Problem 4-28 (LO 4-1, 4-5,4-6) Plaza, Inc., acquires 80 percent of the outstandi

Question

Problem 4-28 (LO 4-1, 4-5,4-6) Plaza, Inc., acquires 80 percent of the outstanding common stock of Stanford Corporation on January 1, 2018, In exchange for $1,135,200 cash. At the acquisition date, Stanford's total fair value, including the noncontrolling interest, was assessed at $1,419,000. Also at the acquisition date, Stanford's book value was $600,200. Several individual items on Stanford's financial records had fair values that differed from their book values as follows: Book Value Fair Value Tradenames (indefinite life) Property and equipment (net, 8-year 320,400 449,400 remaining life) Patent (14-year remaining life) 252, 800 145,100 275, 200 178,700 For internal reporting purposes, Plaza, Inc., employs the equity method to account for this investment. The following account balances are for the year ending December 31, 2018, for both companies. Plaza Stanford Revenues Cost of goods sold Depreciation expense Amortization expense Equity in income of Stanford $(919,700 (813,400) 508,400 215,500 352,600 31,600 25,000 319,200 Net income $ (515, 000) 404,200) Retained earnings, 1/1/18 Net income Dividends declared 1,135,900) (471,700) (515, 000) 267.200 (404,200) 28,000 Retained earnings, 12/31/18 1,383,700) (847,900) Current asseta Investment in Stanford Tradenames Property and equipment (net) Patents $766,300 384,700 1,432,000 213, 900 918,000 320,400 221,200 120,100 3,330,200 1,046,400 $ (126,600) (70, 000) (1,383,700) (847,900) Total assets nts payable Common stock Additional paid-in capital Retained earnings (above) (267,400) (1,552,500) (100, 000) (28,500) Total 1iabilities and equities $(3,330,200) (1,046,400) At year-end, there were no intra-entity receivables or payables. Prepare a worksheet to consolidate the financial statements of Plaza, Inc. and Its subsidiary Stanford. (For accounts where multiple

Explanation / Answer

On the date of acquisition:

During the year:

Fair value adjustment:

Movement of investment and NCI:

Elimination entry for consolidation:

Consolidated financials:

Fair value of consideration given: Ref Particulars Amount Cash 11,35,200 a Total consideration 11,35,200 b Stake acquired 80% c=a/b Fair value of subsidiary 14,19,000 d=100%-b Minority interest 20% e=c*d Fair value of minority interest     2,83,800

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