On January 1, 2009, Vacker Co. acquired 70% of Carper Inc. by paying $650,000. T
ID: 2553995 • Letter: O
Question
On January 1, 2009, 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
2009
$105,000
$54,600
2010
$134,400
$61,600
2011
$154,000
$84,000
On December 31, 2011, Vacker owed $30,800 to Carper. There have been no changes in Carper's common stock account since the acquisition.
1.) Show the acquisition date FV allocation, which includes detailed steps such as allocation to BV, FV over BV, and Goodwill allocation, between controlling and non-controlling interests.
2.) Calculate the following amounts for individual accounts:
a.) The balance of investment in Carper on Vacker's book on Dec. 31st 2010;
b.) Non-controlling interest on consolidated financial statement on Dec. 31st, 2010;
c.) And the balance of non-controlling interest on Dec. 31st, 2011
3.) List all necessary consolidation entries as of December 31, 2011?
Net Income
Dividends Paid
2009
$105,000
$54,600
2010
$134,400
$61,600
2011
$154,000
$84,000
Explanation / Answer
Entry Particular Debit ($) Credit ($) S Common Stock - Carper Inc. 420000 Retained Earnings 375200 Investment in Carper Inc. (70%) 556640 Non Controlling Interest in Carper Inc 238560 A Building 22400 Copyright 72000 Goodwill 140000 Investment in Carper Inc 170080 Non Controlling Interest 64320 I Equity in Subsidiary Earnings 103040 Investment in Carper Inc. 103040 D Investment in Carper Inc. 58800 Dividends Paid 58800 E Dep 2800 Amortization 4000 Building 2800 Copyright 4000 P Accounts Payable 30800 Accounts Receivable 30800
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