P 5-1

1 Worksheet Entries:

Bonds Payable 50,000

Investment in Dancer Corp. Bonds 48,600
Interest income 3,700
Interest expense 3,500
Gain on bond retirement 1,600

2 Dancer Corporation
Conslidated Income Statement
For Year Ended December 31, 2016

Sales 3,040,000
Less: Cost of goods sold (1,405,000)
Gross Profit 1,635,000
Other expense (826,000)
Gain on bond retirement 1,600
Consolidated net income 810,600
Problem 5-6
Common Information
Ownership Interest 80%

Number of Market Price

Cash Shares per Share
Price Paid 400,000

Acquired Company's Balance Sheet Before Purchase

Book Value Market Value Life

Assets

Accounts receivable 90,000

Inventory 50,000
Land 60,000
Buildings 100,000 230,000 20
Accumulated depreciation (30,000)
Equipment 80,000 130,000 5
Accumulated depreciation (30,000)

Goodwill
Total Assets 320,000 360,000

Company
Implied Fair Parent Price NCI Value
Value Analysis Value (80%) (20%)
Price Paid 500,000 400,000 100,000
Fair Value of Net Assets Excluding
Goodwill 380,000 304,000 76,000
Goodwill 120,000 96,000 24,000
Gain on Acquisition

Determination and Distribution of

Excess Schedule
Company Parent Price NCI Value
Value (80%) (20%)
Fair Value of Subsidiary 500,000 400,000 100,000
Less Book Value of Interest Acquired
Common Stock 10,000
Paid in Excess 90,000
Retained Earnings 100,000
Total Equity 200,000 200,000 200,000
Interest Acquired 80% 20%
Book Value 160,000 40,000
Excess of Cost over Book Value 300,000 240,000 60,000
 Accounts Worksheet Annual
Adjusted Distribution Amortizations
Buildings 130,000 debit D1 6,500
Equipment 50,000 debit D2 10,000
Goodwill 120,000 debit D3

Total 300,000

Amortization Schedule
Annual
Account Adjusted Life Amount Current Year
Buildings 20 6,500 6,500
Equipment 5 10,000 10,000
Total Amortizations 16,500 16,500

Intercompany Inventory Profit Deferral

Parent Parent Parent
Amount % Profit
Beginning 0 0% 0
Ending 0 0% 0

Income distribution schedules:

Subsidiary: DR CR
Internally generated net income 27,324
Unrealized profit in ending inventory 3,000
Unrealized profit in beginning inventory 2,250
Amortizations 16,500
Interest adjustment in bonds 920
Gain on bond retirement 6,833

Total 15,987
NCI share 3,197
Controlling share 12,790

Parent
Internally generated net income 173,596
Controlling share of subsidiary 12,790
Total 186,386

Proof for Bond Elimination

Gain remaining at year-end
Carrying value at 12/31/15 102,023
Investment in bonds at 12/31/15 96,110

Gain amoritized during the year

Interest revenue eliminated 8,596
Interest expense eliminated 7,676

Gain at January 1, 2015 6,833

Consolidated Worksheet
Trial Balance Eliminations
Postman Sparton
Cash 144,486 99,347
Accounts receivable 90,000 60,000
Inventory 120,000 55,000
Land 200,000 60,000
Investment in Sparton 429,859 （CY2)

Investment in Sparkle Bonds 96,110

Buildings 600,000 100,000 (D)
Accumulated depreciation - bldgs. (310,000) (40,000)
Equipment 150,000 80,000 (D)
Accumulated depreciation - equip. (90,000) (50,000)
Goodwill 0 (D)
Accounts payable (55,000) (25,000) (IA)
Bond payable 0 (100,000) （B）
Discount (Premium) (2,023) （B）

Common stock - Sparton (10,000) (EL)

Paid-in capital in excess of par - Sparton (90,000) (EL)

Retained earnings - Sparton (120,000) (EL)
(A1)
(A2)
(BI)
Common stock - Postmen (100,000)
Paid-in capital in excess of par -
Postmen (800,000)
Retained earnings- Postmen (300,000) (A1)
(A2)
(BI)
Gain on bond retirement
Sales (850,000) (320,000) (IS)
Cost of goods sold 500,000 200,000 (EI)

Depr. expense - building 30,000 5,000 (A1)

