Question

Tyler Company acquired all of Jasmine Company’s outstanding stock on January 1, 2016, for $244,700 in cash. Jasmine had a book value of only $169,500 on that date. However, equipment (having an eight-year remaining life) was undervalued by $61,600 on Jasmine’s financial records. A building with a 20-year remaining life was overvalued by $12,000. Subsequent to the acquisition, Jasmine reported the following:

	Net Income			Dividends Declared
2016	$	54,600		$	10,000
2017		88,800			40,000
2018		38,000			20,000

In accounting for this investment, Tyler has used the equity method. Selected accounts taken from the financial records of these two companies as of December 31, 2018, follow:

	Tyler Company				Jasmine Company
Revenues—operating	$	(480,000	)		$	(189,000	)
Expenses		275,000				151,000
Equipment (net)		336,000				61,500
Buildings (net)		302,000				70,200
Common stock		(290,000	)			(78,300	)
Retained earnings, 12/31/18		(510,000	)			(169,000	)

Determine the following account balances as of December 31, 2018:

1)Investment in Jasmine Company

2) Equity in Subsidiary Earnings

3) Consolidated Net Income

4) Consolidated Equipment (net)

5) Consolidated Building (net)

6) Consolidated Goodwill (net)

7) Consolidated Common Stock

8) Consolidated Retained Earnings, 12/31/18

Answer 1

a)
Schedule 1—Acquisition-Date Fair Value Allocation and Amortization
Jasmine’s acquisition-date fair value	$  244,700.00
Book value of Jasmine	$ (169,500.00)
Fair value in excess of book value	$    75,200.00
Excess fair value assigned to specificaccounts based on individual fair values
		Life	Annual Excess Amortization
Equipment	$    61,600.00	8	$              7,700.00
Buildings (overvalued)	$   (12,000.00)	20	$               (600.00)
Goodwill	$    25,600.00	indefinite	0
Total	$    75,200.00		$              7,100.00
Investment in Jasmine Company—12/31/18
Jasmine’s acquisition-date fair value	$  244,700.00
2016 Increase in book value of subsidiary	$    10,000.00
2016 Excess amortizations (Schedule 1)	$     (7,100.00)
2017 Increase in book value of subsidiary	$    40,000.00
2017 Excess amortizations (Schedule 1)	$     (7,100.00)
2018 Increase in book value of subsidiary	$    20,000.00
2018 Excess amortizations (Schedule 1)	$     (7,100.00)
Investment in Jasmine Company	$  293,400.00
b. Equity in Subsidiary Earnings
Income accrual ($189,000 - $151,000)	$    38,000.00
Excess amortizations (Schedule 1)	$     (7,100.00)
Equity in subsidiary earnings	$    30,900.00
c. Consolidated Net Income
Consolidated revenues (480,000 + 189,000)	$  669,000.00
Consolidated expenses (275,000 + 151,000)	$ (426,000.00)
Excess amortization expenses (Schedule 1)	$     (7,100.00)
Consolidated net income	$  235,900.00
d. Consolidated Equipment
Book values ($336,000 + $61500)	$  397,500.00
Allocation of purchase price	$    61,600.00
Excess depreciation ($7,700 × 3)	$   (23,100.00)
Consolidated equipment	$  436,000.00
e. Consolidated Buildings
Book values ($302,000 + $70200)	$  372,200.00
Allocation of purchase price	$   (12,000.00)
Excess depreciation ($7,700 × 3)	$      1,800.00
Consolidated Building	$  362,000.00
f. Consolidated goodwil
Allocation of excess fair value to goodwill	$    25,600.00
g. Consolidated Common Stock	$290,000
h. Consolidated Retained Earnings	$510,000