Solution for QID #15079: Alpha Corporation purchased 70 % of Beta Company on January | StudyHelpMe

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 life of five years. During 2015 Beta had income of $40,000 and paid dividends of $10,000. At the time of acquisition Beta had a balance of $50,000 in accumulated depreciation. Alpha uses the equity method in accounting for its ownership of Beta. On December 31, 2016 the trail balances of the companies are as follows. Income statement                              Alpha Corp.                 Beta Company Sales                                                    200,000                       120,000 Cost of Goods sold                              -99,800                        -61,000 Depreciation expense                         -25,000                        -17,400 Interest expense                                 -6,0000                        -14,000 Income from subsidiary                      16,620 Consolidation net income                   85,820                         27,600 Statement of retained earnings         Beginnings balance                             228,560                       50,000 Net income                                         85,820                         27,600 Less Dividends declared                     -40,000                        -10,000 Ending balance                                    274,380                       67,600 Balance sheet Cash & Accounts receivable               81,400                         39,200 Inventory                                            60,000                         55,000 Investments 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 originally cost Alpha $18,000. The equipment has a remaining life of 5 years at 1/1/2015. Prepare an allocation of acquisition value at the time of acquisition to determine any excess value. Record the equity entries made by Alpha for 2016. Prepare the analysis and entries required for the worksheet in 2016.