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1. Alpha Corporation purchased 70% of Beta Company on January 1, 2015, for $98,000. On that date, the non controlling interest had a fair value of $42,000 and Beta reported common stock outstanding of $100,000 and retained earnings of $20,000. The differential is partially comprised of $5,000 related to excess value of buildings and equipment. These assets have a remaining useful life of five years. During 

2015 Beta had income of $40,000 and paid dividends of $10,000.  Alpha uses the equity method in accounting for itsownership of Beta. On December 31, 2016 the trial balances of the companies are as follows:

Income statement Alpha Corporation Beta Company

Sales 200,000 120,000

Cost of goods sold -99,800 -61,000

Depreciation expense -25,000 -17,400

Interest expense -6,000 -14,000

Income from subsidary 16,620

Consolidated net income

Statement of retained earnings 85,820 27,600

Beginning balance 228,560 50,000

Net income 85,820 27,600

Less dividends declared -40,000 -10,000

Ending balance

Balance sheet 274,380 67,600

Cash & accounts receivable 81,400 39,200

Inventory 60,000 55,000

Investment in Beta 124,370

Land 40,000 30,000

Buildings & equipment 504,000 362,000

Accumulated depreciation -168,000 -77,400

Total assets 641,770 408,800

Accounts payable 86,190 41,200

Bonds payable 80,000 200,000

Bond premium 1,200

Common stock 200,000 100,000

Retained earnings 274,380 67,600

Total liabilities & equity 641,770 408,800

 

Beta sold inventory costing $45,000 to Alpha for $75,000 in 2015. Alpha held $9,000 in inventory at the end of 2015. Beta sold inventory costing $77,000 to Alpha in 2016 for $140,000 Alpha held $10,000 in inventory at the end of 2016.

 

On 1/1/2015 Alpha sold equipment with a book value of $10,000 to Beta for $14,000. The equipment orginally cost Alpha $18,000. The equipment has a remaining life of 5 years at 1/1/2015. 

1. Prepare a allocation of acquisition value at the time of acquisition to determine any excess value.

 

2. Record the equity entries made by Alpha for 2015 and 2016.

 

3. Prepare the analysis and entries required for the worksheet in 2015 and 2016