a.Determine the fair value in excess of book value for Prestige’s acquisition da
ID: 2560638 • Letter: A
Question
a.Determine the fair value in excess of book value for Prestige’s acquisition date investment in Stylene.
b.Determine Prestige's December 31, 2018, Investment in Stylene balance.
c.Prepare a worksheet to determine the balances for Peregrine’s December 31, 2018, consolidated financial statements.
36,200 99, 000 214, 000 1,550, 000 898, 000 2,797,200 ccounts payable 1,073,200 Accounts receivable Inventory Equipment (net) Common stock Retained earnings 800, 000 924,000 2,797,200 t the acquisition date, the book values of Stylene's assets and liabilities were generally equivalent to their fair values except for the following assets: Renaining Useful Life Book Value Fair Value $1,708,000 161,000 982, 000 Equipment $1,550,000 898, 000 indefinite uring the next two years, Stylene has the following income and dividends in its own separately prepared financial reports to its parent Dividends $ 25, 000 2017 2018 $216,000 457,000 45, 000 vidends are declared and paid in the same period. The December 31, 2018, separate financial statements for each company appear below. Parentheses indicate credit balances Prestige Stylene $(S,280, 000) $(2,984,000) Cost of goods sold Depreciation expense Anortization expense Equity earnings in stylene 2,840,000 45, 000 183,000 397,000 2,110,000 410, 000 (2,109,000 (464,000 Statement of Retained Earnings Retained earnings 1/1 Net income (above) Dividends declared $1,074,000 $3,410,000) (2,109,000) (464,000) 150,000 45 000 Retained earnings 12/31 (S,369,000 $ 11,493,000) Balance Shcet Cash Accounts receivable Inventory Investnent in Stylene Equipment customer list 65,500 84,500 482, 000 476,000 712,000 941,000 2,798,000 6,610,000 153,000 3,350, 000 258,000 15,298, 000 1,485, 000 924,000 3,041, 000 Goodwill $ Accounts payable Common stock $1,429,000 (8,500, 000) (800, 00O) 1,493,000 $ 3,041,000) Retained earnings, 12/31 S,369,000 Total liabilities and equity $(15,298, 000)Explanation / Answer
a. Fair value in excess of book value= goodwill:
b.Prestige's December 31, 2018, Investment in Stylene balance:
In the given financials investment account balance not reconciling with finacial statements of subsidiary.
Retained earnings of the subsidiary movement is below:
The amounts reported by subsidiary to parent as its net income and dividends is incorrect. If they are correct the retained earnings closing balance should be:
since calculated closing balance not tallying with the retained earnings closing balance given in the above fiancials, it is assumed that the financials are correct and the amounts reported to parent are incorrect.
By taking amounts in the financials of subsidiary as correct the investment account of the parent should reflect an amount of:
fair value amortisation per year is:
Trademarks have indefinite life hence not amortised only tested for impairment.
Adjustment entry for investment accoutn will be:
c. consolidated statements:
Fair value adjustment balances:
On acquisition goodwill:
Elimination entry:
Consolidated statements:
Account Book value Fair value Fair value adjustment Useful life Amortisation per year Equipment 15,50,000 17,08,000 1,58,000 8 19,750 Customer list - 1,61,000 1,61,000 4 40,250 Trademark 8,98,000 9,82,000 84,000 - -Related Questions
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