Depr. expense - equipment 15,000 10,000 (A2)
Other expenses 140,000 70,000
Interest expense 7,676
Interest revenue (8,596) (B)
Subsidiary income (21,859) （CY1)
Div. Declared - Sparton 10,000
Div. Declared - Postmen 20,000
Totals 0 0
Consolidated net income
NCI share
Controlling share
NCI
Controlling retained earnings
Totals

Eliminations and Adjustments:

（CY1)
Subsidiary Income 21,859
Investment in Spartan 21,859

（CY2)
Investment in Spartan 8,000
Dividends Declared - Spartan 8,000

(EL)
Common stock - Spartan 8,000

Paid-in capital in excess of par - Spartan 72,000

Retained earnings- Spartan 96,000
Investment in Spartan 176,000

(D)
Buildings 130,000
Equipment 50,000
Goodwill 120,000
Investment in Spartan 240,000
Retained Earnings - Spartan, NCI 60,000

(A1)
Retained earnings- Postmen 5,200
Retained earnings- Spartan 1,300
Depreciation expense 6,500
Accumulated depreciation - bldgs. 13,000

(A2)
Retained earnings- Postmen 8,000
Retained earnings- Spartan 2,000
Depreciation expense 10,000
Accumulated depreciation - equip. 20,000

(IS)
Sales 20,000
Cost of goods sold 20,000
(IA)
Accounts payable 7,000
Accounts receivable 7,000

(BI)
Retained earnings- Postmen 1,800
Retained earnings- Spartan 450
Cost of goods sold 2,250

(EI)
Cost of goods sold 3,000
Inventory - Spartan 3,000

（B）
Bonds payable 100,000
Premium on bonds 2,023
Investment in Spartan 96,110
Interest Income 8,596
Interest expense 7,676
Gain on bond retirement 6,833
 Total
400,000

Book Market
Value Value Life
Liabilities

Accounts payable 17,352

Bonds payable 100,000
Premium on bonds payable 2,648

Equity

Common stock 10,000

Paid-in capital excess of par 90,000
Retained earnings 100,000

Total Liabilities and Equity 320,000 0

Prior Years Total Key
6,500 13,000 A1
10,000 20,000 A2
16,500 33,000

Sub Sub Sub

Amount % Profit
9,000 25% 2,250
12,000 25% 3,000
 Eliminations Consol NCI Control. Consol.
Dr Cr Net Inc. R.E. Bal. Sht.
243,833
(IA) 7,000 143,000
(EI) 3,000 172,000
260,000
8,000 （CY1) 21,859
(EL) 176,000
(D) 240,000 0

（B） 96,110 0
130,000 830,000
(A1) 13,000 (363,000)
50,000 280,000
(A2) 20,000 (160,000)
120,000 120,000
7,000 (73,000)
100,000 0
2,023 0

8,000 (2,000)

72,000 (18,000)
96,000
1,300 NCI 60,000
2,000
450 (80,250)
(100,000)

(800,000)
5,200
8,000
1,800 (285,000)
(B) 6,833 (6,833)
20,000 (1,150,000)
3,000 (IS) 20,000
(BI) 2,250 680,750

6,500 41,500
10,000 35,000
210,000
(B) 7,676 0
8,596 0
21,859 0
（CY2) 8,000 2,000
 20,000
681,728 681,728
(189,583)
3,197 (3,197)
186,386 (186,386)
(101,447) (101,447)
(451,386) (451,386)
0
Problem 5-10
Common Information

Consolidated Worksheet
Paratec Sym Eliminations
Dr Cr
Cash 190,000 40,000
Accounts Receivable 738,350 142,000
Inventory 500,000 75,000
Prepaid Rent on Equipment 7,000 (CL1) 7,000
Investment in Bonds 250,000 65,000
Investment in Subsidiary 400,000 (CV) 160,000 (EL) 510,000
(D) 50,000

Land 250,000 85,000

Plant and Equipment 1,950,000 295,000 (CL2) 120,000
Accumulated Depreciation--
Plant and Equipment (250,000) (60,000) (CL3) 36,000
Equipment Under Operating
Lease 120,000 (CL2) 120,000

