Problem 4-3 (LO 2) 70%, equity, beginning and ending inventory, subsidiary

| June 14, 2016

Question
Problem 4-3 (LO 2) 70%, equity, beginning and ending inventory, subsidiary
seller. Refer to the preceding facts for Panther’s acquisition of Spider common stock. On Jan-
uary 1, 20X2, Panther held merchandise acquired from Spider for $8,000. This beginning
inventory had an applicable gross profit of 25%. During 20X2, Spider sold $30,000 worth of
merchandise to Panther. Panther held $6,000 of this merchandise at December 31, 20X2. This
ending inventory had an applicable gross profit of 30%. Panther owed Spider $6,000 on
December 31 as a result of these intercompany sales.

1. Prepare a zone analysis and a determination and distribution of excess schedule for the
investment in Spider.
2. Complete a consolidated worksheet for Panther Corporation and its subsidiary Spider Cor-
poration as of December 31, 20X2. Prepare supporting amortization and income distribu-
tion schedules.

Complete Problem 4-3 using the Problems_Templates4.

Prob 4-3 D&D

A
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75

B

C

D

E

F

G

H

Book
Value

Market
Value

Life

Problem 4-3
Intercompany merchandise sales – BI & EI, Sub Seller
Common Information
Ownership interest
Price paid (including direct acquisition costs)
Year of consolidation (1 = year of purchase)

70.00%
350,000
2

Acquired company’s balance sheet before purchase
Book
Value

Market
Value

Life

Priority assets:

Total priority assets

Total liabilities

0

Stockholders’ equity:
Common stock
Paid-in capital in excess of par
Retained earnings
Total equity

0

Mkt value of net assets

0

Nonpriority assets:

Total nonpriority assets
Existing goodwill
Total assets

Intercompany Merchandise Information:
Parent
Sales

Parent
%

Subsidiary
Sales

Subsidiary
%

Current year sales
Unpaid account balance, year end
Beginning inventory
Ending inventory

Zone Analysis

Group
Total

Priority accounts
Nonpriority accounts

Ownership
Portion
0
0

Cumulative
Total
0
0

0
0

Price Analysis
Price =
Assign to priority accounts
Assign to nonpriority accounts
Goodwill
Extraordinary gain

350,000
0

full value

Allocation Tables
Nonpriority Accounts

Total
Goodwill
Extraordinary gain

Market

Percent

Available

Assign

Total adjustments

Adjust

70.00%
Amortization

Page 1

Determination and Distribution of Excess Schedule
Price paid for investment:
Less book value interest acquired:
Common stock
Paid-in capital in excess of par
Retained earnings
Total equity
Interest acquired
Excess of cost over book value (debit)
Adjustments:

Book

Prob 4-3 Schedules

A
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34

B

C

D

E

F

G

Annual
Amount

Current
Year

Prior
Years

Total

Key

Problem 4-3
Amortization Schedules
Year of consolidation
Account adjustments
To be amortized

2
Life

Total amortizations
Intercompany Inventory Profit Deferral
Parent
Amount
Beginning
Ending

Income distribution schedules:
Subsidiary:
Internally generated net income

Parent
%

DR

Parent
Profit

Sub
Amount

CR

Total
NCI share
Controlling share
Parent
Internally generated net income
Controlling share of subsidiary

Amortizations
Total

Page 2

Sub
%

Sub
Profit

Prob 4-3 Worksheet

A
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51

B

C

D

E

F

G

H

I

J

K

Consol
Net Inc.

NCI

Control.
R.E.

Consol.
Bal. Sht.

Problem 4-3 (concluded)
Year of consolidation

Cash
Accounts receivable
Inventory
Land
Investment in Spider

Buildings
Accumulated depreciation – bldgs.
Equipment
Accumulated depreciation – equip.
Goodwill
Accounts payable
Bond payable

2
Trial Balance
Panther
Spider
116,000
132,000
90,000
45,000
120,000
56,000
100,000
60,000
378,000

800,000
(220,000)
150,000
(90,000)
(60,000)

Common stock – Spider
Paid-in capital in excess of par – Spider
Retained earnings – Spider

Eliminations
Dr

Cr

200,000
(65,000)
72,000
(46,000)
(102,000)
(100,000)

(10,000)
(90,000)
(142,000)

Common stock – Panther
Paid-in capital in excess of par – Panther
Retained earnings – Panther

(100,000)
(800,000)
(325,000)

Sales
Cost of goods sold

(800,000)
450,000

(350,000)
208,500

30,000
15,000
140,000

7,500
8,000
98,000
8,000

Depr. expense – building
Depr. expense – equipment
Other expenses
Interest expense
Subsidiary income
Dividends declared – Spider
Dividends declared – Panther
Totals
Consolidated net income
NCI share
Controlling share
NCI
Controlling retained earnings
Totals

(14,000)
10,000
20,000

Eliminations and Adjustments:

Page 3

L

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