Question

On January 1, 2020, John Doe Enterprises (JDE) acquired a 55% interest in Tractors-R-Us Manufacturing, Inc. (TMI). JDE paid for the transaction with $3 million cash and 500,000 shares of JDE common stock (par value $1.00 per share). At the time of the acquisition, TMI's book value was $16,970,000.

On January 1, JDE stock has a market value of $14.90 per share and there was no control premium in this transaction. Any consideration transferred over book value is assigned to goodwill. TMI had the following balances on January 1, 2020.

For internal reporting purposes, JDE employed the equity method to account for this investment.

On January 1, 2020, John Doe Enterprises (JDE) acquired a 55% interest in Tractors-R-Us Manufacturing, Inc. (TMI). JDE paid for the transaction with $3 million cash and 500,000 shares of JDE common stock (par value $1.00 per share). At the time of the acquisition, TMI's book value was $16,970,000. On January 1, JDE stock had a market value of $14.90 per share and there was no control premium in this transaction. Any consideration transferred over book value is assigned to goodwill. TMI had the following balances on January 1, 2020. Book Fair Value Value Land $1,700,000 $2,550,000 Buildings (seven-year remaining life) 2,700,000 3,400,000 Equipment (five-year remaining life) 3,700,000 3,300,000 For internal reporting purposes, JDE employed the equity method to account for this investment. 1. Prepare a schedule to determine goodwill, and the amortization and allocation amounts. The following account balances are for the year ending December 31, 2020 for both companies. John Doe Enterprises S(298,000,000) 271,000,000 4.361,500) $(31.361,500) Tractors-R-Us Manufacturing $(103,750,000) 95,800,000 Revenues Expenses Equity in income-Tractors-R-UsManufacturing Net income SC 7.950.000) Retained earnings, January 1, 2020 Net income (above) Dividends paid Retained earnings, December 31, 2020 $ 2,500,000) ( 31,361,500) 5,000,000 (28.861,500) $ ( - SC 100.000) 7,950,000) 3.000.000 5,050,000) $ 20,800,000 Current Assets Investment in Tractor Manufacturing Land Buildings Equipment (net) Total assets $ 30,500,000 13,161,500 1,500,000 5,600,000 3.100.000 S 53.861,500 1,700,000 2,360,000 2.960,000 27.820.000 $ SC 3,100,000) Accounts payable Notes payable Common stock Additional paid-in capital Retained earnings, Dec. 31, 2020 (above) Total liabilities and stockholders' equity ( 2,900,000) ( 19,000,000) 28.861,500 S (53.861.500) $ (4,900,000) 1,000,000) ( 6,000,000) ( 10,870,000) 5,050,000) $C 27.820.000) 2. Prepare the consolidating entries and the consolidation worksheet for this business combination. Assume goodwill has been reviewed and there is no goodwill impairment.

1. Prepare a schedule to determine goodwill, and the amortization and allocation amounts.

2. Prepare the consolidating entries and the consolidation worksheet for this business combination. Assume goodwill has been reviewed and there is no goodwill impairment.

Answer 1

1)

Particulars	Amount ($)
Cash	3,000,000
common stock (500000 @14.90)	7450000
FV of 55% stake	10,450,000
Total Fv of TMI	19,000,000
BV of TMI	16,970,000
Excess of Fv over BV	2,030,000
Allocation:
Land	850,000
Building (7 yrs remaining life)	700,000
Equipment (5 yrs remaining life)	-400,000
	1,150,000
Goodwill	880,00

Amortization:

   Excess of Fv Yearly amort. JDE share NCI@45%

Building (7yrs remaining life) 700,000 100,000

Equipment (5yrs remaining life) -400,000 -80,000

20,000 11000 6050

B C D E F 1 Consolidation worksheet Consolidated Adjustments JDE TIM JDE TIM -298000000 -103750000 271000000 95800000 -43615001 4361500 -31361500 -7950000 -401750000 366820000 4 Revenue 5 Expenses 6 Equity in income of TIM 7 Net income 20000 -34930000 8 4361500 9 Retained earnings (Jan 1, 2020) 10 Net income (above) 11 Dividend paid 12 Retained earnings (Dec 31, 2020) 13 -2500000 -31361500 5000000 -28861500 -100000 -7950000 3000000 -5050000 100000 3588500 -3000000 -2500000 -31361500 5000000 -28861500 51300000 14 Current assets 15 Investment in TIM 16 Land 17 Buildings 30500000 13161500 1500000 5600000 20800000 -13161500 1700000 2360000 850000 4050000 6000008560000

3100000 2960000 -320000 880000 5740000 880000 70530000 53861500 27820000 18 Eqipment (net) 19 Goodwill 20 Total assets 21 22 Accounts payable 23 Notes payable 24 Common stock 25 Additional paid-in capital 26 Retained earnings (Dec 31, 2020) 27 Non-Controlling interest 28 Total liabilities and shareholders' equity -3100000 -4900000 -1000000 -2900000 -6000000 -19000000 -10870000 -28861500 -5050000 -10768500 -538615001 -27820000 6000000 10870000] -8000000 -1000000 -2900000 -19000000 -28861500 -10768500 -70530000