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Daisy Company

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Daisy Company;On January 1, 2009, Daisy Company acquired 80 percent of Rose Company for $594,000 in cash. Rose?s total book value on that date was $610,000 and the fair value of the noncontrolling interest was $148,500. The newly acquired subsidiary possessed a trademark (10-year remaining life) that, although unrecorded on Rose?s accounting records, had a fair value of $75,000. Any remaining excess acquisition-date fair value was attributed to goodwill.;Daisy decided to acquire Rose so that the subsidiary could furnish component parts for the parent?s production process. During the ensuing years, Rose sold inventory to Daisy as follows;Year;Cost to Rose;Company;Transfer Price;Gross Profit Rate;Transferred Inventory;Still Held at End of Year (at transfer price);2009;$100,000;$140,000;28.6%;$20,000;2010;100,000;150,000;33.3;30,000;2011;120,000;160,000;25.0;68,000;Any transferred merchandise that Daisy retained at a year-end was always put into production during the following period.;On January 1, 2010, Daisy sold Rose several pieces of equipment that had a 10-year remaining life and were being depreciated on the straight-line method with no salvage value. This equipment was transferred at an $80,000 price, although it had an original $100,000 cost to Daisy and a $44,000 book value at the date of exchange.;On January 1, 2011, Daisy sold land to Rose for $50,000, its fair value at that date. The original cost had been only $22,000. By the end of 2011, Rose had made no payment for the land.;The following separate financial statements are for Daisy and Rose as of December 31, 2011. Daisy has applied the equity method to account for this investment.;Daisy Company;Rose Company;Sales;$ (900,000);$ (500,000);Cost of goods sold;598,000;300,000;Operating expenses;210,000;80,000;Gain on sale of land;(28,000);?0?;Income of Rose Company;(60,000);?0?;Net income;$ (180,000);$ (120,000);Retained earnings, 1/1/11;$ (620,000);$ (430,000);Net income;(180,000);(120,000);Dividends paid;55,000;50,000;Retained earnings, 12/31/11;$ (745,000);$ (500,000);Cash and accounts receivable;$ 348,000;$ 410,000;Inventory;430,400;190,000;Investment in Rose Company;737,600;?0?;Land;454,000;280,000;Equipment;270,000;190,000;Accumulated depreciation;(180,000);(50,000);Total assets;$ 2,060,000;$ 1,020,000;Liabilities;(715,000);(120,000);Common stock;(600,000);(400,000);Retained earnings, 12/31/11;(745,000);(500,000);Total liabilities and equities;$(2,060,000);$(1,020,000);Required;Answer the following questions;a. By how much did Rose?s book value increase during the period from January 1, 2009, through December 31, 2010?;b. During the initial years after the takeover, what annual amortization expense was recognized in connection with the acquisition-date excess of fair value over book value?;c. What amount of unrealized gross profit exists within the parent?s inventory figures at the beginning and at the end of 2011?;d. Equipment has been transferred between the companies. What amount of additional depreciation is recognized in 2011 because of this transfer?;e. The parent reports Income of Rose Company of $60,000 for 2011. How was this figure calculated?;f. Without using a worksheet, determine consolidated totals.;g. Prepare the worksheet entries required at December 31, 2011, by the transfers of inventory, land, and equipment

 

Paper#28634 | Written in 18-Jul-2015

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