AAHamlen 3e - Solutions Manual - Ch05

CHAPTER 5
SOLUTIONS TO MULTIPLE CHOICE QUESTIONS, EXERCISES AND PROBLEMS

MULTIPLE CHOICE QUESTIONS
1.
b
Calculation of goodwill:
Acquisition cost
Fair value of noncontrolling interest
Total fair value
Book value
Plant and equipment revaluation
Identifiable intangibles
Fair value of identifiable net assets
Goodwill
$ 91,700,000
6,300,000
98,000,000
$ 13,000,000
(25,000,000)
40,000,000
28,000,000
$ 70,000,000
Allocation of goodwill between controlling and noncontrolling interest:

Total goodwill
Pomegranates goodwill: $91,700,000 (90% x $28,000,000)
Goodwill to noncontrolling interest
$ 70,000,000
66,500,000
$ 3,500,000
Goodwill is allocated 95% to the controlling interest and 5% to the noncontrolling

interest.
(R)
Goodwill
Plant and equipment
Investment in Starfruit (1)
Noncontrolling interest in Starfruit (2)
40,000,000
70,000,000
25,000,000
80,000,000
5,000,000
(1) [90% x ($40,000,000 - $25,000,000)] + $66,500,000

(2) [10% x ($40,000,000 - $25,000,000)] + $3,500,000
2.
c
(R)
Goodwill
Plant and equipment
24,000,000
68,000,000
20,000,000
68,200,000
3,800,000
(1) [90% x ($24,000,000 - $20,000,000)] + (95% x $68,000,000)

(2) [10% x ($24,000,000 - $20,000,000)] + (5% x $68,000,000)
Solutions Manual, Chapter 5
Cambridge Business Publishers, 2016

5-1
3.
b
Starfruit net income
Revaluation write-offs:
Plant and equipment depreciation
Identifiable intangibles amortization
Goodwill impairment loss
4.
Equity in Net Income

$ 6,750,000
NCI in Net Income

$ 750,000
2,250,000
(7,200,000)
(475,000)
$ 1,325,000
250,000
(800,000)
(25,000)
$ 175,000
c
10% x ($13,000,000 + $40,000,000 $25,000,000) = $2,800,000
5.
c
Noncontrolling interest in net income = $750,000 + $250,000 $800,000 =
Noncontrolling interest in OCI = 10% x $100,000 =
Noncontrolling interest in comprehensive income
6.
$ 200,000
10,000
$ 210,000
d
(E)
Stockholders equity
Investment in Starfruit
Noncontrolling interest in Starfruit
13,000,000
11,700,000
1,300,000
(R)
Plant and equipment
40,000,000
25,000,000
14,300,000
700,000
(1) Investment in Starfruit balance on Pomegranates books is $26,000,000 (= $20,000,000 cost + $6,000,000
gain on acquisition). Elimination of the investment in (R) is the remainder of the investment balance, after
elimination (E).
(2) The credit to noncontrolling interest in (R) brings the noncontrolling interest to fair value, after
elimination (E).
7.
a
There is no goodwill when the acquisition is a bargain purchase.
8.
9.
10.

5-2
Advanced Accounting, 3rd Edition
EXERCISES
E5.1
Date of Acquisition Consolidation Eliminating Entries

a. Calculation of goodwill:
Acquisition cost
Total fair value
Book value of Saylor
Revaluations:
Land
IPR&D
Goodwill
$ 12,000,000
2,600,000
14,600,000
$ 3,000,000
200,000
1,500,000
4,700,000
$ 9,900,000

Total goodwill
Pennants goodwill: $12,000,000 (80% x $4,700,000)
$ 9,900,000
8,240,000
$ 1,660,000
b. Working paper eliminating entries, date of acquisition:

(E)
Stockholders equity Saylor
Investment in Saylor (80%)
Noncontrolling interest in Saylor (20%)
3,000,000
2,400,000
600,000
(R)
Land
IPR&D
Goodwill
Investment in Saylor (1)
Noncontrolling interest in Saylor (2)
200,000
1,500,000
9,900,000
9,600,000
2,000,000
(1) [80% x ($200,000 + $1,500,000)] + $8,240,000 = $9,600,000

(2) [20% x ($200,000 + $1,500,000)] + $1,660,000 = $2,000,000

5-3
E5.2
Equity in Net Income and Noncontrolling Interest in Net Income

To allocate the goodwill impairment, we need to know the original allocations of
goodwill:
Acquisition cost
Total fair value
Book value of Sun City
Revaluation: Identifiable intangibles
Goodwill
$ 35,200,000
9,800,000
45,000,000
$ 3,000,000
5,000,000
8,000,000
$ 37,000,000

Total goodwill
Palms goodwill: $35,200,000 (70% x $8,000,000)
$ 37,000,000
29,600,000
$ 7,400,000
Goodwill is allocated in an 80:20 ratio.

2017 equity in net income and noncontrolling interest in net income:
Sun Citys reported net income

$5,000,000/5

5-4
Total
$ 8,000,000
Equity in NI
$ 5,600,000
Noncontrolling
Interest in NI
$ 2,400,000
(1,000,000)
(2,000,000)
$ 5,000,000
(700,000)
(1,600,000)
$ 3,300,000
(300,000)
(400,000)
$ 1,700,000
E5.3
Consolidation Eliminating Entries, Date of Acquisition and Two Years Later

Acquisition cost
Total fair value
Book value of Stardust
Revaluations:
Plant and equipment
Goodwill
$ 51,100,000
2,900,000
54,000,000
$ 2,000,000
(6,000,000)
8,000,000
4,000,000
$ 50,000,000

Total goodwill
Plazas goodwill: $51,100,000 (90% x $4,000,000)
$ 50,000,000
47,500,000
$ 2,500,000
Goodwill is allocated in a 95:5 ratio.

(E)
Capital stock
Retained earnings
Accumulated OCI
Investment in Stardust (90%)
Noncontrolling interest in Stardust (10%)
300,000
1,650,000
50,000
1,800,000
200,000
(R)
Goodwill
Plant and equipment
Investment in Stardust (1)
Noncontrolling interest in Stardust (2)
8,000,000
50,000,000
6,000,000
49,300,000
2,700,000
(1) [90% x ($8,000,000 - $6,000,000)] + $47,500,000 = $49,300,000

(2) [10% x ($8,000,000 - $6,000,000)] + $2,500,000 = $2,700,000

5-5
c. 2018 equity in net income and noncontrolling interest in net income:
Stardusts reported net income

Plant and equipment $6,000,000/10
Identifiable intangibles $8,000,000/4
Goodwill impairment loss 95:5
Total
$ 4,000,000
Equity
in NI
$ 3,600,000
600,000
540,000
(2,000,000) (1,800,000)
(200,000)
(190,000)
$ 2,400,000 $ 2,150,000
Noncontrolling
Interest in NI
$ 400,000
60,000
(200,000)
(10,000)
$ 250,000
Working paper eliminating entries, two years later:

(C)
Equity in NI
Equity in OCL
Investment in Stardust
(E)
Capital stock
Retained earnings, beg. (1)
Accumulated OCI, beg. (2)
Investment in Stardust (90%)
Noncontrolling interest in Stardust (10%)
2,150,000
9,000
2,141,000
300,000
4,450,000
75,000
4,342,500
482,500
(1) $1,650,000 + $2,800,000 = $4,450,000

(2) $50,000 + $25,000 = $75,000
(R)
Goodwill
Plant and equipment
Investment in Stardust (3)
Noncontrolling interest in Stardust (4)
6,000,000
50,000,000
5,400,000
48,040,000
2,560,000
(3) [90% x ($6,000,000 - $5,400,000)] + $47,500,000 = $48,040,000

(4) [10% x ($6,000,000 - $5,400,000)] + $2,500,000 = $2,560,000
(O)
Operating expenses
Plant and equipment
Goodwill
(N)
Noncontrolling interest in NI
Noncontrolling interest in OCL
Noncontrolling interest
5-6
1,600,000
600,000
2,000,000
200,000
250,000
1,000
249,000
E5.4
Date of Acquisition Consolidation Eliminating Entries, Bargain Purchase

a.
Acquisition cost
Total
Book value of Sparrow
Revaluations:
Land
Other plant assets, net
Equity method investments
Long-term debt
Gain on acquisition
$ 22,000,000
4,000,000
26,000,000
$ 25,000,000
(800,000)
2,000,000
1,500,000
(700,000)
27,000,000
$ (1,000,000)
Peregrines acquisition entry:

