Question

Miller Company acquired an 80 percent Interest In Taylor Company on January 1, 2019. Miller pald $728,000 in cash to the owners of Taylor to acquire these shares. In addition, the remaining 20 percent of Taylor shares continued to trade at a total value of $182,000 both before and after Miller's acquisition On January 1, 2019, Taylor reported a book value of $474.000 (Common Stock = $237,000; Additional Pald-in Capital = $71,100; Retained Earnings = $165.900). Several of Taylor's bulidings that had a remaining life of 20 years were undervalued by a total of $63.200. During the next three years, Taylor reports Income and declares dividends as follows: Dividends Year 2019 2020 2021 Net Income $ 55,600 72,960 12,200 16,30 Determine the appropriate answers for each of the following questions:

Answer 1

Ans)

a)

Schedule-1 Fair value allocation and Excess Amortizations
Consideration tranferred by Miller	$728,000
Noncontrolling interest fair value	$182,000
Taylor's fair value	$910,000
Less: Taylor's book value	($474,000)
Fair value in excess of book value	$436,000

	Excess fair value assigned to specific accounts based on fair value	Remaining life	Annual excess amortization
Excess fair value assigned to buildings	$63,200	20 years	$3,160
Goodwill ($436,000-$63,200)	$372,800	indefinite	$0
Total			$3,160

b) Amount of goodwill = $372,800

c)

Entry S

January 1,2019

Account Title	Debit	Credit
Common stock (Taylor)	$237,000
Additional paid-in capital (Taylor)	$71,100
Retained earnings (Taylor)	$165,900
Investment in Taylor company (80%)		$379,200
Noncontrolling interest in Taylor (20%)		$94,800

2

January 1,2019

Account Title	Debit	Credit
Buildings	$63,200
Goodwill	$372,800
Investment in Taylor company (80%)		$348,800
Noncontrolling interest in Taylor (20%)		$87,200

Required D

Equity method:
Income accrual (55600*80%)	44480
Excess amortization expense (3160*80%)	2528
Investment income	41952
Partial equity method:
Income accrual (55600*80%)	44480
Initial value method:
Dividends received (8100*80%)	$6480

Required E

Equity method:
Initial fair value paid	728000

Income accrual 2019-2021 167840

($ 55,600 +72,900 +81,300)*80%

Dividends 2019-2021 -29280

($ 8,100 +12,200 +16,300)*80%

Excess amortization -7584

2019-2021 (3160*80%*3)

Investment in Taylor	$858976
Partial equity method:
Initial fair value paid	728000

Income accrual 2019-2021 167840

($ 55,600 +72,900 +81,300)*80%

Dividends 2019-2021 -29280

($ 8,100 +12,200 +16,300)*80%

Investment in Taylor	$866560
Initial value method:
Investment in Taylor	$728000