Accumulated Depreciation--
Assets Under Operating Lease (36,000) (CL3) 36,000
Goodwill (D) 50,000
Accounts Payable (385,000) (52,000)
Deferred Rent Revenue (7,000) (CL1) 7,000
Common Stock--Paratec (2,000,000)
Retained Earnings--Paratec (1,076,350) (CV) 160,000
Common Stock--Sym (200,000) (EL) 200,000
Retained Earnings--Sym (310,000) (EL) 310,000
Sales (4,720,000) (500,000)
Rental Income (12,000) (CL1) 12,000
Cost of Goods Sold 3,068,000 300,000
Rent Expense 12,000 (CL1) 12,000
Other Expenses 725,000 101,000
Dividends Declared 295,000
Totals 0 0 895,000 895,000
Consolidated net income
Controlling retained earnings
Totals

Eliminations and Adjustments:

(CV)
Investment in Sym Corp 160,000
Retained Earnings - -Paratec 160,000

(EL)
Common stock - Sym 200,000
Retained earnings- Sym 310,000
 Investment in Sym 510,000

(D)
Goodwill 50,000
Investment in Sym 50,000

(CL1)
Rental Income 12,000
Rent Expense 12,000
Deferred Rent Revenue 7,000
Prepaid Rent on Equipment 7,000

(CL2)
Plant and Equipment 120,000
Equipment Under
Operating Lease 120,000

(CL3)

Accumulated Depreciation--
Assets Under Operating Lease 36,000
Accumulated Depreciation--
Plant and Equipment 36,000
 Consol Control. Consol.
Net Inc. R.E. Bal. Sht.
230,000
880,350
575,000
0
315,000

335,000
2,365,000

(346,000)

0
50,000
(437,000)
0
(2,000,000)
(1,236,350)

(5,220,000)

3,368,000

826,000
295,000

(1,026,000) (1,026,000)
(1,967,350) (1,967,350)
0
Problem 5-11
Common Information
Ownership Interest 80%

Market
Number of Price per
Cash Shares Share Total
Price Paid 450,000 450,000

Acquired Company's Balance Sheet Before Purchase

Book
Book Value Market Value Life Value
Assets Liabilities

Accounts receivable 40,000 Accounts payable 80,000

Inventory 60,000
Land 100,000
Buildings 400,000 500,000 20
Accumulate depreciation (200,000)
Equipment 100,000 Equity
Accumulate depreciation (30,000)
Common stock ($1
par) 10,000
Paid-in capital in
excess of par 190,000
Retained earnings 190,000
Goodwill

Total Liabilities and

Total Assets 470,000 500,000 Equity 470,000

Company
Implied Fair Parent Price NCI Value
Value Analysis Value (80%) (20%)
Price Paid 562,500 450,000 112,500
Fair Value of Net Assets
Excluding Goodwill 490,000 392,000 98,000
Goodwill 72,500 58,000 14,500
Gain on Acquisition

Determination and
Distribution of Excess
Schedule
Company Parent Price NCI Value
Value (80%) (20%)
Fair Value of Subsidiary 562,500 450,000 112,500
Less Book Value of Interest
Acquired
Common Stock 10,000
Paid in Excess 190,000
Retained Earnings 190,000
Total Equity 390,000 390,000 390,000
Interest Acquired 80% 20%
Book Value 312,000 78,000
Excess of Cost over Book
Value 172,500 138,000 34,500
Annual
Worksheet Amortizati
Accounts Adjusted Distribution ons

Buildings 100,000 debit D1 5,000

Goodwill 72,500 debit D2

Total 172,500

Amortization Schedule
Annual Current
Account Adjusted Life Amount Year Prior Years Total
Buildings 20 5,000 5,000 5,000 10,000

Total Amortizations

Intercompany Inventory Profit Deferral

Parent Parent Parent Sub Sub
Amount % Profit Amount %
Beginning 10,000 25%
Ending 12,000 25%

Intercompany Lease Calculations

Interest calculations
Values
Market value at inception 100,000
Implicit interest rate 12%
Guaranteed residual value 10,000
Lease inception period 1/1/2016
Lease term Years 5
Payment 23,363
Depreciation term 5
Balances for period:
Current depreciation 100,000
Accumulated depreciation 18,000
Interest 9,196
Lease obligation balance 76,637
Minimum lease payments 103,452
Unearned interest 17,619
Income distribution schedules:
Subsidiary: DR CR
Internally generated net income 40,804
Unrealized profit in ending inventory 3,000
Unrealized profit in beginning inventory 2,500
Amortizations 5,000

Total 35,304
NCI share 7,061
Controlling share 28,243

Parent
Internally generated net income 174,196
Controlling share of subsidiary 28,243