Investment in Sparrow
Merger expenses
Cash
Gain on acquisition
23,000,000
3,000,000
25,000,000
1,000,000

(E)
Capital stock
Retained earnings
Accumulated other comprehensive income
Treasury stock
Investment in Sparrow (80%)
Noncontrolling interest in Sparrow (20%)
(R)
Other plant assets, net
Equity method investments
Noncontrolling interest in Sparrow (1)
Land
Long-term debt
Investment in Sparrow (2)
4,000,000
20,000,000
1,500,000
500,000
20,000,000
5,000,000
2,000,000
1,500,000
1,000,000
800,000
700,000
3,000,000
(1) $5,000,000 $4,000,000 = $1,000,000 adjustment needed to bring the NCI balance to its fair value
at the date of acquisition.
(2) $23,000,000 $20,000,000 = $3,000,000 to eliminate the remainder of the investment balance.

5-7
E5.5
Consolidation Eliminating Entries at End of First Year (see related E4.3)

a. Calculation of goodwill is as follows:
Acquisition cost ($10,000,000 + $300,000)
Total
Book value of Saddlestone
Revaluation: Identifiable intangibles
Goodwill
$ 10,300,000
6,500,000
16,800,000
$ 7,200,000
2,000,000
9,200,000
$ 7,600,000

Total goodwill
Peaks goodwill: $10,300,000 (60% x $9,200,000)
$ 7,600,000
4,780,000
$ 2,820,000
b. 2016 equity in net income and noncontrolling interest in net income:
Saddlestones reported net income

Revaluation write-off:
Identifiable intangibles $2,000,000/5
Total
$ 3,000,000
Equity in NI
$ 1,800,000
(400,000)
$ 2,600,000
(240,000)
$ 1,560,000
Noncontrolling
interest in NI
$ 1,200,000
(160,000)
$ 1,040,000
c. Consolidation working paper eliminating entries for 2016:

(C)
Equity in net income of Saddlestone
Dividends Saddlestone
Investment in Saddlestone
(E)
Stockholders equitySaddlestone, 1/1
Investment in Saddlestone
Noncontrolling interest in Saddlestone
(R)
Goodwill
Investment in Saddlestone (1)
Noncontrolling interest in Saddlestone (2)
1,560,000
600,000
960,000
7,200,000
4,320,000
2,880,000
2,000,000
7,600,000
5,980,000
3,620,000
(1) (60% x $2,000,000) + $4,780,000

(2) (40% x $2,000,000) + $2,820,000

5-8
(O)
Amortization expense
400,000
400,000
(N)
Noncontrolling interest in income of Saddlestone
Dividends Saddlestone
Noncontrolling interest in Saddlestone
E5.6
1,040,000
400,000
640,000
Consolidation Eliminations Several Years After Acquisition

a.
Paramounts acquisition cost
Total
Book value, date of acquisition
Revaluations:
Accounts receivable
Inventory
Equipment
Patents
Deferred tax liabilities
Goodwill
$ 2,910,000
790,000
3,700,000
$1,500,000
(100,000)
(125,000)
(400,000)
200,000
(75,000)
1,000,000
$ 2,700,000
Paramounts share of goodwill = $2,910,000 (75% x $1,000,000) = $2,160,000

Noncontrolling interests share of goodwill = $540,000 (20%)
(80%)
b.
January 2012 balance
Change in Suns retained earnings, 2012-2017:
($1,800,000 $800,000), divided 75:25
Write-off of Suns identifiable net asset revaluations,
2012-2017: ($100,000 + $125,000 + $240,000
$200,000 + $60,000), divided 75:25
Goodwill impairment, 2012-2017:
($2,700,000 $2,000,000), divided 80:20
Balance, end of 2017
Investment
$ 2,910,000
Noncontrolling
interest
$
790,000
750,000
250,000
243,750
81,250
(560,000)
$ 3,343,750
(140,000)
981,250

5-9
c. (E)
Stockholders equity-Sun
Investment in Sun
Noncontrolling interest in Sun
2,500,000
1,875,000
625,000
(R)
Goodwill
Equipment, net (1)
Investment in Sun (2)
Noncontrolling interest in Sun (3)
2,000,000
160,000
15,000
1,468,750
356,250
(1) $400,000 [(6/10) x $400,000]

(2) (80% x $2,000,000) (75% x $175,000)
(3) (20% x $2,000,000) (25% x $175,000)
E5.7
Consolidation Eliminating Entries Several Years After Acquisition

a.
Acquisition cost
Total
Book value, date of acquisition
Revaluations:
Plant and equipment
Favorable lease agreements
Gaming licenses
Goodwill
$ 41,450
13,550
55,000
$
4,000
(15,000)
5,000
7,000
(3,000)
Palomars share of goodwill = $41,450 (65% x -$2,000) = $42,750

Noncontrolling interests share of goodwill = $14,250
(25%)
(2,000)
$ 57,000
(75%)
b.
Date of acquisition cost
Change in Saharas retained earnings, 2013-2016: ($12,000 $1,500) x 65%
Revaluation write-offs, identifiable net assets, 2013-2016:
+ Plant and equipment [4 x ($15,000/20)] x 65%
- Favorable leases $5,000 x 65%
- Gaming licenses [4 x ($7,000/7)] x 65%
+ Deferred tax reversals $2,200 x 65%
Goodwill impairment losses, 2013-2016 $3,600 x 75%
Balance, January 1, 2017
+ Equity in NI for 2017 [($2,550 + $15,000/20 - $7,000/7 + $300) x 65%]
($1,000 x 75%)
- Dividends (65% x $200)
Investment balance, December 31, 2017

5-10
Investment
$ 41,450
6,825
1,950
(3,250)
(2,600)
1,430
(2,700)
43,105
940
(130)
$ 43,915
c. (C)
Equity in NI
Dividends
Investment in Sahara
940
130
810
(E)
Capital stock
RE, January 1
Investment in Sahara
2,500
12,000
9,425
5,075
(R)
Gaming licenses
Goodwill
Plant and equipment
Investment in Sahara (1)
Noncontrolling interest (2)
3,000
53,400
12,000
800
33,680
9,920
(1) [65% x ($3,000 - $12,000 - $800)] + (75% x $53,400) = $33,680

(2) [35% x ($3,000 - $12,000 - $800)] + (25% x $53,400) = $9,920
(O)
Plant and equipment
Depreciation expense
Tax expense
Goodwill
Gaming licenses
750
300
1,000
1,000
750
300
1,000
1,000
(N)
Noncontrolling interest in NI (3)
Dividends
660
70
590
(3) [($2,550 + $15,000/20 - $7,000/7 + $300) x 35%] ($1,000 x 25%) = $660

5-11
E5.8
Consolidation Working Paper, Date of Acquisition (see related E3.9)

Acquisition cost
Total fair value
Book value of Sylvan
Goodwill
$ 43,000,000
4,250,000
47,250,000
17,000,000
$ 30,250,000

