Question

C. (1) ENTRY S  (2) ENTRY A, (3) ENTRY I  (4) ENTRY D (5) ENTRY E

Chapter 3 Homework A Saved Help 12.5 points Branson paid $512,300 cash for all of the outstanding common stock of Wolfpack, Inc., on January 1, 2017. On that date, the subsidiary had a book value of $343,000 (common stock of $200,000 and retained earnings of $143,000), although various unrecorded royalty agreements (10-year remaining life) were assessed at a $146,000 fair value. Any remaining excess fair value was considered goodwill. In negotiating the acquisition price, Branson also promised to pay Wolfpack's former owners an additional $71,000 if Wolfpack's income exceeded $110,000 total over the first two years after the acquisition. At the acquisition date, Branson estimated the probability-adjusted present value of this contingent consideration at $49,700. On December 31, 2017, based on Wolfpack's earnings to date, Branson increased the value of the contingency to $56,800. During the subsequent two years, Wolfpack reported the following amounts for income and dividends: Skipped 2017 2018 Net Income $ 60,200 70,200 Dividends Declared $ 20,000 30,000 eBook Print In keeping with the original acquisition agreement, on December 31, 2018, Branson paid the additional $71,000 performance fee to Wolfpack's previous owners. Prepare each of the following: References a. Branson's entry to record the acquisition of the shares of its Wolfpack subsidiary. b. Branson's entries at the end of 2017 and 2018 to adjust its contingent performance obligation for changes in fair value and the December 31, 2018, payment. c. Prepare consolidation worksheet entries as of December 31, 2018, assuming that Branson has applied the equity method. d. Prepare consolidation worksheet entries as of December 31, 2018, assuming that Branson has applied the initial value method.

D. (1) ENTRY C (2) ENTRY S, (3) ENTRY A (4) ENTRY I (5) ENTRY E

Answer 1

Anecer Page No 0 @ Towinal entry to record the acquisition of the shares of Subsidiary welfare inc's - Particular Debit I Goedit Investment in wolápach Inc. : $ 562000 To contingent performance obligation - $ 49,700 To cash $512,300 : Coedit obligation $4100 @ Jawinal entries Date Particular dec 31, Lons from increas in contingent performante $ 7100 2017 To contingent performance obligation dec 31, hem from increase in contingent performance $14200 2018 Obligation To contingent perbormance obligation Contingent performance. Obligation $ 71000 2018 To cash $14200 dec3² 4 +1000 → 71000 – 56800 = $14200 56800-497000 $4100

Page. No@ Consolidated worksheet entries Equila method Retained carnêngs = $143000 + 60200 - 20,000 = $183200 Particular I Gedit event $200,000 $383200 $ 204400 Debit Common stock wolfpack Inc. . Retained earnings $ 183200 To investment in wolf pack, Royally agereements ( 14600 – 1460) $131400 Goodwill $73000 To investment in Wolfpach Equity earnings of coltbach (40200 -1960$55600 To investment in wolf packi Investment in wolfpack $30,000 . To dividends Amortization expense (46000) $ 14,600 To royalting agreement Goodwill Consideration given = 512300 + 49900 : = $562000 $55600 $ 30,000 $14,600 Book value received - 200,000 + 143000 - $343000

- Page No ③ Excess = 562000 – 343000 = $ 219000 Allocation to soyalty agreement = $146000 Geodusill = 219000 – 146000 : $ = 3000 @ Event Cansolidated cooksheets entries Initial value method Particular Debit | Credit Invesfment in coeltpack . 625600 - To retained earnings 70260-1460. mcd] 25600 Common stock wolf pock $ 200,000 Retained earnings $183200 To investment in Wolfpacks $383200 Royalty agreements(1460-1460) $ 131400 Goodwill 73000 To investment in wolfrack $204400 Dividend income $ 30,000 To dividends paid $30,000 Amortization expense (146009) $14600 To royalty agreement $ 14600