Please help me this Business Condolidation question
Garth Company acquired 70% of the outstanding common stock of Brooks Company on June 30, 2011 for $331,100. On that date, the fair value of the non-controlling interest was $141,900. On the acquisition date, Brooks Company had retained earnings in the amount of $60,000, and the fair value of its recorded assets and liabilities was equal to their book value. The excess of cost over the fair value of the recorded net assets was attributed to an unrecorded manufacturing formula held by Brooks Company, which had an expected remaining useful life of five years from June 30, 2011.
On December 31, 2011, Garth company sold equipment (with an original cost of $200,000 and accumulated depreciation of $50,000) to Brooks Company for $175,000. This equipment has since been depreciated at an annual rate of 20% of the purchase price.
During 2012, Brooks Company sold land to Garth Company at a profit of $30,000. Garth still holds the land acquired from Brooks.
The inventory of Garth Company on December 31, 2012 included goods purchased from Brooks Company on which Brooks recognized a profit of $7,500.
During 2013, Brooks Company sold goods to Garth Company for $375,000, of which $80,000 was unpaid at December 31, 2013. The December 31, 2013 inventory of Garth Company included goods acquired from Brooks Company on which Brooks recognized a profit of $10,500.
During 2013 Garth Company sold goods to Brooks Company for $600,000 at a markup on sales of 20%. At December 31, 2013, 30% of these goods remain unsold by Brooks Company. Brooks Company still owes Garth Company $200,000 for these inventory purchases.
On January 1, 2013 Brooks Company reports $600,000 in bonds outstanding with a book value of $564,000. Garth purchases half of these bonds on the open market for $291,000. Attribute the income effects of this transaction to the parent company.
Required: Carefully Follow and label each step.
1. Prepare the acquisition analysis as of acquisition date. Compute the unamortized differential as of 1/1/2013.
2. Analyze each intercompany transaction. Label as either upstream downstream.
3. Calculate Net income to the controlling interest for the year 2013
4. Verify the calculation of the balance in the acccount equity in sub earnings and record the parent company entries with respect to its investment during 2013
5. Prepare all elimination entries for 2013.
6. Complete the consolidating spreadsheet for the year ended 2013.
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Rating:
5/
Solution: Garth Company solution (1 (first part),2 and 5th question)