Total goodwill
Princecrafts goodwill: $43,000,000 (90% x $17,000,000)
$ 30,250,000
27,700,000
$ 2,550,000
b.
Consolidation Working Paper
Accounts Taken
From Books
(in thousands)
Cash
Princecraft
Dr (Cr)
$
Eliminations
Sylvan
Dr (Cr)
Dr
Cr
Consolidated
Balances
Dr (Cr)
17,000
$ 2,000
$ 19,000
Other current assets
20,000
8,000
28,000
Property and equipment, net
70,000
15,000
85,000
Investment in Sylvan
43,000
--
15,300 (E)
27,700 (R)
Goodwill
--
--
(R)
--
30,250
30,250
Total liabilities
(30,000)
(8,000)
(38,000)
Common stock
(15,000)
(5,000)
(E)
5,000
(15,000)
Additional paid-in capital
(45,000)
(10,000)
(E)
10,000
(45,000)
Retained earnings
(60,000)
(2,000)
(E)
2,000
(60,000)
1,700 (E)
______
Total
______
$
______
$ 47,250
2,550 (R)
$47,250
(4,250)
$
Note: Princecrafts balance sheet above reflects the following acquisition entry (in
thousands):
Investment in Sylvan
Cash
5-12
43,000
43,000
c.
Consolidated Balance Sheet, Date of Acquisition (in thousands)
Assets
Cash
Other current assets
Property and equipment, net
Goodwill
Total assets
Liabilities and stockholders equity
Total liabilities
Stockholders equity
Princecrafts stockholders equity:
Common stock
Retained earnings
Total Princecrafts stockholders equity
Total stockholders equity
Total liabilities and stockholders equity
E5.9
19,000
28,000
85,000
30,250
$ 162,250
$
38,000
15,000
45,000
60,000
120,000
4,250
124,250
$ 162,250
Consolidation Eliminating Entries, Date of Acquisition: U.S. GAAP and IFRS

(in thousands)
a. Plummers acquisition entry:
Investment in Softek
Merger expenses
Cash
Common stock, par value
25,000
500
500
4,000
21,000
Acquisition cost
Total fair value
Book value of Softek
Revaluations:
Plant assets
Trademarks
Customer lists
Long-term debt
Goodwill
$ 25,000
2,500
27,500
$ 12,000
(3,000)
1,500
1,000
(100)
11,400
$ 16,100

5-13

Total goodwill
Plummers goodwill: $25,000 (90% x $11,400)
$
$
16,100
14,740
1,360
Consolidation eliminating entries:

(E)
Common stock
Retained earnings
Accumulated OCI
Treasury stock
Noncontrolling interest in Softek
200
8,000
5,000
800
400
10,800
1,200
(R)
Trademarks
Customer lists
Goodwill
Plant assets, net
Long-term debt
Investment in Softek (1)
Noncontrolling interest in Softek (2)
1,500
1,000
16,100
3,000
100
14,200
1,300
(1) [90% x ($1,500 + $1,000 $3,000 $100)] + $14,740 = $14,200

(2) [10% x ($1,500 + $1,000 $3,000 $100)] + $1,360 = $1,300
b. Consolidation eliminating entries:

(E)
Common stock
Retained earnings
Accumulated OCI
Treasury stock
Noncontrolling interest in Softek

5-14
200
8,000
5,000
800
400
10,800
1,200
(R)
Trademarks
Customer lists
Goodwill
Noncontrolling interest in Softek (3)
Plant assets, net
Long-term debt
1,500
1,000
14,740
60
3,000
100
14,200
(3) 10% x ($1,500 + $1,000 $3,000 $100) = $(60)
Note: The IFRS alternative valuation method attributes no goodwill to the

noncontrolling interest. The noncontrolling interest balance at the date of acquisition
is 10% x the fair value of Softeks identifiable net assets, or 10% x $11,400 = $1,140.
E5.10 Consolidation at Date of Acquisition, IFRS and U.S. GAAP
(in millions)
Acquisition cost
Less 49% fair value of identifiable net assets
Goodwill
39.00
(2.45)
36.55
49% x 5
Noncontrolling interest = 51% x 5 = 2.55

b. (E)
Stockholders equity
Investment in Compador
(R)
Current assets
Current liabilities and provisions
Goodwill
Noncurrent assets
5.00
2.45
2.55
0.10
0.10
36.55
0.20
36.55
Note: There is no revaluation adjustment to the noncontrolling interest in (R) because

the total fair value of the identifiable net assets equals book value.

5-15
c. Calculation of goodwill:
Acquisition cost
Total fair value
Book value
Net revaluations of identifiable net assets
Goodwill
39.00
38.00
77.00
5.00
-5.00
72.00
Goodwill to the controlling interest = 39.00 (49% x 5.00) = 36.55 (equal to the
amount reported using the IFRS alternative).
Noncontrolling interests = fair value at date of acquisition = 38.
d. (E)
Stockholders equity
5.00
2.45
2.55
(R)
Current assets
Current liabilities and provisions
Goodwill
Noncurrent assets
0.10
0.10
72.00
0.20
36.55
35.45
E5.11 Consolidation Eliminating Entries, One Year After Acquisition, IFRS

Acquisition cost
Share of fair value of identifiable net assets: ( 7,000,000 x 45%)
Goodwill
65,000,000
3,150,000
61,850,000
Noncontrolling interests = 55% x 7,000,000 = 3,850,000.

5-16
b. (C)
Equity in NI of E-Minus
Investment in E-Minus
1,800,000
1,800,000
45% x 4,000,000 = 1,800,000.
(E)
Stockholders equity
(R)
Goodwill
7,000,000
3,150,000
3,850,000
61,850,000
61,850,000
Eliminating entry (O) is not required since goodwill is not impaired.

(N)
2,200,000
2,200,000
4,000,000 x 55% = 2,200,000.
E5.12 Consolidation at Acquisition Date, IFRS

(in millions)
Acquisition cost
Total fair value of Sotelma
Fair value of identifiable net assets:
Book value
Revaluations:
License
Customer bases
Deferred tax
Total fair value of identifiable net assets
Goodwill
278
208
486
35
24
2
(3)
58
428
Goodwill to controlling interests = 278 (51% x 58) = 248

Goodwill to noncontrolling interests = 428 - 248 = 180

5-17
b. Maroc Telecom paid a premium to purchase a controlling interest in Sotelma.

Marocs acquisition cost of 278 implies a full price of 278/.51 = 545, and a
noncontrolling interest value of 545 x 49% = 267. However, the fair value of the
noncontrolling interest is only 208.
c. (E)
Stockholders equity-Sotelma
Investment in Sotelma
35
18
17
(R)
License
Customer bases
Goodwill
Deferred tax
Investment in Sotelma
24
2
428
3
260
191
260 = (51% x 23) + 248; 191 = (49% x 23) + 180.
d. Noncontrolling interest = 49% x 58 = 28

E5.13 Consolidated Balance Sheet, Date of Acquisition: U.S. GAAP and IFRS
Acquisition cost $3,000,000 + (200,000 x $80)
Total fair value
Book value of Powerline
Revaluations:
Current assets
Plant and equipment
Brand names
Goodwill
$ 19,000,000
1,800,000
20,800,000
$ 4,500,000
(500,000)
(6,000,000)
3,000,000
1,000,000
$ 19,800,000

Total goodwill
Microsofts goodwill: $19,000,000 (90% x $1,000,000)

5-18
$ 19,800,000
18,100,000
$ 1,700,000
b.
Accounts Taken
From Books
Eliminations
(in thousands)
Microsoft
Dr (Cr)
Powerline
Dr (Cr)
Current assets
$ 7,000
$ 2,000
500 (R)
Plant and equipment, net
35,000
7,000
6,000 (R)
Investment in Powerline
19,000
Dr
Cr
Consolidated
Balances
Dr (Cr)
$
8,500
36,000
4,050 (E)
14,950 (R)
--
Brand names
--
(R) 3,000
3,000
Goodwill
--
(R) 19,800
19,800
Current liabilities
(5,000)
(1,500)
(6,500)
(20,000)
(3,000)
(23,000)
(5,000)
(100)
(19,600)
Retained earnings
(11,000)
Long-term liabilities
Accumulated other
comprehensive (income) loss
(400)
Total
100
(5,000)
(1,450)
(E) 1,450
(19,600)
(3,000)
(E) 3,000
(11,000)
50
--
--
________
_______
(E)
50 (E)
(400)
450 (E)
______
$ 27,350
1,350 (R)
$ 27,350
(1,800)
$
Note 1: Microsofts balance sheet above reflects the following acquisition entry (in
thousands):
19,000
Cash
3,000
Common stock
2,000
14,000
Note 2: The $14,950,000 credit to investment in entry (R) = [90% (-$500,000 $6,000,000 + $3,000,000)] + $18,100,000 (goodwill).
The $1,350,000 credit to noncontrolling interest in entry (R) = [10% ($500,000 - $6,000,000 + $3,000,000)] + $1,700,000 (goodwill).

