Cost of sales (100) Other Expenses Net income Add: Retained earnings January 1 Deduct: Dividends 68 Retained earnings December 31 Balance Sheet at December 31 Cash S 36 160 S 30 40 Dividends receivable from Syn Note receivable from Pen Investment in Syn Buildings- net 10 20 190 439.2 130 340 60 160 100 Equipment-net Toal assets 1569 Accounts payable Note payable to Syn Dividends payable Capital stock, S20 par Retained eamings S 170.8 S 20 10 1,000 1 69 420 388.8 Total equities ADDITIONAL INFORMATION 1. Pen Corporation acquired 13,500 shares of Syn Company slock for $30 per share on January 1, 201 wheo Syn's stockholders' equity consisted of $300.000 capital stock and S30,000 retained earnings. 2 Syn Company's land was undervalued when Pen acquired its interest, and accordingly,$40,000 of the fair valuc/book value differential was assigned to land. Any remaining differential is assigned to unrecorded patents with a 10-year remaining life. 3. Syn Company owes Peo S10,000 on account, and Pen owes Syn S10,000 on a note payable. REQUIRED: Prepare consolidated workpapers for Pen Corporation and Subsidiary for the year ended December 31, 2012.

Explanation / Answer

$34,200

Working Notes:- 1) Calculation of Capital Profit of Syn Ltd. Retain Earning $30,000 Add:- Revaluation Reserves $40,000 Capital Profit $70,000 2) Calculation of Revenue Profit of Syn Ltd. Net Income $48,000 Add:- Retained Earning (68000-30000) After 01/01/2011 $38,000 Less:- Dividend $32,000 Revenue Profit $54,000 3) Calculation of % of Shares Held by pen Ltd. Total Shares $300000/20 Per Share 15000 Shares % Held By pen Ltd. 13500/15000 90% 4) Calculation of Patent Investment (13500*30per share) $405,000 Less:- Share Capital($300000*90%) $270,000 Less:- Capital Profit ($70000*90%) $63,000 $72,000 5) Calculation of Monority's Interest Share Capital ($300000*10%) $30,000 Add Capital Profit ($70000*10%) $7,000 Less Revenue Profit ($54000*10%) $5,400 $42,400 5) Calculation of Retained Earning of Pen Ltd. Retained earning $388,800 Add Revenue Profit of Syn ltd. ($54000*90%) $48,600 Less Patents written off ($72000/10*2) $14,400 $423,000 5) Calculation of Goodwill Investment in Books $439,200 Less Investment in Shares (13500*20per share) $405,000

$34,200

Consolidated Balance Sheet As on 31 Dec, 2012 Particulars $ in thousand Cash (36+30) 66 Account Receivable (160+40) Less :-inter Transaction-10 10 190 Dividend Receivable From Syn 14.4 Less:-Dividend payable from pen 14.4 0 Note Receivable from Pen 10 Less:- Note payable to Syn 10 0 Inventory 190+20 210 Land 130+60 190 add:-Revaluation 40 230 Building 340+160 500 Equipment 260+100 360 Goodwill-W.N-7 34.2 Patent $72 less:-Written off 14.4 58.4 1648.6 Account Payable 170.8+20 190.8 Less:-Inter 10 180.8 Note Payable 10 Less :-Note Receivable 10 0 Dividend Payable 16 less:-Dividend Receivable 14.4 1.6 Minority Interest-WN-5 42.4 Capital Stock 20Per share 1000 Retained Earning-WN-6 423 1648.6

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