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8

Accounting

8.On January 1, 2011, P Inc. Paid $300,000 for 60% of S Company's outstanding capital stock. S Inc. reported common stock on that date of $250,000 and retained earnings of $100,000. Plant assets, which had a five-year remaining life, were undervalued in S Inc. Financial records by $10,000. S Inc. also had a patent that was not on the books but had a market value of $60,000. The patent has a remaining useful life of 10 years. Any remaining fair value/book value differential is allocated to goodwill. S Inc. net income and dividends paid the first three years that P Inc. owned them are shown below: For 2011 net income 80,000 Dividends 30,000 For 2012 net income 90,000 Dividends 10,000 For 2013 net income 60,000 Dividends 18.890 Calculate the noncontrolling interest that should be reported on the consolidated balance sheet at the end of 2013. Using Full Equity Methods, Please
9.Assuming that P Inc. Uses the equity method to record its investment in S Inc. Calculate the ending balance in the Investment in S Inc. account at the end of 2013.

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Calculation of Goodwill:

Total Consideration paid 300,000
Less: Book value of assets ($350,000 * 60%) (210,000)
Excess amount over book value 90,000
Less: Attributable to Plant Assets (10,000)
Less: Attributable to Patent (60,000)
Goodwill 20,000

Calculation of Balance of Investment in S Inc:

Particulars Amount ($)
Consideration paid 300,000
Add: Income of S Inc. attributed  
2011 - 80,000 * 60% 48,000
2012 - 90,000 * 60% 54,000
2013 - 60,000 * 60% 36,000
Less: Dividends attributed  
2011- 30,000 * 60% (18,000)
2012 - 10,000 * 60% (6,000)
2013- 18,890 * 60% (11,334)
Less: excess depreciation of Plant assets (10,000 * 3/5) (6,000)
Less: Excess depreciation of Patent (60,000 * 3/10) (18,000)
Total Investment balance 378,666