5-19
c. Calculation of goodwill:
Acquisition cost
90% x fair value of identifiable net assets
Goodwill
90% x $1,000,000
$ 19,000,000
900,000
$ 18,100,000

Accounts Taken
From Books
Eliminations
(in thousands)
Microsoft
Dr (Cr)
Powerline
Dr (Cr)
Current assets
$ 7,000
$ 2,000
500 (R)
35,000
7,000
6,000 (R)
19,000
Dr
Cr
Consolidated
Balances
Dr (Cr)
$
8,500
36,000
4,050 (E)
14,950 (R)
--
Brand names
--
(R) 3,000
3,000
Goodwill
--
(R) 18,100
18,100
Current liabilities
(5,000)
(1,500)
(6,500)
(20,000)
(3,000)
(23,000)
(5,000)
(100)
(19,600)
Retained earnings
(11,000)
Accumulated other
comprehensive (income) loss
(400)
Total
100
(5,000)
(1,450)
(E) 1,450
(19,600)
(3,000)
(E) 3,000
(11,000)
50
-$
(E)
-$
(R)
350
$ 26,000
50 (E)
(400)
450 (E)
(100)
$ 26,000
Note: The IFRS alternative valuation method attributes no goodwill to the

noncontrolling interest. At the date of acquisition, the noncontrolling interest
is valued at 10% of the fair value of Powerlines identifiable net assets, or
10% x $1,000,000 = $100,000.

5-20
E5.14 Consolidated Cash Flow from Operations

Consolidated net income
+ Consolidated depreciation expense
+ Amortization of previously unrecognized identifiable intangibles
- Amortization of premium on LT debt
- 40% of undistributed equity method income (40% x $1,700,000)
+ Decrease in noncash current operating assets
- Decrease in current operating liabilities
Cash flow from operating activities
$ 20,000,000
3,000,000
1,400,000
(80,000)
(680,000)
2,800,000
(2,100,000)
$ 24,340,000
E5.15 Consolidated Cash Flow from Operations

a.
Parents reported income
Subsidiarys reported income
Less revaluation write-offs:
Depreciation
Amortization
$ 1,000,000
240,000

+ Consolidated depreciation expense (1)
+ Consolidated amortization expense (2)
+ Goodwill impairment loss
- Undistributed equity investment income (3)
Cash flow from operating activities
$ 1,182,000
216,000
65,000
40,000
(25,000)
$ 1,478,000
(3,000)
(15,000)
(40,000)
$ 1,182,000
b.
(1) $175,000 + $38,000 + $3,000

(2) $50,000 + $15,000
(3) $60,000 - $35,000

5-21
PROBLEMS
P5.1
Consolidation Working Paper, Date of Acquisition

(in millions)
Acquisition cost
Total fair value
Book value of Bagota
Revaluations:
Property, plant and equipment
Patents and trademarks
Customer-related intangibles
Goodwill
$ 1,200
_375
1,575
$ 500
(200)
45
30
25
_ 400
$ 1,175

Total goodwill
Hersheys goodwill: $1,200 (75% x $400)
$ 1,175
900
$ 275
b.
Accounts Taken
From Books
Eliminations
(in millions)
Current assets
PP&E, net
Investment in Bagota
Patents and trademarks
Customer-related intangs
Goodwill
Current liabilities
Retained earnings
Treasury stock
Accumulated OCL
Total liabilities and equity
5-22
Hershey
Dr (Cr)
$ 1,500
1,600
1,200
Bagota
Dr (Cr)
$ 325
600
--
1,300
--
75
(1,600)
(1,900)
(300)
(1,950)
(3,900)
4,000
50
(100)
(400)
(10)
(200)
(300)
-10
______
$
0
______
$
0
Dr
Cr
200 (R)
375 (E)
825 (R)
(R)
45
(R)
30
(R) 1,175
(R)
(E)
(E)
(E)
25
10
200
300
______
$ 1,785
10 (E)
125 (E)
250 (R)
$ 1,785
Consolidated
Balances
Dr (Cr)
$ 1,825
2,000
-1,420
30
1,175
(1,700)
(2,275)
(300)
(1,950)
(3,900)
4,000
50
(375)
0
c.
Consolidated Balance Sheet, July 1, 2016
Assets
Current assets
Property, plant and equipment, net
Goodwill
Total assets
Current liabilities
Total liabilities
Stockholders equity
Hersheys stockholders equity:
Common stock
Retained earnings
Treasury stock
Accumulated other comprehensive loss
Total Hershey stockholders equity
P5.2
$
$
1,825
2,000
1,175
1,450
6,450
1,700
2,275
3,975
300
1,950
3,900
(4,000)
(50)
2,100
375
2,475
$ 6,450
Consolidated Balance Sheet Working Paper, Date of Acquisition, Bargain Purchase

(see related P3.4)
(in millions)
a.
Acquisition cost
Total
Book value of Saxon
Revaluations:
Inventory
Long-term investments
Land
Buildings and equipment, net
Long-term debt
Gain on acquisition
$ 1,000
200
$ 1,200
$ 1,295
100
(50)
245
300
110
2,000
$ (800)

5-23
Paxons acquisition entry:

Investment in Saxon
Cash
Gain on acquisition
1,800
1,000
800
b.
Accounts Taken
From Books
Paxon
Dr (Cr)
Cash and receivables
Eliminations
Saxon
Dr (Cr)
$ 1,860
$ 720
1,700
900
--
300
Inventory
Investment in Saxon
Dr
Consolidated
Balances
Dr (Cr)
Cr
$ 2,580
(R)
100
2,700
50 (R)
1,800
250
1,036 (E)
764 (R)
Land
--
650
175
(R)
245
1,070
Buildings and equipment
3,400
600
(R)
300
4,300
Accumulated depreciation
(1,000)
Current liabilities
(1,500)
(1,000)
Long-term debt
(2,000)
(400)
(R)
110
(500)
(100)
(E)
100
(500)
(1,200)
(350)
(E)
350
(1,200)
Retained earnings
(3,210)
(845)
(E)
845
(3,210)
(R)
59
Total
Note:
--
-$
-$
(1,000)
(2,500)
$ 2,109
(2,290)
259 (E)
$ 2,109
(200)
$
In journal entry form, the eliminating entries are:
(E)
Retained earnings
Investment in Saxon

5-24
100
350
845
1,036
259
(R)
Inventory
Land
Long-term debt
Investment in Saxon
100
245
300
110
59
50
764
The adjustment to noncontrolling interest brings its balance to fair value at the
acquisition date. The adjustment to the investment eliminates the remaining balance.
c.
Consolidated Balance Sheet, January 1, 2016
Assets
Inventory
Current assets
Land
Buildings and equipment, net of $1,000 accumulated
depreciation
Total assets
Current liabilities
Long-term debt
Total liabilities
Stockholders equity
Paxon stockholders equity:
Common stock
Retained earnings
Total Paxon stockholders equity
$
$
2,580
2,700
5,280
250
1,070
3,300
9,900
2,500
2,290
4,790
500
1,200
3,210
4,910
200
5,110
9,900

5-25
P5.3
Consolidation Eliminating Entries, Date of Acquisition

(in thousands)
a.
Investment in Summer
Merger expenses
Cash
Earnings contingency liability
8,800
300
8,300
800
b. Consolidation working paper eliminating entries:

(E)
Common stock
Retained earnings
Investment in Summer
500
3,000
2,625
875
(R)
In-process research and development
Goodwill (1)
Noncurrent liabilities
Inventories
Plant assets, net
Intangibles
Lawsuit liability
Investment in Summer (2)
Noncontrolling interest (3)
(1) Calculation of goodwill:
Acquisition cost
Total fair value
Book value of Summer
Revaluations:
Inventories
Plant assets, net
Intangibles
Noncurrent liabilities
IPR&D
Lawsuit liability
Goodwill
1,500
9,300
100
200
500
1,000
1,000
400
6,175
1,625
$ 8,800
2,500
11,300
$ 3,500
(200)
(500)
(1,000)
(1,000)
100
1,500
(400)
2,000
$ 9,300

