Question

Plexi Company purchased 85% of the outstandingcommon stock of Sesnor Company on January 1, 209 for ss,moo NOTE COST METHOD USED BY PARENT Credit Investment in Subsidiary-Sesnor 5,700,000 in Jan. 1, ZO 9 $5,700,000 The SesnorCompanybatndutettonw09and unna are as follows: Fair Value 120,000 $ 260,000 350,000 $ 450,000 1,275,000 950,00o 3,200,000 $ 3,450,000 $1,000000 1,000,000 250,000 $120,000 $350,000 $1,275,000 $ 3,200,000 $2,500,000 Cash Accounts Receivable Net Plant Assets $ 1,500,000 Other Assets Total Assets Accounts Payable ies 1,375,000 1,150,000 500,000 $325,000 $ 1,375,000 $750,000 Other Uabilit $ 250,000 Total Uabilities Common Stock (Par $1) APIC Retained Eamings 100,000 100,000 3,070,000 3,885,000 Total Equity Total Liabilities &Equity945,000$6360.000 85%Ownership 85% 15% 100% NCI lied $5,700,000 $ 1,005,882 6,705,882 $ 4,070,000 2,635,882 1,500,000 37,500 250,000 S 1,385,882 $1,385,882 Fair Value Given Up Book Value Received $ 3,459,500 610,500 395,382 1,275,000 $ 225,000 7,500 207,882 207,882 Difference Land Other Liabilities $ 2,240,500 $ $ 212,500 $ $ 1,178,000 $ $ 1,178,000 $ Goodwill Balance During 2012, Sesnor Company dedared dividends in the amount of During 2012, Sesnor Company had net income in the amount of 250,000 212,500 Sesnor Company Retained Earnings as of 12/31/2011 was 3,200,000 PREPARE THE WORKPAPER (and related workpaper entriesjTHAT WOULD BE MADE IN THE PREPARATION OF THE CONSOUDATED FINANCIAL STATEMENTS ON DECEMBER 31, 2012 Cost Method - After Year of Acquisition the following workpaper entries are made en Debi investment in Subsidiary-Sesnor Company Credit 110,500 Retained Earnings 1/1 Current Year- Parent $110,500

Answer 1

Investment in Subsidiary Company-Sesnor Company					110500
Retained Earnings 1/1 Current year-Parent						110500
The above entry is made to incorporate the profits earned by subsidiary after its acquisition
85% of (3200000-3070000) = $110500
Dividend Income					212500
Dividend Declared Sub-Sesnor Company						212500
The above entry is made to accou t for the dividend declared by the subsidiary
85% of 250000 = $212500
Common Stock Sesnor Co.					100000
APIC Sesnor Co.					900000
Retained Earnings - Sesnor Co.					3200000
Difference					2635882
Investment in Subsidiary Company-Sesnor Company						5810500
NCI						1025382
The above entry is made at the time of Consolidation of Accounts of Subsidiary and it is used to eliminate own investment in Subsidiary and account for Non- Controlling Interest
Investment In Subsidiary = 5700000+85% of(3200000-3070000) = $5810500
Non- Controlling Interest = 15% of
(100000+900000+3200000+2635882) = $1025382
Land		1500000
Goodwill		1385882
Other liabilities			250000
Difference			2635882
First 4 sub-parts can be answered at a go.