Given Data P04-32 Sam Corporation outstanding common stock acquired by Father, Inc. Cash paid by Father, Inc.

for Sam Corporation shares Book value of Sam Corporation Sam accounts values on 1/1/09 Book Value $ 60,000 275,000 100,000 130,000 Father, Inc. 12/31/2009 $ (1,360,000) 700,000 260,000 44,000 (105,000) $ (461,000) Fair Value $ 225,000 250,000 200,000 120,000 Sam Corporation 12/31/2009 $ (540,000) 385,000 10,000 5,000 5,000 $ (135,000) 80% $ 680,000 600,000

Use this template to complete the

Land Buildings and equipment (10-year remaining life) Copyright (20-year life) Notes payable (due in 8 years)

Step 1: Complete purchase price alloca Step 2: Complete Journal Entries on Ta Step 3: Input journal entries into Tab 4-3 Step 4: Complete consolidated totals on

Revenues Cost of goods sold Depreciation expense Amortization expense Interest expense Equity in income of Sam Net income Retained earnings, 1/1/0 Net income Dividends paid Retained earnings, 12/31/09 Current assets Investment in Sam Land Buildings and equipment (net) Copyright Total assets Accounts payable Notes payable Common stock Additional paid-in capital Retained earnings Total liabilities and equity

(1,265,000) (440,000) (461,000) (135,000) 260,000 65,000 $ (1,466,000) $ (510,000) $ 965,000 733,000 292,000 877,000 $ 2,867,000 $ $ 528,000 60,000 265,000 95,000 948,000

(191,000) $ (148,000) (460,000) (130,000) (300,000) (100,000) (450,000) (60,000) (1,466,000) (510,000) $ (2,867,000) $ (948,000)

Note: Credits are indicated by parentheses.

se this template to complete the Problem 4-32 based upon the 3 step approach below:

tep 1: Complete purchase price allocation on Tab 4-32 tep 2: Complete Journal Entries on Tab 4-32 Journal Entries tep 3: Input journal entries into Tab 4-32 consolidation worksheet tep 4: Complete consolidated totals on Tab 4-32

Journal Entries to Record Consolidation

"S" Entry DR Retained Earnings Common Stock APIC Inv. In Sam NCI 510,000 100,000 60,000 536,000 134,000 670,000 Elimination of the subsidiary's stockholder's equity accounts. 670,000 CR

"A" Entry Land Copyright Notes Payable Investment in Sam Buildings & Equipment NCI 165,000 100,000 10,000 200,000 25,000 50,000 275,000 Allocation of subsidiary total fair value in excess of book value 275,000

"I" Entry Equity in Income Investment in Sam 105,000 105,000 105,000 105,000

Elimination of intercompany income (equity accrual less amortization expenses)

"D" Entry Investment in Sam Dividends Paid 52,000 52,000 52,000 Elimination of intercompany dividend payments. 52,000

"E" Entry

Amortization Expense Interest Expense Buildings & Equipment Depreciation Expense Copyright Notes Payable

5,000 1,250 2,500 2,500 5,000 1,250 8,750 8,750

Recognition of amortization expenses on fair-value allocations.

1,110,750

1,110,750

Student Name: Class: Problem 04-32

FATHER, INC. AND SAM CORPORATION - Purchase price allocation and annual amortization Acqisition-date subsidiary fair value Book value of subsidiary Fair value in excess of book value $ 850,000 600,000 $ 250,000 Correct!

Allocations to specific accounts based on difference between fair value and book value: Land $ 165,000 Buildings and equipment (25,000) Copyright 100,000 Notes payable 10,000 250,000 Total $ Correct!

Annual excess amortizations: Buildings and equipment Copyright Notes payable Total

(25,000) 100,000 10,000

Life (years) 10 20 8

Excess Amortizations $ (2,500) 5,000 1,250 $ 3,750

Correct!

