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Topp Manufacturing Company acquired 90 percent of Bussman




Topp Manufacturing Company acquired 90 percent of Bussman Corporation?s outstanding common stock on December 31, 20X5, for $1,52,000. At that date, the fair value of the noncontrolling interest was $128,000, and Bussman reported common stock outstanding of $500,000, premium on common stock of $280,000, and retained earnings of $420,000. The book values and fair values of Bussman?s assets and liabilities were equal, except for land, which was worth $30,000 more than its book value.;On April 1, 20X6, Topp issued at par $200,000 of 10 percent bonds directly to Bussman, interest on the bonds payable March 3 and September 30. On January 2, 20X7, Topp purchased all of Bussman?s outstanding 10-year 12 percent bonds from an unrelated institutional investor at 98. The bonds originally had been issued on January 2, 20X1, for 10. Interest on the bonds is payable December 31 and June 30.;Since the date it was acquired by Topp Manufacturing, Bussman has sold inventory to Topp on a regular basis. The amount of such intercompany sales totaled $64,000 in 20X6 and $78,000 in 20X7, including a 30 percent gross profit. All inventory transferred in 20X6 had been resold by December 31, 2006, except inventory for which Topp had paid $15,000 and did not resell until January 20X7. All inventory transferred in 20X7 had been resold at December 31, 20x7, except merchandise for which Topp had paid $18,000.;At December 31, 20X7, trial balances for Topp and Bussman appeared as follows;Topp Manufacturing Bussman Corporation;Item Debit Credit Debit Credit;Cash 39500 29000;Current Receivables 112500 85100;Inventory 301000 348900;Investment in Bussman Stock 1251000;Investment in Bussman Bonds 985000;Investment in Topp Bonds 200000;Land 1231000 513000;Buildings and Equipment 2750000 1835000;Cost of Goods Sold 2009000 430000;Depreciation and Amortization 195000 85000;Other Expenses 643000 206000;Dividends Declared 50000 40000;Accumulated Depreciation 1210000 619000;Current Payables 98000 79000;Bonds Payable 200000 1000000;Premium on Bonds Payable 3000;Common Stock 1000000 500000;Premium on Common Stock 700000 280000;Retained Earnings, January 1 3033000 470000;Sales 3101000 790000;Other Income 135000 31000;Income from Subsidiary 90000;Total 9567000 9567000 3772000 3772000;As of December 31, 20X7, Bussman had declared but not yet paid its fourth-quarter dividend of $10,000. Both Topp and Bussman use straight-line depreciation and amortization, including the amortization of bond discount and premium. On December 31, 20X7, Topp?s management reviewed the amount attributed to goodwill as a result of its purchase of Bussman common stock and concluded that an impairment loss in the amount of $25,000 had occurred during 20X7 and should be shared proportionately between the controlling and noncontrolling interests. Topp uses the basic equity method to account for its investment in Bussman.;a. Compute the amount of the goodwill as of January 1, 20X7;b. Compute the balance of Topp?s Investment in Bussman Stock account as of January 1, 20X7.;c. Compute the gain or loss on the constructive retirement of Bussman?s bonds that should appear in the 20X7 consolidated income statement.;d. Compute the income that should be assigned to the noncontrolling interest in the 20X7 consolidated income statement;e. Compute the total noncontrolling interest as of December 31, 20X6;f. Present all elimination enteries that would appear in a three-part consolidation workpaper as of December 31, 20X7;g. Prepare and complete a three-part workpaper for the preparation of consolidated financial statements for 20X7.;Attachment Preview;Accounting Question.docx Download Attachment;Topp Manufacturing Company acquired 90 percent of Bussman Corporations outstanding;common stock on December 31, 20X5, for $1,52,000. At that date, the fair value of the;noncontrolling interest was... Show more


Paper#26431 | Written in 18-Jul-2015

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