Thomas Inc. had the following stockholders\' equity accounts as of January 1, 20

Question

Thomas Inc. had the following stockholders' equity accounts as of January 1, 2013:

Preferred stock - $90 par value, nonvoting and nonparticipating; 9% cumulative dividend $2,700,000

Common Stock - $25 par value $5,600,000

Retained earnings $14,000,000

Kuried Co. acquired all of the voting common stock of Thomas on January 1, 2013, for $20,656,000. The preferred stock remained in the hands of outside parties and had a fair value of 3,060,000. A database valued at $656,000 was recognized and amortized over five years.

During 2013, Thomas reported earning $630,000 in net income and paid $504,000 in total cash dividends. Kuried used the equity method to account for this investment.

A. What is the amount of Goodwill resulting from this aquisition?

B. What was the non-controlling interest's share of consolidated net income for the year 2013?

C. What is the controlling interest share of Thomas' net income for the year ended December 31, 2013?

D. What was Kuried's balance in the investment in Thomas Inc. account as of December 31, 2013?

E. Prepare all consolidation entries for 2013.

Explanation / Answer

Question A. Common Stock, $25 per $    5,600,000.00 Retained Earnings $ 14,000,000.00 Book Value of assets taken over $ 19,600,000.00 Add: Database $        656,000.00 Total Value of assets taken over $ 20,256,000.00 Cost of Acquisition $ 20,656,000.00 Good will $        400,000.00 Question B. Non-controlling interest: Per value of Preference share $    2,700,000.00 As all common stocks are taken over by Kuried Co. there is only Preference shareholders remain as non controlling interest. Preference shareholders do not have share of income. Question C. Reported Net income $        630,000.00 Depreciation on Database( 656000/5) $      (131,200.00) $      (103,800.00) Share of Controlling Interest $        498,800.00 20359800.00 Question D. Beginning Balance of Investment $ 20,256,000.00 Add: Share of Income $        498,800.00 Value of Investment on 31-Dec-2013 $ 20,754,800.00 Question E. Investment in Thomas Inc. $ 20,256,000.00 Goodwill $        400,000.00 Cash $ 20,656,000.00 (Acquisition of Shares of Thomas Inc.) Cash 261000 Dividend Income 261000 (common dividend received.) Investment in Thomas Inc. $        498,800.00 Share of Income from Thomas Inc. $        498,800.00 (Share of Cotrolling interest Recorded)

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