|
Assignment 4: Final Project
Roberts Corporation and William Company (Continuing
Project)
Assume instead that on January 1, 2009, Roberts Corporation
acquired 80 percent of the outstanding voting stock of William Company in
exchange for $1,200,000 cash. At that time, although William’s book value was
$925,000, Roberts assessed William’s total business fair value at $1,500,000.
The book values of William’s individual assets and liabilities
approximated their fair values at the acquisition date, except for the equipment
account, which was undervalued by $350,000. The undervalued equipment had a
five-year remaining life at the acquisition date. Any remaining excess fair
value was attributed to goodwill. No goodwill impairments have occurred.
During its first year of combined operations, William earned net
income of $180,000 and paid dividends totaling $30,000. William immediately
began supplying inventory to Roberts. Below are the details of the intercompany
inventory sales for the current year:
Year
|
Intercompany
sales |
Intercompany ending inventory
at transfer price |
Gross profit rate on
intercompany inventory transfers |
|
2009 |
$125,000 |
$80,000 |
25% |
Separate financial statements for both companies as of December
31, 2009, are shown below:
|
Roberts |
William |
|
Revenues |
$(1,740,000) |
$(900,000) |
|
Cost of goods sold |
$820,000 |
$500,000 |
|
Depreciation expense |
$104,000 |
$85,000 |
|
Amortization expense |
$220,000 |
$120,000 |
|
Interest expense |
$20,000 |
$15,000 |
|
Income from Subsidiary |
$(72,000) |
0 |
|
Net Income |
$(648,000) |
$(180,000) |
|
|
|
|
|
Retained earnings, 1/1/09 |
$(2,800,000) |
$(125,000) |
|
Net Income (above) |
$(648,000) |
$(180,000) |
|
Dividends paid |
$200,000 |
$30,000 |
|
Retained earnings, 12/31/09 |
$(3,248,000) |
$(275,000) |
|
|
|
|
|
Cash |
$691,000 |
$115,000 |
|
Accounts receivable |
$500,000 |
$215,000 |
|
Inventory |
$990,000 |
$800,000 |
|
Investment in William Stock |
$1,248,000 |
0 |
|
Buildings and equipment (net) |
$1,025,000 |
$863,000 |
|
Patents |
$950,000 |
$107,000 |
|
Total assets |
$5,404,000 |
$2,100,000 |
|
|
|
|
|
Accounts payable |
$(411,000) |
$(200,000) |
|
Notes payable |
$(545,000) |
$(825,000) |
|
Common stock |
$(900,000) |
$(700,000) |
|
Additional paid-in capital |
$(300,000) |
$(100,000) |
|
Retained earnings, 12/31/09 (above) |
$(3,248,000) |
$(275,000) |
|
Total liabilities and stockholders’ equity |
$(5,404,000) |
$(2,100,000) |
Based on the information given above, complete the following
tasks:
- Assuming that Roberts accounts for its investment in William using the
equity method, prepare all necessary general journal entries for the year ending
December 31, 2009. Include supporting calculations of all amounts in a separate
schedule.
- Next, prepare the eliminating entries needed at January 1, 2009, to prepare
the consolidated balance sheet as of the date of acquisition. You are not
required to prepare the actual consolidated balance sheet.
- Finally, prepare the eliminating entries needed at December 31, 2009, and
prepare the consolidated income statement, retained earnings statement, and
balance sheet as of December 31, 2009, using spreadsheet software (Microsoft
Excel). Be sure to show clearly the noncontrolling interest in both net income
and stockholders’ equity on your worksheet.
Submit your answers in a Microsoft Excel sheet.
Name your sheet: SU_MBA6302_W2_A4_LastName_FirstInitial.xls.
Submit your document to the W2: Assignment 4 Dropbox
by Saturday, October 19, 2013.
Cite any sources you use using the correct APA format on a
separate page.
Assignment 4 Grading Criteria
|
Maximum
Points |
|
Prepared all necessary general journal entries for the year ending
December 31, 2009.
|
15 |
|
Prepared the eliminating entries needed at January 1, 2009, and
the consolidated balance sheet as of the date of acquisition.
|
15 |
|
Prepared the eliminating entries needed at December 31, 2009, and
the consolidated income statement, retained earnings statement, and balance
sheet as of December 31, 2009.
|
15 |
|
Used correct spelling, grammar, and professional vocabulary. Cited
all sources using the correct APA style.
|
5 |
| Total: |
50 |
|
|
![]()
![]()
![]()
Cite
sources using APA
|