Total goodwill
$ 9,300
Placers goodwill: $8,800 (75% x $2,000)
7,300
$ 2,000
(2) [75% x ($100 + $1,500 $200 $500 $1,000 $1,000 $400)] + $7,300 = $6,175
(3) [25% x ($100 + $1,500 $200 $500 $1,000 $1,000 $400)] + $2,000 = $1,625
5-26
P5.4
Consolidated Working Paper One Year After Acquisition, Bargain Purchase (see
related P4.4)
(in millions)
a. Calculation of gain on acquisition:
Acquisition cost
$ 1,620
180
1,800
Book value ($100 + $350 + $845)

Revaluations:
Inventory
Land
Long-term debt (discount)
Gain on acquisition
$ 1,295
100
(50)
245
300
110
2,000
$ (200)
b.
Equity
in NI
Total
Saxons reported net income for 2016
($10,000 + $10 $8,000 $40 $25
$1,600 = $345)
Inventory
Long-term investments (adjustment to
gain on sale)
Buildings and equipment ($300/20)
Long-term debt ($110/5)
$ 345
(100)
50
(15)
(22)
$ 258
$ 310.5
Noncontrolling
interest in NI
$ 34.5
(90)
(10)
45
(13.5)
(19.8)
$ 232.2
5
(1.5)
(2.2)
$ 25.8

5-27
c.
Consolidation Working Paper, December 31, 2016
Trial Balances
Taken From Books
Paxon
Dr (Cr)
Saxon
Dr (Cr)
3,270
Inventory
Investment in Saxon
Eliminations
Dr
Consolidated
Balances
Dr (Cr)
Cr
800
2,260
940
--
--
1,962.2
$ 4,070
(R)
100
(O-2)
50
--
100 (O-1)
50
3,200
(R)
--
142.2 (C)
1,165.5 (E)
654.5 (R)
Land
--
650
300
(R)
245
3,600
1,150
(R)
300
Current liabilities
(2,020)
(1,200)
Long-term debt
(5,000)
(450)
(R)
110
Common stock
(500)
(100)
(E)
100
(500)
(1,200)
(350)
(E)
350
(1,200)
Retained earnings, Jan. 1
(2,610)
(845)
(E)
845
(2,610)
--
1,195
15 (O-3)
5,035
(3,220)
--
22 (O-4)
(5,362)
129.5 (E)
50.5 (R)
15.8 (N)
Dividends
Sales revenue
500
(30,000)
Equity in net income of Saxon

Gain on sale of securities
Cost of goods sold
100
90
(C)
10
(N)
(10,000)
(232.2)
--
--
(10)
(195.8)
500
(40,000)
(C)
232.2
-50 (O-2)
(60)
26,000
8,000
300
40
(O-3)
15
355
Interest expense
250
25
(O-4)
22
297
2,770
1,600
--
--
Other operating expenses

$

5-28
(O-1) 100
34,100
4,370
(N)
25.8
______
$ 2,495
$ 2,495
25.8
$
P5.5
Consolidated Working Paper Two Years After Acquisition, Bargain Purchase (see
related P5.4)
(all amounts in millions)
a.
Equity
in NI
Noncontrolling
interest in NI
$ 200
$ 180
$ 20
(15)
(22)
$ 163
(13.5)
(19.8)
$ 146.7
(1.5)
(2.2)
$ 16.3
Total
Saxons reported net income for 2017
($12,000 $9,500 $60 $40 $2,200
= $200)
Buildings and equipment ($300/20)
Long-term debt ($110/5)
Note:
Inventory (FIFO) and long-term investment revaluations were realized
through sale in 2016.
b.
Trial Balances
Taken From Books
Eliminations
Paxson
Dr (Cr)
Saxon
Dr (Cr)
$ 3,000
Inventory
2,500
Investment in Saxon
2,063.9
Dr
Consolidated
Balances
Dr (Cr)
Cr
850
950
3,450
--
101.7 (C)
1,386
(E)
576.2 (R)
Land
650
250
(R)
245
5,905
1,440
(R)
285
Current liabilities
(2,500)
(1,000)
Long-term debt
(6,000)
(800)
(R)
88
Common stock
3,850
-1,145
15 (O-1)
7,615
(3,500)
22 (O-2)
(6,734)
(500)
(100)
(E)
100
(500)
(1,200)
(350)
(E)
350
(1,200)
(3,022.2)
(1,090)
(E)
1,090
--
--
(3,022.2)
154
(E)
41.8 (R)
11.3 (N)
(207.1)
continued

5-29
b. table continued
Trial Balances
Taken From Books
Paxson
Dr (Cr)
Dividends
Sales revenue
Equity in net income of Saxon
Dr
Consolidated
Balances
Dr (Cr)
Cr
50
45
(C)
(N)
500
(12,000)
(146.7)
Cost of goods sold
--
(47,000)
(C)
146.7
--
30,000
9,500
450
60
(O-1)
15
525
Interest expense
300
40
(O-2)
22
362
3,000
2,200
--
--

$
P5.6
Saxon
Dr (Cr)
500
(35,000)
Eliminations
39,500
5,200
(N)
16.3
$ 2,358
______
16.3
$ 2,358
Consolidation Working Paper, Second Year Following Acquisition

(in millions)
a. Calculation of 2015 equity in net loss and noncontrolling interest in net loss:
Equity
in NL
Total
Emerald Safari Resort reported loss ($2,200 +
$300 + $200 $1,800 $1,000) = $(100)
Noncontrolling
interest in NL
$ (100)
$ (70)
$ (30)
( 10)
(7)
(3)
$ (110)
$ (77)
$ (33)

5-30
b.
Trial Balances
Taken From Books
Dr (Cr)
Harrahs
Entertainment
Current assets
1,400
Land, buildings,
riverboats and
equipment, net
17,844.7
Intangible assets
2,500
Investment in Emerald
Eliminations
Emerald
Safari Resort
$
Dr
Cr
200
20,263.7
800
(R)
60
--
(C)
80.5
10
(O)
3,350
436.8 (E)
42
1,600
2,419
398.3
Current liabilities
Consolidated
Balances
Dr (Cr)
(R)
--
(1,500)
(300)
(1,800)
(14,000)
(2,600)
(16,600)
(5,520)
(324)
(E)
324
(5,520)
(900)
(300)
(E)
300
(900)
Capital stock
--
--
(N)
34.5
187.2 (E)
18
Dividends
100
(R)
(170.7)
3.5 (C)
1.5 (N)
100
Casino revenues
(6,600)
(2,200)
(8,800)
Food and beverage

revenues
(1,400)
(300)
(1,700)
Rooms revenues
(1,000)
(200)
(1,200)
Equity in net loss of

Emerald
77
--
Direct casino, food and

beverage, rooms
expenses
7,200
1,800
9,000
General and
administrative expenses
1,400
1,000
2,400
Impairment losses
--
--
Noncontrolling interest in
net loss
--
--
_____
33
$ 809
$ 809
77
(O)
(C)
--
10
10
(N)
(33)
$

5-31
P5.7
Equity Method and Eliminating Entries Three Years After Acquisition (see related
P4.2)
a. Calculation of equity in net income and noncontrolling interest in net income for
2016:
Total
Sunset Coasts reported net income for
2016
Plant assets ($1,000,000)/10
Identifiable intangibles $3,600,000/20 (1)
Equity
in NI
Noncontrolling
interest in NI
$ 200,000
$ 180,000
$ 20,000
100,000
(180,000)
$ 120,000
90,000
(162,000)
$ 108,000
10,000
(18,000)
$ 12,000
(1) $3,600,000 = $3,150,000 + $350,000 ($1,400,000 $500,000 $1,000,000)
b. Calculation of investment balance at December 31, 2016:

