Solution for QID #87590: Alpha Corporation purchased 60% of Beta Company on January 1 | StudyHelpMe

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.