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.
Paper#44825 | Written in 18-Jul-2015Price : $67