Question

Fox Corporation acquired 100 percent ownership of Lamb Products on January 1, 2018.

for $200,000. On that date, Lamb reported retained earnings of $50,000 and had $10,000 of common stock outstanding and $90,000 of Paid in Capital

Fox has used the equity method of accounting for its investment in Lamb.

On the date of the business combination, the fair value of Lamb's depreciable assets

were $20,000 more than book value. The differential assigned to depreciable

assets is amortized over 10 years. In addition, notes payable is overvalued by $15,000 and has

a remaining life of 5 years. Any remaining acquisition differential is assigned to goodwill, which is

not impaired at December 31, 2018.

There was $10,000 of intercompany receivables/payables as of 12/31/18

Required: Carefully Follow and label each step.

1. Prepare the acquisition analysis as of acquisition date. Compute the

unamortized differential as of 1/1/2018 and the amortization for 2018

2. Verify the calculation of the balance in the acccount equity in sub

earnings and record the parent company entries with respect to its equity

investment in sub

3. Calculate Net Income Allocated to the Controlling Interest (also known as consolidated net income)

4. Prepare all elimination entries for 2018

5. Complete the consolidating spreadsheet for the year ended 2018.

There was $10,000 of intercompany receivables/payables as of 12/31/18

Answer 1

It seems that full information is not provided for the question 3 to 5.

The information of net income of Lamb product is not provided hence net income allocated to controlling interest cant be worked out.

Q.1 Prepare the acquisition analysis as of acquisition date. Compute the unamortized differential as of 1/1/2018 and the amortization for 2018

Acquisition Analysis
50,000.00	Retained Earning
10,000.00	Common Stock
90,000.00	Paid up capital
20,000.00	Increase in Asset Fair value
15,000.00	Fair value reduction in Notes Payable
185,000.00	Total value of acquisition
200,000.00	Less : Consideration Paid
15,000.00	Goodwill

Unamortized difference and Amortization of 2018

20,000.00	Unamortized differential for Asset
10.00	Period of Amortization
2,000.00	Amortization in 2018
15,000.00	Unamortized differential for Notes Payable
5.00	Period of Amortization
3,000.00	Amortization in 2018
35,000.00	Total Unamortized Differentials
5,000.00	Total Amortization for 2018

Q.2 : Verify the calculation of the balance in the account equity in sub earnings and record the parent company entries with respect to its equity investment in sub

Journal	Debit	Credit
Investment in lamb products	200,000.00
Cash		200,000.00
(100% share acquisition in Lamb product and accounted under equity method of acquisition)
Acquisition Premium on Investment in Lamb Products	35,000.00
Acquisition Premium on Investment in Lamb Products		35,000.00
(Acquisition premium for Fixed Asset and Notes Payable accounted)
Amortization of Acquisition premium of investment in Lamb Products	5,000.00
Acquisition Premium on Investment in Lamb Products		5,000.00
(Being amortization of acquisition premium over useful life of underlying assets)

Q.3 : Calculate Net Income Allocated to the Controlling Interest (also known as consolidated net income)

Information is missing with respect to Net Income

Q.4 : Prepare all elimination entries for 2018

The only elimination entry would be in respect of Account receivable & payable

Account	Debit	Credit
Accounts Payable	10,000.00
Account Receivable		10,000.00
(Being elimination entry for inter company account receivable and Payable)

Q.5 : Complete the consolidating spreadsheet for the year ended 2018

The information is missing in relation to financial statement of the both company.