Student Name: Class: Problem 04-32

Totals for the business combination for the year ending December 31, 2006 FATHER, INC. AND SAM CORPORATION Account Name Revenues Balance Explanation 1,900,000 Sum of Father and Sam's revenues for the year

Cost of goods sold

1,085,000 Sum of Father and Sam's COGS for the year

Depreciation expense

267,500 Sum of Father and Sam's depreciation for the year less excess buildings and equipment amortization 10,000 Sum of Father and Sam's amortization for the year add excess copyright amortization 50,250 Sum of Father and Sam's interest expense for the year add excess notes payable amortization This is elimnated, hence ZERO

Amortization expense

Interest expense

Equity in income of Sam

Net income

487,250 Net income of Father and Sam except equity in income of Sam adjusted for amotization of excess fair value 1,265,000 Retained earnings of Father

Retained earnings, 1/1

Noncontrolling interest in income of subsidiary Dividends paid

26,250 Net income of Sam less amortization of excess fair value multiplied by 20% 260,000 Dividends of Father only

Retained earnings, 12/31

1,466,000 Retained earnings of Father

Current assets

1,493,000 Sum of Father and Sam's current assets

Investment in Sam

Consolidated amount is zero

Land

517,000 Sum of Father and Sam's land accounts plus excess fair value 1,119,500 Sum of Father and Sam's building accounts plus excess fair value less amortization 190,000 Sum of Father and Sam's copyright accounts plus excess fair value less amortization 3,319,500 339,000 Sum of Father and Sam's accounts payable account

Buildings and equipment (net)

Copyright

Total assets Accounts payable

Notes payable

581,250 Sum of Father and Sam's notes payable accounts plus excess fair value less amortization 183,250 Net assets of Sam adjusted for unamortized fair value excess multiplied by 20% 300,000 Common stock of Fathers only

Noncontrolling interest in Sam

Common stock

Additional paid-in capital

450,000 APIC of Fathers only

Retained earnings, 12/31

1,466,000 Retained earnings of Fathers only

Total liabilities & equities

2,216,000

Student Name: Class: Problem 04-32

FATHER, INC. AND SAM CORPORATION Consolidation Worksheet Father, Sam Inc. Corporation $ (1,360,000) $ (540,000) 700,000 385,000 260,000 10,000 5,000 [E] 44,000 5,000 [E] (105,000) [I] $ (461,000) $ (135,000) Consolidation Entries Debit Credit Noncontrolling Interest Consolidated Totals $ (1,900,000) 1,085,000 267,500 10,000 50,250 $ 26,250 (487,250) 26,250 (461,000) $ (1,265,000) (461,000) 260,000 $ (1,466,000) $ 1,493,000 -

Accounts Revenues Cost of goods sold Depreciation expense Amortization expense Interest expense Equity in income of Sam Separate company net income Consolidated net income Noncontrolling interest in Sam's income Controlling interest in CNI Retained earnings, 1/1 Net income Dividends paid Retained earnings, 12/31 Current assets Investment in Sam

[E] 5,000 1,250 105,000

2,500

Correct! Correct! Correct! Correct! Correct! Correct! Correct! Correct! Correct! Correct! Correct! Correct! Correct! Correct! Correct!

$ (1,265,000) $ (461,000) 260,000 $ (1,466,000) $ $ 965,000 733,000 $

(440,000) [S] (135,000) [ I ] 65,000 (510,000) 528,000 -

352,000 108,000

[E] [D]

3,750 52,000

88,000 26,250 13,000

[S] [A] [A] [A] 165,000 [A] 95,000

536,000 197,000

Land Buildings and equipment (net) Copyright Total assets Accounts payable Notes payable NCI in Sam 1/1 NCI in Sam 12/31 Common stock Additional paid-in capital Retained earnings, 12/31 Total liabilities and equity Parentheses indicate a credit balance.

292,000 877,000 2,867,000 (191,000) (460,000)

60,000 265,000 95,000 948,000

22,500

517,000 1,119,500 190,000 $ 3,319,500 (339,000) (581,250) (183,250) (300,000) (450,000) (1,466,000) $ (3,319,500)

Correct! Correct! Correct! Correct! Correct! Correct! Correct! Correct! Correct! Correct! Correct! Correct!

(148,000) (130,000) [A]

8,750 [*C] 183,250

(300,000) (450,000) (1,466,000) $ (2,867,000) $

(100,000) [S] (60,000) [S] (510,000) [*C] (948,000)

100,000 60,000 510,000