P03-30

Student Name:
Class:
Problem 03-30

a. Fair-Value Allocation and Annual Amortization

Allocation

Life
(years)

Land
Buildings
Equipment
Customer list
Total

Account Name
Revenues

Balance

Explanation

Cost of goods sold

Depreciation expense

Amortization expense

Buildings (net)

Equipment (net)

Customer list

Common stock

Additional paid-in capital

Page 1

Annual
Excess
Amortizations

P03-30
Part b. Why can consolidated totals be determined without knowing
the consolidation method used?

Part c. If the equity method is used by the parent, what

consolidation entries would be used?
MERGARONITE COMPANY
General Journal
Account

Debit

Credit

Consolidation Entry S
Common stock (Hill)
Additional paid-in capital (Hill)
Retained earnings, 1/1
Investment in Hill
(To eliminate beginning stockholders' equity of subsidiary)

Consolidation Entry A
Land
Equipment (net)
Customer list (net)
Buildings (net)
Investment in Hill
(To record unamortized allocation balances as of beginning of current year)

Consolidation Entry I
Investment income
Investment in Hill
(To remove equity income recognized during year-equity method accrual
[based on subsidiary's income] less amortization for the year)

Consolidation Entry D
Investment in Hill
Dividends paid
(To remove intra-entity dividend payments)

Consolidation Entry E
Amortization expense
Depreciation expense
Buildings
Equipment

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P03-30
Customer list
(To recognize excess acquisition-date fair-value amortizations for the period)

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Given P03-30
Given Data P03-30:
Mergaronite
Hill
12/31/2013
12/31/2013
$ (600,000) $ (250,000)
280,000
100,000
120,000
50,000
Not given
NA
(900,000)
(600,000)
130,000
40,000
200,000
690,000
300,000
90,000
500,000
140,000
200,000
250,000
(400,000)
(310,000)
(300,000)
(40,000)
(50,000)
(160,000)

Revenues
Cost of goods sold
Depreciation expense
Investment income
Retained earnings, 1/1/13
Dividends paid
Current assets
Land
Buildings (net)
Equipment (net)
Liabilities
Common stock
Additional paid-in capital

Mergaronite's $10 par common stock issued

for acquisition of Hillnumber of shares
Fair market value of Mergaronite stockper share
Hill's land undervalued by
Hill's buildings overvalued by
Hill's equipment undervalued by
Remaining life of buildingsyears
Remaining life of equipmentyears
Appraised value of Hill's customer list
Remaining life of Hill's customer listyears

$
$
$
$

Page 7

7,000
100
20,000
30,000
60,000
10
5
100,000
20

P03-31
Student Name:
Class:
Problem 03-31

Part a. Consolidated Worksheet

PETERSON AND CONSOLIDATED SUBSIDIARY
Consolidation Worksheet
For Year Ending December 31, 2013

Peterson
Income Statement
Revenues
Cost of goods sold
Gain on bargain purchase
Depreciation and amortization
Equity earnings from Santiago
Net income
Statement of Retained Earnings
Retained earnings, 1/1
Net income
Dividends paid
Retained earnings, 12/31

Santiago,

(535,000) $
170,000
(100,000)
125,000
(160,000)
(500,000) $

(495,000)
155,000
140,000
(200,000)

$ (1,500,000) $
(500,000)
200,000
$ (1,800,000) $

(650,000)
(200,000)
50,000
(800,000)

Balance Sheet
Current assets
Investment in Santiago

Trademarks
Patented technology
Equipment
Total assets

100,000
300,000
610,000
$ 2,500,000

Liabilities
Common stock
Retained earnings, 12/31
Total liabilities and equity

190,000
1,300,000

300,000
-

200,000
400,000
300,000
$ 1,200,000

(165,000) $ (100,000)
(535,000)
(300,000)
(1,800,000)
(800,000)
$ (2,500,000) $ (1,200,000)

Parentheses indicate a credit balance.

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Adjustments & Eliminations

Debit

P03-31

ments & Eliminations

Credit

Consolidated

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Given P03-31
Given Data P03-31:
PETERSON CORPORATION
Santiago outstanding voting stock purchased by Peterson
Fair value consideration paid to Santiago
Santiago book value at acquisition date
Patented technology account undervalued
Estimated remaining life in years

100%
$ 1,090,000
$
950,000
$
240,000
6

Financial Statements
December 31, 2013
Peterson
Corp.
Income Statement
Revenues
Cost of goods sold
Gain on bargain purchase
Depreciation and amortization
Equity earnings from Santiago
Net income
Statement of Retained Earnings
Retained earnings, 1/1
Net income
Dividends paid
Retained earnings, 12/31
Balance Sheet
Current assets
Investment in Santiago
Trademarks
Patented technology
Equipment
Total assets
Liabilities
Common stock
Retained earnings, 12/31
Total liabilities and equity

$
$

Santiago
Inc.

(535,000) $
170,000
(100,000)
125,000
(160,000)
(500,000) $

(495,000)
155,000
140,000
(200,000)

(1,500,000) $
(500,000)
200,000
(1,800,000) $

(650,000)
(200,000)
50,000
(800,000)

190,000
1,300,000
100,000
300,000
610,000
2,500,000

300,000
200,000
400,000
300,000
$ 1,200,000

(165,000) $ (100,000)
(535,000)
(300,000)
(1,800,000)
(800,000)
(2,500,000) $ (1,200,000)

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