Investment in Sunset Coast, January 1, 2014
90% x Sunset Coasts reported income, 2014-2016
90% x Sunset Coasts reported dividends, 2014-2016 (50% of
reported income)
Revaluation write-offs, 2014-2016:
Plant assets [($1,000,000)/10] x 3 x 90%
Identifiable intangibles ($3,600,000/20) x 3 x 90%
Investment in Sunset Coast, December 31, 2016
$3,150,000
765,000
(382,500)
270,000
(486,000)
$3,316,500
Note: Under LIFO and increasing inventory, the revalued inventory is assumed to
still be on hand.
c. Calculation of noncontrolling interest balance at December 31, 2016:
Fair value of noncontrolling interest, January 1, 2014
10% x Sunset Coasts reported income, 2014-2016
10% x Sunset Coasts reported dividends, 2014-2016 (50% of
reported income)
Revaluation write-offs, 2014-2016:
Plant assets ($1,000,000/10) x 3 x 10%
Identifiable intangibles ($3,600,000/20) x 3 x 10%
Noncontrolling interest in Sunset Coast, December 31, 2016

5-32
$ 350,000
85,000
(42,500)
30,000
(54,000)
$ 368,500
d. Consolidation working paper eliminating entries for 2016:

(C)
Equity in net income of Sunset Coast
DividendsSunset Coast (0.5 x $200,000 x 90%)
Investment in Sunset Coast
(E)
Stockholders equitySunset Coast, 1/1
Noncontrolling interest in Sunset Coast
108,000
90,000
18,000
1,725,000
1,552,500
172,500
Sunset Coasts stockholders equity, January 1, 2016 = $1,400,000 + (1 - 0.5)($850,000 $200,000) =

$1,725,000.
(R)
3,240,000
Inventory
500,000
Plant assets, net
800,000
1,746,000
194,000
Revaluations at January 1, 2016 = original revaluations less write-offs for 2014 and
2015.
(O)
Plant assets, net
(N)
Noncontrolling interest in NI of Sunset Coast
Dividends Sunset Coast (0.5 x $200,000 x
10%)
100,000
180,000
100,000
180,000
12,000
10,000
2,000

5-33
P5.8
Consolidation Working Paper After Several Years

(in thousands)
Acquisition cost
Total fair value
Book value of Regional Bottling
Previously unreported franchise rights
Goodwill
$ 72,000
13,000
85,000
$ 25,000
5,000
30,000
$ 55,000

Total goodwill
Consolidated Bottlings goodwill: $72,000 (75% x $30,000) (90%)
Goodwill to noncontrolling interest (10%)
$ 55,000
49,500
$ 5,500
b. Calculation of equity in net loss and noncontrolling interest in net loss for 2017:
Total
Regional Bottlings reported net income
for 2017 (1)
Franchise rights impairment
Goodwill impairment (90:10 ratio)
$ 3,000
(2,500)
(6,000)
$ (5,500)
Equity
in NL
$
2,250
(1,875)
(5,400)
$ (5,025)
Noncontrolling
interest in NL
$
750
(625)
__(600)
$ (475)
(1) $3,000 = $300,000 ($175,000 + $114,000 + $8,000)
c. Calculation of investment balance at December 31, 2017:

Investment in Regional Bottling, January 1, 2008
75% x Regionals reported comprehensive income less dividends,
2008-2016 (2)
75% x franchise rights write-offs, 2008-2016
Investment in Regional Bottling, January 1, 2017
Equity in net loss, 2017
Equity in OCL, 2017
Investment in Regional Bottling, December 31, 2017
$ 72,000
4,350
(750)
75,600
(5,025)
(15)
$ 70,560
(2) Change in book value 2008-2016 of $5,800 (= $30,800 $25,000) is attributed to accumulated
comprehensive income less dividends, since the stock accounts did not change; $30,800 =
$1,000 + $12,000 + $18,100 $100 $200.

5-34
d.
Trial Balances
Taken From Books
Eliminations
Consolidated
Bottling
Dr (Cr)
Regional
Bottling
Dr (Cr)
$ 160,000
$ 30,000
Property, plant & equipment, net
248,000
233,780
Franchise rights, net
466,400
--
(R)
4,000
2,500 (O)
70,560
--
(C)
5,040
23,100 (E)
Current assets
Investment in Regional Bottling

Goodwill
--
--
Dr
Cr
Consolidated
Balances
Dr (Cr)
$ 190,000
481,780
(R) 55,000
467,900
52,500 (R)
--
6,000 (O)
49,000
Current liabilities
(120,000)
(20,000)
(140,000)
Long-term debt
(700,000)
(210,000)
(910,000)
Common stock
(12,000)
(1,000)
(100,000)
(50,500)
(E)
1,000
(12,000)
(12,000)
(E) 12,000
(100,000)
(18,100)
(E) 18,100
(50,500)
Accumulated other
comprehensive loss, Jan. 1
13,000
100
100 (E)
13,000
Treasury stock
30,000
200
200 (E)
30,000
--
--
2,000
--
(N)
480
7,700 (E)
6,500 (R)
Dividends
Net sales
(1,200,000)
Equity in net loss of Regional

Bottling
2,000
(300,000)
5,025
Equity in OCL of Regional

Bottling
(13,720)
(1,500,000)
--
15
5,025 (C)
--
15 (C)
--
Cost of sales
760,000
175,000
935,000
Selling, delivery and

administrative expenses
400,000
114,000
514,000
500
--
Interest expense
28,000
8,000
Other comprehensive (income)

loss
(1,000)
Impairment losses
--
--
Noncontrolling interest in OCL
--
--
8,500
9,000
36,000
20
Noncontrolling interest in NL
$
(O)
(980)
_____
$104,120
475 (N)
(475)
5 (N)
(5)
$104,120

5-35
e.
Consolidated Statement of Income and Comprehensive Income
Year Ended December 31, 2017
Net sales
$ 1,500,000
Cost of sales
(935,000)
Gross profit
565,000
Selling, delivery and administrative expenses
(514,000)
Impairment losses
(9,000)
Interest expense
(36,000)
6,000
Plus: Net loss attributable to noncontrolling interest
_
__475
Net income attributable to Consolidated Bottling
$
6,475
Plus: Other comprehensive income
Comprehensive income
Plus: Comprehensive loss attributable to noncontrolling
interest (1)
Comprehensive income attributable to Consolidated Bottling
6,000
980
6,980
480
7,460
(1) $475 + $5 = $480
Consolidated Balance Sheet, December 31, 2017

Assets
Current assets
Franchise rights, net
Goodwill
Total assets
Current liabilities
Total liabilities
Stockholders equity
Consolidated Bottling stockholders equity:
Common stock
Retained earnings (2)
Treasury stock
Accumulated other comprehensive loss (3)
Total Consolidated Bottling stockholders equity
190,000
481,780
467,900
49,000
$ 1,188,680
$
140,000
910,000
1,050,000
12,000
100,000
54,975
(30,000)
(12,015)
124,960
13,720
138,680
$ 1,188,680
(2) $50,500 + $6,475 - $2,000 = $54,975

(3) $13,000 - $980 - $5 = $12,015
5-36
P5.9
Consolidated Statement of Cash Flows

(in thousands)
Sunny Valley Resort and Subsidiary
For the year 2017
Cash from operating activities
Consolidated net income ($400,000 + $24,000) (1)
Add (subtract) items not affecting cash:
Loss on retirement of plant assets (2)
Changes in current assets and liabilities:
Increase in other current assets
Decrease in current liabilities
Net cash from operating activities
Cash from investing activities
Acquisition of plant assets (3)
Cash from financing activities
Increase in noncurrent liabilities
Dividends paid to controlling stockholders
Dividends paid to noncontrolling stockholders
Net decrease in cash
Plus cash balance, January 1
Cash balance, December 31
$ 424,000
$ 350,000
30,000
50,000
(400,000)
(268,000)
430,000
(668,000)
186,000
(300,000)
100,000
(70,000)
(16,000)
14,000
(100,000)
700,000
$ 600,000
(1) Noncontrolling interest in net income = $120,000 x 20%

(2) $1,600,000 + $350,000 $1,500,000 = $450,000 accumulated depreciation on plant assets scrapped;
$500,000 $450,000 = $50,000 loss on retirement of plant assets.
(3) X = cost of plant assets acquired; $4,200,000 + X $500,000 = $4,000,000; X = $300,000.

