1) Isac SAA acquired 90% ownership of Piero SAA for $3.6 million, implying a fair value of Piero SAA of $4 million.
2) For 2014, Piero SAA had income of $750,000, of which $250,000 was allocated to the noncontrolling interest.
3) At year-end 2014, the consolidated balance sheet reported total assets of $14.04 million, including goodwill of $200,000 from the acquisition. The noncontrolling interest was $1.44 million.
1) Isac SAA acquired 90% ownership of Piero SAA for $3.6 million, implying a fair value of Piero SAA of $4 million.
2) For 2014, Piero SAA had income of $750,000, of which $250,000 was allocated to the noncontrolling interest.
3) At year-end 2014, the consolidated balance sheet reported total assets of $14.04 million, including goodwill of $200,000 from the acquisition. The noncontrolling interest was $1.44 million.
1) Isac SAA acquired 90% ownership of Piero SAA for $3.6 million, implying a fair value of Piero SAA of $4 million.
2) For 2014, Piero SAA had income of $750,000, of which $250,000 was allocated to the noncontrolling interest.
3) At year-end 2014, the consolidated balance sheet reported total assets of $14.04 million, including goodwill of $200,000 from the acquisition. The noncontrolling interest was $1.44 million.
1) Isac SAA acquired 90% ownership of Piero SAA for $3.6 million, implying a fair value of Piero SAA of $4 million.
2) For 2014, Piero SAA had income of $750,000, of which $250,000 was allocated to the noncontrolling interest.
3) At year-end 2014, the consolidated balance sheet reported total assets of $14.04 million, including goodwill of $200,000 from the acquisition. The noncontrolling interest was $1.44 million.
Implied fair value of Edma HF ($99,000 / 45%) $220,000
The fair value of 15% interest ($220,000 x 15%) $33,000
Cost to obtain 30% of Edma HF’s interest $31,000 ($10,000 + $21,000) Gain from revaluation of investment in Edma HF $ 2,000
2. Income from Edma HF in 2014 $ 9,000
($60,000 x 60% x 3 /12)
3. Cost to purchase 5% interest $10,000
Cost to purchase 10% interest $21,000 Cost to purchase 45% interest $99,000 Gain on revaluation of investment $ 2,000 Income from Edma HF in 2014 $ 9,000 Investment in Edma HF at the end of 2014 $141,000
Exercise 8-7 1. Percentage ownership of Yasmeen BSC in Talal BSC 81,82% (90,000 / 110,000)
2. Talal BSC equity after issuance of additional shares $900,000
($800,000 + (10,000 x $10)
Yasmeen BSC’s equity in Talal BSC after issuance $736,364
($900,000 x 81.82%) Yasemeen BSC’s equity in Talal BSC before issuance $800,000 Decrease in Yasemeen BSC’s equity in Talal BSC ($ 63,636)
January 2 Additional paid-in capital (-SE) 63,636 Investment in Talal BSC (-A) 63,636 To adjust investment in Talal BSC after issuance of additional shares
3. January 1, 2014 balance $800,000
Less: adjustment due to issuance of new shares ($63,636) Investment in Talal BSC after the issuance $736,364 Problem 8-3 Solution P8-3
Preliminary computations: Price to acquire 90% percent interest of Piero SAA $3,600,000 Implied fair value of Piero SAA ($3,600,000 / 90%) $4,000,000 Piero SAA’s stockholders’ equity at January 1 $3,800,000 Goodwill $ 200,000c
Income from Piero SAA’s for the first quarter $ 225,000
(90% x ($4,500,000 - $2,800,000 - $700,000) x 3 / 12) Income from Piero SAA’s for the last three quarters $ 525,000 (70% x ($4,500,000 - $2,800,000 - $700,000) x 9 / 12) Income from Piero SAA for 2014 ($225,000 + $525,000) $ 750,000a
Noncontrolling interest share for the first quarter: $ 25,000
(10% x ($4,500,000 - $2,800,000 - $700,000) x 3 / 12) Noncontrolling interest share for the last three quarters: $ 225,000 (30% x ($4,500,000 - $2,800,000 - $700,000) x 9 / 12) Noncontrolling interest share for 2014 $ 250,000b
Investment in Piero SAA before adjustment $2,835,000
Add: Income from Piero SAA for the las three quarters $ 525,000 Adjusted investment in Piero SAA $3,360,000
Noncontrolling interest January 1:
10% of Implied fair value of Piero SAA at January 1 $ 400,000c
Noncontrolling interest March 31
20% of implied fair value of Piero SAA at March 31 $ 850,000c (20% x ($4,000,000 + $250,000))
PIERO SAA AND SUBSIDIARY CONSOLIDATION WORKPAPER FOR THE YEAR
ENDED DECEMBER 31, 2014 (IN THOUSANDS) Isac SAA Piero Adjustments and Consolidated SAA Eliminations Statements Debits Credits Income Statement Sales $ 7,400 $ 4,500 $ 11,900 Income from Piero SAA $ 750 a. 750 Cost of sales -$ 5,800 -$ 2,800 -$ 8,600 Other expenses -$ 400 -$ 700 -$ 1,100 Noncontrolling interest b. 250 -$ 250 share Controlling share of net $ 1,950 $ 1,000 $ 1,950 income Retained Earnings Statement Retained earnings - Isac $ 2,500 $ 2,500 SAA Retained earnings - Piero $ 1,800 c. 1800 SAA Controlling share of net $ 1,950 $ 1,000 $ 1,950 income Dividends -$ 200 -$ 200 a. 140 -$ 200 b. 60
Retained earnings - $ 4,250 $ 2,600 $ 4,250
December 31
Balance Sheet Cash $ 900 $ 400 $ 1,300 Accounts receivable $ 200 $ 700 $ 900 Inventory $ 1,640 $ 700 $ 2,340 Land $ 2,100 $ 2,800 $ 4,900 Equipment $ 3,000 $ 1,400 $ 4,400 Investment in Piero SAA $ 3,360.0 a. 610 c. 2,750 Goodwill c. 200 $ 200 Total Assets $ 11,200 $ 6,000 $ 14,040
Accounts payable $ 1,900 $ 1,400 $ 3,300
Common stock $ 5,000 $ 2,000 c. 2000 $ 5,000 Additional-paid in capital $ 50 $ 50 Retained earnings $ 4,250 $ 2,600 $ 4,250 $ 11,200 $ 6,000 Noncontrolling interest c. 400 January 1 Noncontrolling interest c. 850 March 31 Noncontrolling interest b. 190 $ 1,440.0 December 31 Total liabilities and equities $ 14,040
