Question

Miller Company acquired an 80 percent Interest In Taylor Company on January 1, 2016. MIller pald $776,000 In cash to the owners of Taylor to acquire these shares. In addition, the remalning 20 percent of Taylor shares continued to trade at a total value of $194,000 both before and after Miller's acquisition. On January 1, 2016, Taylor reported a book value of $580,000 (Common Stock $290,000, Additional Paid-In Capltal $87,000; Retained Earnings $203,000). Several of Taylor's buildings that had a remaining life of 20 years were undervalued by a total of $77,400. = During the next three years, Taylor reports Income and declares dividends as follows: Dividends Year Net Income 9, 900 2016 68, 100 2017 89, 100 14, 900 2018 99, 300 19, 900 Determine the approprlate answers for each of the following questlons: a. What amount of excess depreclation expense should be recognized In the consollidated financlal statements for the Inltlal years following this acquisition? b. If a consolidated balance sheet is prepared as of January 1, 2016, what amount of goodwill should be recognized? c. If a consolidation worksheet is prepared as of January 1, 2016, what Entry S and Entry A should be included? dl. On the separate financial records of the parent company, what amount of investment income would be reported for 2016 under each of the following accounting methods? The equlty method. The partlal equity method. The Initlal value method. e. On the parent company's separate financlal records, what would be the December 31, 2018, balance for the Investment In Taylor Company account under each of the following accounting methods? e. On the parent company's separate financlal records, what would be the December 31, 2018, balance for the Investment In Company account under each of the following accounting methods? Taylor The equity method. The partlal equity method. The Initial value method. f. As of December 31, 2017, Miller's Bulldings account on Its separate records has a balance of $796,000 and Taylor has a similar account with a $298,500 balance. What Is the consollidated balance for the Buldings account? g. What Is the balance of consolidated goodwill as of December 31, 2018? h. Assume that the parent company has been applying the equity method to this investment. On December 31, 2018, the separate financlal statements for the two companles present the following information: Miller Taylor Company 290, 000 Company $ 497,500 278, 600 Common stock Additional pai d-in capital Retained earnings, 12/31/18 87, 000 616, 900 414, 800 What will be the consolidated balance of each of these accounts? Complete this question by entering your answers in the tabs below. Req A and Req D and Req F and Req C Req H G a.What amount of excess depreciation expense should be recognized in the consolidated financial statements for the initial years following this acquisition? b. If a consolidated balance sheet is prepared as of January 1, 2016, what amount of goodwill should be recognized?

Answer 1

Since, the question has multiple parts, I have answered the first four parts with all the details.

_____

Part a)

The amount of excess depreciation expense is determined as follows:

Consideration Transferred by Miller	776,000
Fair Value of Non Controlling Interest	194,000
Taylor's Fair Value	970,000
Taylor's Book Value	580,000
Fair Value in Excess of Book Value	390,000
		Life	Annual Excess Amortizations
Excess Fair Value Assigned to Buildings	77,400	20	3,870
Goodwill	312,600	Indefinite	0
Total	$390,000		$3,870

Answer for Part a) is $3,870

_____

Part b)

The value of goodwill is $312,600 (390,000 - 77,400) as calculated in Part a).

Answer for Part b) is $312,600.

_____

Part c)

The entries are prepared as below:

Event	General Journal	Debit	Credit
Entry S	Common Stock	$290,000
	Additional Paid-In Capital	$87,000
	Retained Earnings	$203,000
	Investment in Taylor Company (580,000*80%)		$464,000
	Noncontrolling Interest in Taylor (580,000 - 464,000)		$116,000
Entry A	Buildings	$77,400
	Goodwill	$312,600
	Investment in Taylor Company (390,000*80%)		$312,000
	Noncontrolling Interest in Taylor (390,000*20%)		$78,000

_____

Part d)

The amount of investment income under each method is calculated as below:

Equity Method:

Income Accrual (68,100*80%)	54,480
Excess Amortization Expense (3,870*80%)	3,096
Investment Income	$51,384

____

Partial Equity Method

Investment Income = Income Accrual*80% = 68,100*80% = $54,480

____

Initial Value Method

Investment Income = Dividend*80% = 9,900*80% = $7,920

____

Tabular Representation:

	Investment Income
The Equity Method	$51,384
The Partial Equity Method	$54,480
The Initial Value Method	$7,920