5-37
P5.10 Consolidated Statement of Cash Flows

(in millions)
Prime Casinos and Saratoga International Hotels
For the Year ended December 31, 2017
Cash from operating activities:
Add (subtract) items not affecting cash from operations:
Loss on sale of plant assets
Changes in current assets and liabilities:
Increase in other current assets
Increase in current liabilities
Net cash from operating activities
Cash from investing activities:
Sale of plant assets (1)
Acquisition of plant assets
Cash from financing activities:
Increase in long-term liabilities
Issuance of capital stock
Dividends paid to majority stockholders
Dividends paid to noncontrolling interest (2)
Net increase in cash
Plus cash balance, January 1, 2017
Cash balance, December 31, 2017
$ 612
$ 250
25
10
(100)
250
15
(675)
150
200
(435)
(2)
285
150
1,047
(660)
(87)
300
200
$ 500
(1) Cost of plant assets sold = $2,500 + $675 - $3,100 = $75

Accumulated depreciation on plant assets sold = $800 + $250 - $1,000 = $50
Cash received from sale of plant assets = $75 - $50 - $10 = $15
(2) $150 + $12 $160 = $2

5-38
P5.11 Consolidation Two Years After Acquisition, IFRS

(in millions)
Acquisition cost
Book value of Monaco
Revaluations:
Inventory
4,000
1,000
(100)
400
300
1,600
x 80%
Goodwill
1,280
2,720
b. Calculation of equity in net income and noncontrolling interest in net income for
2016:
Monacos reported net income for 2016 (1)

Property, plant and equipment 400/10
Identifiable intangibles 300/3
Goodwill
Total
600
Equity
in NI
480
(40)
(100)
(200)
260
(32)
(80)
(200)
168
Noncontrolling
interest in NI
120
(8)
(20)
_-92
(1) 600 = 3,500 (2,500 + 400)

5-39
c.
Trial Balances
Taken From Books
Rendezvous
Dr (Cr)
Current assets
500
Eliminations
Monaco
Dr (Cr)
Dr
Cr
900
3,000
2,000
Investment in Monaco
4,316
--
Consolidated
Balances
Dr (Cr)
1,400
(R)
360
40 (O)
5,320
128 (C)
1,120 (E)
--
200
Goodwill
--
--
3,068 (R)
--
200
100 (O)
300
(R) 2,620
200 (O)
2,420
(R)
Liabilities
(4,648)
(1,150)
Capital stock
(1,500)
(800)
(E)
800
(1,500)
(1,000)
(600)
(E)
600
(1,000)
--
(5,798)
--
280 (E)
112 (R)
82 (N)
Dividends
--
50
(474)
40 (C)
10 (N)
Sales revenue
(5,000)
Equity in NI of Monaco
Administrative and other operating
expenses
--
(8,500)
(C)
168
--
4,200
2,500
--
--
(O)
200
200
300
400
(O)
40
840
(O)
100
(N)
92
____
5,180
5,180

5-40
(3,500)
(168)
Cost of sales
--
6,700
92
P5.12 Consolidation Several Years After Acquisition, IFRS

(in thousands)
Acquisition cost
Book value of Hearty
Revaluations:
Plant and equipment
Long-term debt
150,000
70,000
(50,000)
40,000
2,000
62,000
x
75%
Goodwill
46,500
103,500
b. Calculation of equity in net income and noncontrolling interest in net income for
2017:
Heartys reported net income for 2017 (1)
Total
15,000
Equity
in NI
11,250
Noncontrolling
interest in NI
3,750
5,000
3,750
1,250
(4,000)
(3,000)
(1,000)
(750)
(750)
(50,000/10)
Identifiable intangibles (40,000/10)
Goodwill
15,250
11,250
- 4,000
(1) 15,000 = 140,000 (80,000 + 45,000)

5-41
c.
Trial Balances
Taken From Books
Eliminations
Lily
Dr (Cr)
Hearty
Dr (Cr)
35,000
20,000
226,500
202,000
Investment in Hearty
176,750
--
Current assets
Dr
Cr
Consolidated
Balances
Dr (Cr)
55,000
(O)
5,000
30,000 (R)
403,500
11,250 (C)
69,000 (E)
Goodwill
Current liabilities
100,000
10,000
--
--
96,500 (R)
--
24,000
4,000 (O)
130,000
(R) 101,000
750 (O)
100,250
(R)
(30,000)
(25,000)
(55,000)
(350,000)
(100,000)
(450,000)
Capital stock
(80,000)
(54,000)
(E)
54,000
(80,000)
(60,000)
(38,000)
(E)
38,000
(60,000)
(R)
1,500
Long-term debt
--
--
23,000 (E)
4,000 (N)
Sales revenue
(400,000)
(140,000)
(540,000)
Equity in net income of Hearty
(11,250)
Cost of goods sold
250,000
80,000
--
--
(O)
750
143,000
45,000
(O)
4,000
--
--
(N)
4,000
______
243,500
243,500

5-42
--
(25,500)
(C)
11,250
-330,000
750
5,000 (O)
187,000
4,000
P5.13 Consolidation Two Years After Acquisition

(in thousands)
a. Calculation of 2017 equity in net income and noncontrolling interest in net income:
Silver Nuggets reported NI for 2017

($100,000 $80,000 $14,000 = $6,000)
Revaluation write-off:
Identifiable intangibles ($20,000/5)
Total
Equity
in NI
Noncontrolling
interest in NI
$ 6,000
$ 4,800
$ 1,200
(4,000)
$ 2,000
(3,200)
$ 1,600
(800)
$ 400
b.
Trial Balances
Taken From Books
Mirror
Resorts
Dr (Cr)
Current assets
$ 35,000
Eliminations
Silver
Nugget
Dr (Cr)
$
Cr
5,000
216,600
140,000
Intangibles
350,000
51,050
86,440
--
Investment in Silver Nugget
Dr
Consolidated
Balances
Dr (Cr)
$
40,000
356,600
(R) 16,000
4,000 (O)
413,050
440 (C)
17,200 (E)
68,800 (R)
Goodwill (1)
Current liabilities
(R) 68,000
-68,000
(50,000)
(20,000)
(70,000)
Long-term debt
(600,000)
(150,000)
(750,000)
Common stock
(500)
(100)
(E)
100
(500)
(6,000)
(5,500)
(E)
5,500
(6,000)
(25,000)
(17,700)
(E) 17,700
(25,000)
AOCI, Jan. 1
(1,000)
Treasury stock
4,000
200
200 (E)
1,600
1,600 (E)
(1,000)
4,000
4,300 (E)
15,200 (R)
110 (N)
(19,610)
continued

5-43
b. table continued
Trial Balances
Taken From Books
Mirror
Resorts
Dr (Cr)
Dividends
Eliminations
Silver
Nugget
Dr (Cr)
2,000
Dr
Cr
1,500
Consolidated
Balances
Dr (Cr)
1,200 (C)
300 (N)
Sales revenue
(800,000)
Equity in net income of Silver

Nugget
(100,000)
(1,600)
Equity in OCI of Silver Nugget
--
(40)
Cost of goods sold
650,000
80,000
Operating expenses
140,000
14,000
(900,000)
(C)
1,600
--
(C)
40
-730,000
(O)
4,000
Other comprehensive income
100
--
--
(N)
400
Noncontrolling interest in OCI
--
--
(N)
10
2,000
158,000
(50)
50
$ 113,350
400
________
$ 113,350
10
$
(1) Original goodwill = $80,000 + $18,000 - $10,000 - $20,000 = $68,000

Goodwill allocated to Mirror Resorts = $80,000 [80% x ($10,000 + $20,000)] = $56,000
P5.14 Consolidation Working Paper One Year After Acquisition

(in thousands)
Acquisition cost
Total fair value
Book value of Shawnee
Revaluations:
Plant and equipment
Licenses and certificates
Goodwill

5-44
$ 25,400
11,600
37,000
$ 2,000
(5,000)
8,000
5,000
$ 32,000

Total goodwill
Pine Mountains goodwill: $25,400 (60% x $5,000) =
32,000
22,400
9,600
Goodwill is allocated in a 70:30 ratio.

