question archive Alpha Corporation purchased 60% of Beta Company on January 1, 2015, for $82,800

Alpha Corporation purchased 60% of Beta Company on January 1, 2015, for $82,800

Subject:AccountingPrice: Bought3

Alpha Corporation purchased 60% of Beta Company on January 1, 2015, for $82,800. On that date, the

non controlling interest had a fair value of $55,200 and Beta reported common stock outstanding of $100,000 and retained earnings of $20,000. The differential is partially comprised of $10,000 related to land. During 2015 Beta had income of $40,000 and paid dividends of $10,000. Alpha uses the equity method in accounting for its ownership of Beta. On December 31, 2016 the trial balances of the companies are as follows:

               

                                                                               Alpha

Income statement                                        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 subsidiary                                       16,680

Consolidated net income                                   85,880                 27,600

Statement of retained earnings      

Beginning balance                                             228,560                 50,000

Net income                                                           85,880                   27,600

Less dividends declared                                     -40,000                 -10,000

Ending balance                                                    274,440                 67,600

 

Balance sheet

Cash & accounts receivable                              81,400                 39,200

Inventory                                                               60,000                 55,000

Investment in Beta                                             107,040

Land                                                                       40,000                 30,000

Buildings & equipment                                      504,000                362,000

Accumulated depreciation                             -168,000                  -77,400

Total assets                                                        624,440                408,800

 

Accounts payable                                                68,800                  41,200

Bonds payable                                                      80,000                 200,000

Bond premium                                                      1,200

Common stock                                                   200,000                 100,000

Retained earnings                                            274,440                  67,600

Total liabilities & equity                                 624,440                 408,800

 

Beta sold inventory costing $25,500 to Alpha for $42,500 in 2015. Alpha held $8,500 in inventory at the end of 2015. Beta sold inventory costing $21,000 to Alpha in 2016 for $35,000 and Alpha held $10,500 in inventory at the end of 2016.

 

On 1/1/2015 Alpha sold equipment with a book value of $9,000 to Beta for $12,000. The equipment originally cost Alpha $16,000. The equipment has a remaining life of 5 years at 1/1/2015.

 

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

 

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

 

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

pur-new-sol

Purchase A New Answer

Custom new solution created by our subject matter experts

GET A QUOTE