Total 202,439

Press Simon Eliminations

Dr
Cash 72,363 73,637
Accounts receivable 72,000 45,000 (IA)
Inventory 120,000 56,000 (EI)
Land 100,000 100,000
Investment in Simon 506,643 (CY2) 8,000 (CY1)
(EL)
(D)

Minimum Lease Pmt. Rec. 103,452 (CL2)

Unearned interest - Min. LP (17,619) (CL2) 17,619
Buildings 800,000 400,000 (D1) 100,000
Accumulated depreciation -
bldgs. (220,000) (220,000) (A)
Equipment 150,000 100,000 (CL3) 100,000
Accumulated depreciation -
equip. (90,000) (50,000) (CL4)

Equipment - Capital lease 100,000 (CL3)

Acc. Depr. - Equip, CL (18,000) (CL4) 18,000
Goodwill (D2) 72,500

Accounts payable (60,000) (40,000) (IA) 6,000

Obligation - Capital Lease (76,637) (CL2) 76,637

Acc. interest - Capital lease (9,196) (CL2) 9,196
Common stock - Simon (10,000) (EL) 8,000
Paid-in capital in excess of par
- Simon (190,000) (EL) 152,000
Retained earnings - Simon (230,000) (EL) 184,000 NCI
(A) 1,000
(BI) 500
Common stock - Press (100,000)
Paid-in capital in excess of par
- Press (800,000)
Retained earnings- Press (450,000) (A) 4,000
(BI) 2,000

Sales (800,000) (400,000) (IS) 40,000

Cost of goods sold 450,000 240,000 (EI) 3,000 (IS)
(BI)

Depr. expense - building 30,000 10,000 (A) 5,000

Depr. expense - equipment 15,000 28,000

Other expenses 140,000 72,000

Interest expense 9,196 (CL1)
Interest revenue (9,196) (CL1) 9,196

Subsidiary income (32,643) (CY1) 32,643

Dividends declared - Simon 10,000 (CY2)
Dividends declared - Press 20,000
Totals 0 0 849,291
Consolidated net income
NCI share
Controlling share
NCI
Controlling retained earnings
Totals

(CY1)
Subsidiary income 32,643
Investment in Simon 32,643

(CY2)
Dividends declared - Simon 8,000
Investment in Simon 8,000

(EL)
Common stock - Simon 8,000
Paid-in capital in excess of par
- Simon 152,000
Retained earnings - Simon 184,000
Investment in Simon 344,000

(D)
Buildings 100,000
Goodwill 72,500
Investment in Simon 138,000
Retained earnings - Simon,
NCI 34,500

(A)
Retained earnings - Simon 1,000
Retained earnings- Press 4,000
Depr. expense - building 5,000
Accumulated depreciation -
bldgs. 10,000

(IS)
Sales 40,000
Cost of goods sold 40,000

(IA)
Accounts payable 6,000
Accounts receivable 6,000

(BI)
Retained earnings - Simon 2,000
Retained earnings- Press 500
Cost of goods sold 2,500

(EI)
Cost of goods sold 3,000
Inventory 3,000

(CL1)
Interest income 9,196
Interest expense 9,196

(CL2)
Unearned interest - Min. LP 17,619
Obligation - Capital Lease 76,637
Acc. interest - Capital lease 9,196
Minimum Lease Pmt. Rec. 103,452

(CL3)
Equipment 100,000
Equipment - Capital lease 100,000

(CL4)
Acc. Depr. - Equip, CL 18,000
Accumulated depreciation -
equip. 18,000
Market
Value Life

0
Key
A

Sub
Profit
2,500
3,000
ns Consol NCI Control. Consol.
Cr Net Inc. R.E. Bal. Sht.
146,000
6,000 111,000
3,000 173,000
200,000
32,643
344,000
138,000 0

103,452 0
0
1,300,000

10,000 (450,000)
350,000

18,000 (158,000)

100,000 0
0
72,500

(94,000)

0
0
(2,000)
 (38,000)
34,500

(79,000)
(100,000)

(800,000)

(444,000)

(1,160,000)
40,000 650,500
2,500

45,000
43,000

212,000
9,196 0

8,000 2,000
20,000
849,291
(209,500)
7,061 (7,061)
202,439 (202,439)
(124,061) (124,061)
(626,439) (626,439)
0