b. Calculation of 2016 equity in net income and noncontrolling interest in net income:
Equity
in NI
Total
Shawnees reported NI for 2016 ($4,000
$2,100 = $1,900)
Plant and equipment ($5,000/10)
Licenses and certificates ($8,000/4)
Goodwill impairment loss (70:30 ratio)
Noncontrolling
interest in NI
$ 1,900
$ 1,140
$ 760
500
(2,000)
(150)
$ 250
300
(1,200)
(105)
$ 135
200
(800)
(45)
$ 115
c.
Accounts
Taken From Books
Pine
Mountain
Dr (Cr)
Current assets
AFS investments
Investment in Shawnee
Eliminations
Shawnee
Peak
Dr (Cr)
$ 5,000
$ 1,000
70,000
12,000
2,000
800
25,538
--
Dr
Cr
Consolidated
Balances
Dr (Cr)
$
(O)
500
5,000 (R)
6,000
77,500
2,800
138 (C)
1,200 (E)
24,200 (R)
--
--
--
(R)
8,000
2,000 (O)
6,000
Goodwill
--
--
(R)
32,000
150 (O)
31,850
Liabilities
Capital stock
AOCI, January 1
(82,577)
(9,895)
(92,472)
(100)
(9)
(E)
(100)
(13,700)
(1,985)
(E)
1,985
(13,700)
(15)
(6)
(E)
(15)
continnued

5-45
c. table continued
Accounts
Taken From Books
Pine
Mountain
Dr (Cr)
Eliminations
Shawnee
Peak
Dr (Cr)
Dr
Consolidated
Balances
Dr (Cr)
Cr
800 (E)
10,800 (R)
117 (N)
Revenues
(28,000)
Equity in net income

Equity in OCI
Operating expenses
(4,000)
(32,000)
(135)
--
(C)
135
--
(3)
--
(C)
--
2,100
(O)
1,650
25,750
22,000
Unrealized gains (OCI)
(8)
(5)
Noncontrolling interest in
income
--
--
(N)
115
Noncontrolling interest in OCI
--
--
(N)
______
$ 44,405
$ 44,405
Total
(11,717)
(13)
115
2
$
d.
Consolidated Statement of Income and Comprehensive Income
Year Ended December 31, 2016
Revenues
Operating expenses
Net income attributable to noncontrolling interest
Net income attributable to Pine Mountain
$ 32,000
(25,750)
6,250
(115)
6,135

Other comprehensive income:
Unrealized gains on AFS securities
Comprehensive income
Comprehensive income attributable to noncontrolling interest (1)
Comprehensive income attributable to Pine Mountain
6,250
13
6,263
(117)
6,146
(1) $115 + $2 = $117

5-46
Consolidated Balance Sheet, December 31, 2016

Assets
Current assets
AFS investments
Goodwill
Total assets
Liabilities
Stockholders equity
Pine Mountain stockholders equity:
Capital stock
Retained earnings (2)
Accumulated other comprehensive income (3)
Pine Mountain stockholders equity
6,000
77,500
2,800
6,000
31,850
$ 124,150
$
92,472
100
19,835
26
19,961
11,717
31,678
$ 124,150
(2) $13,700 + $6,135 = $19,835

(3) $15 + $13 - $2 = $26
P5.15 Noncontrolling Interest in Comprehensive Income

a. Vodafones 45 percent noncontrolling interest in net income is $12,050, implying that
Verizon Wireless total net income (adjusted for revaluation write-offs) was $26,778
(= $12,050/.45).
Since consolidated income is $23,547, Verizons separate results are a loss of $3,231
(= $23,547 - $26,778).
b. Verizon Wireless must have reported an other comprehensive loss for 2013. But the
other comprehensive income attributed to Verizon Communications includes its own
other comprehensive income plus its share of Verizon Wireless other comprehensive
loss. Verizon Communications reported a net gain in other comprehensive income,
more than offsetting its share in Verizon Wireless loss.

5-47
c. We can estimate the total separate other comprehensive gain/loss of each of the two
entities as follows:
Verizon Wireless total other comprehensive loss ($15/.45)
Verizon Communications share of Verizon Wireless other
comprehensive loss ($33 - $15)
Total other comprehensive income attributable to Verizon
Communications
Remove Verizon Communications share of Verizon Wireless
other comprehensive loss
Verizon Communications separate other comprehensive income
$(33)
(18)
123
18
$141
Conclusion:
Verizon Wireless other comprehensive loss = $33
Verizon Communications other comprehensive income = $141
d. (N)
Noncontrolling interest in income of Verizon Wireless
Noncontrolling interest in other comprehensive loss
of Verizon Wireless
Dividends Verizon Wireless
Noncontrolling interest in Verizon Wireless

5-48
12,050
15
7,831
4,204

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CHAPTER 5

SOLUTIONS TO MULTIPLE CHOICE QUESTIONS, EXERCISES AND PROBLEMS

Allocation of goodwill between controlling and noncontrolling interest:

Goodwill is allocated 95% to the controlling interest and 5% to the noncontrolling

(1) [90% x ($40,000,000 - $25,000,000)] + $66,500,000

(1) [90% x ($24,000,000 - $20,000,000)] + (95% x $68,000,000)

Solutions Manual, Chapter 5

Cambridge Business Publishers, 2016

Equity in Net Income

NCI in Net Income

Cambridge Business Publishers, 2016

Advanced Accounting, 3rd Edition

Date of Acquisition Consolidation Eliminating Entries

Allocation of goodwill between controlling and noncontrolling interest:

b. Working paper eliminating entries, date of acquisition:

(1) [80% x ($200,000 + $1,500,000)] + $8,240,000 = $9,600,000

Solutions Manual, Chapter 5

Cambridge Business Publishers, 2016

Equity in Net Income and Noncontrolling Interest in Net Income

Allocation of goodwill between controlling and noncontrolling interest:

Goodwill is allocated in an 80:20 ratio.

Sun Citys reported net income

Cambridge Business Publishers, 2016

Advanced Accounting, 3rd Edition

Consolidation Eliminating Entries, Date of Acquisition and Two Years Later

Allocation of goodwill between controlling and noncontrolling interest:

Goodwill is allocated in a 95:5 ratio.

(1) [90% x ($8,000,000 - $6,000,000)] + $47,500,000 = $49,300,000

Solutions Manual, Chapter 5

Cambridge Business Publishers, 2016

c. 2018 equity in net income and noncontrolling interest in net income:

Stardusts reported net income

Working paper eliminating entries, two years later:

(1) $1,650,000 + $2,800,000 = $4,450,000

(3) [90% x ($6,000,000 - $5,400,000)] + $47,500,000 = $48,040,000

Date of Acquisition Consolidation Eliminating Entries, Bargain Purchase

Peregrines acquisition entry:

b. Working paper eliminating entries, date of acquisition:

Solutions Manual, Chapter 5

Cambridge Business Publishers, 2016

Consolidation Eliminating Entries at End of First Year (see related E4.3)

Allocation of goodwill between controlling and noncontrolling interest:

b. 2016 equity in net income and noncontrolling interest in net income:

Saddlestones reported net income

c. Consolidation working paper eliminating entries for 2016:

(1) (60% x $2,000,000) + $4,780,000

Cambridge Business Publishers, 2016

Advanced Accounting, 3rd Edition

Consolidation Eliminations Several Years After Acquisition

Paramounts share of goodwill = $2,910,000 (75% x $1,000,000) = $2,160,000

Solutions Manual, Chapter 5

Cambridge Business Publishers, 2016

(1) $400,000 [(6/10) x $400,000]

Consolidation Eliminating Entries Several Years After Acquisition

Palomars share of goodwill = $41,450 (65% x -$2,000) = $42,750

Cambridge Business Publishers, 2016

Advanced Accounting, 3rd Edition

(1) [65% x ($3,000 - $12,000 - $800)] + (75% x $53,400) = $33,680

(3) [($2,550 + $15,000/20 - $7,000/7 + $300) x 35%] ($1,000 x 25%) = $660

Solutions Manual, Chapter 5

Cambridge Business Publishers, 2016

Consolidation Working Paper, Date of Acquisition (see related E3.9)

Allocation of goodwill between controlling and noncontrolling interest: