On January 1, 2012, Alpha acquires 80 perecent of Delta total buisnesss fair value, $125,000 was allocated to copyrights with a 20-year remainining life. nSubsequenetly, On 1, 2013, Delta obtained 70 pervcent of Omega outstanding voting shres. In this second acquisition, $120,000 of Omega;s total buisnesss fair value was assigned to copyrights thatnhad a remaining life of 12 years. Delta book value was $490,000 on January 1, 2012. Omega reported a book value of $140,000 on January 1, 2013.

Deltamade numerours inventory transfers to Alpha since the business combination was formed. Unrealized groasss profits of $15,000 were present in Alpha;s inventory as of Janaury 1, 2014. During the year, $200,000 in additional intra-entity slaes were made with $22,000 in gross profit remaining unrealized at the end of the period.

Both Alpha and Delta utilized the partial equity method to account for their invesmne balances.

Following are the individual financial statesment for the companies for 2014 with consolidated total. Develop the worksheet entries necessary to derive these reported balance:

 

Alpha Delta Omega Consolidated

Company Company Comp Total

 

Sales…………………… $(900,000) $(500,000) $(200,000) $(1,400,000)

Cost of goods sold………………….. 500,000 240,000 80,000 627,000

Operating expenses……………………… 294,000 129,000 50,000 489,250

Income of subsidiary………………………..(144,000) (49,000) 0 0

Separterae company net income…………....$(250,000) $(180,000) $(70,000)

Consolidated net income ………………………………………………………… $(283,750)

Net income attributed to the noncontrolling

Intereste(Delta Compnay)……………………………………………………………….31,950

Net income attributed to the noncontroll

Intereset(Omega Company)………………………………………………………………18,000

Netincome attributable to the Alpha Company……………………………………… 233,800

Retained earnings, 1/1/14 . . . . . . . . . . $ (600,000) $ (400,000) $(100,000) $ (572,400)

Net income (above) . . . . . . . . . . . . . . . . . . . . . . (250,000) (180,000) (70,000) (233,800)

Dividends paid. . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 40,000 50,000 50,000

Retained earnings, 12/31/14 . . . . . . . . . . . . . $ (800,000) $ (540,000) $(120,000) $ (756,200)

Cash and receivables . . . . . . . . . . . . . . . . . . . . . $ 262,000 $ 206,000 $ 70,000 $ 538,000

Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 290,000 310,000 160,000 738,000

Investment in Delta Company . . . . . . . . . . . . . . 628,000 –0– –0– –0–

Investment in Omega Company. . . . . . . . . . . . . –0– 238,000 –0– –0–

Property, plant, and equipment . . . . . . . . . . . . . 420,000 316,000 270,000 1,006,000

Copyrights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . –0– –0– –0– 206,250

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,600,000 $ 1,070,000 $ 500,000 $ 2,488,250

Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (600,000) $ (410,000) $(280,000) $(1,290,000)

Common stock . . . . . . . . . . . . . . . . . . . . . . . . . (200,000) (120,000) (100,000) (200,000)

Retained earnings, 12/31/14 . . . . . . . . . . . . . . . (800,000) (540,000) (120,000) (756,200)

Noncontrolling interest

in Delta Company, 12/31/14 . . . . . . . . . . . . . . –0– ,–0–, –0– , (146,050)

Noncontrolling interest

in Omega Company, 12/31/14. . . . . . . . . . . . . –0– –0– –0– (96,000)

Total liabilities and equities. . . . . . . . . . . . . $(1,600,000) $(1,070,000) $(500,000) $(2,488,250)

 

Summit owns a 90 percent majority voting interest in Treeline. In turn, Treeline owns a 70 percent

majority voting interest in Basecamp. In the current year, each firm reports the following income and

dividends. Operating income figures do not include any investment or dividend income.

 

Operating Income Dividends Paid

Separate Company Income Dividend Declare

Summit $345,000 $150,000

Treeline 280,000 100,000

Basecamp 175,000 40,000

In addition, in computing its income on a full accrual basis, Treeline’s acquisition of Basecamp necessitates

excess acquisition-date fair value over book value amortizations of $25,000 per year. Similarly,

Summit’s acquisition of Treeline requires $20,000 of excess fair-value amortizations.

Required

Prepare an Excel spreadsheet that computes the following:

1. Treeline’s income including its equity in Basecamp earnings.

2. Summit’s income including its equity in Treeline’s total earnings.

3. Total entity net income for the three companies.

4. Total noncontrolling interest in the total entity’s net income.

5. Difference between these elements:

•Summit’s net income.

•Total entity net income for the three companies less noncontrolling interest in the total entity’s net

income.

(Hint:The difference between these two amounts should be zero.)