Plaza, Inc., acquires 80 percent of the outstanding common stock of Stanford Cor
ID: 2547634 • Letter: P
Question
Plaza, Inc., acquires 80 percent of the outstanding common stock of Stanford Corporation on January 1, 2018, in exchange for $1,052,900 cash. At the acquisition date, Stanford's total fair value, including the noncontrolling interest, was assessed at $1,316,125 Also at the acquisition date, Stanford's book value was $543,900. Several individual items on Stanford's financial records had fair values that differed from their book values as follows: Book Value Fair Value s 284,600 422,200 Tradenames (indefinite life) Property and equipment (net, 8-year remaining life) Patent (14-year remaining life) 233,600 134,900 251,200 165,700 For internal reporting purposes, Plaza, Inc., employs the equity method to account for this investment. The following account balances are for the year ending December 31, 2018, for both companies Plaza Stanford $(852,700)$(714,100) Revenues Cost of goods sold Depreciation expense Amortization expense Equity in income of Stanford 313,200 29,200 22,300 471,400 199,800 276,000 $(457,500) (349,400) Net income Retained earnings, 1/1/18 Net income Dividends declared $(1,009,100) (418,900) (457,500) (349,400) 237,400 $(1,229,200) 22,000 (746,300) Retained earnings, 12/31/18 Current assets Investment in Stanford Tradenames Property and equipment (net) Patents $680,500 1,311,300 190,000 815,500 $341,700 0 284,600 204,400 112,600 $ 943,300 Total assets $ 2,997,300Explanation / Answer
Worksheet to consolidate the financial statements of Plaza, Inc. and its subsidiary Stanford Consolidation Entries Noncontrolling Consolidated Accounts Plaza Stanford Debit Credit Interest Totals Revenues ($852,700) ($714,100) ($142,820) ($1,566,800) Cost of Goods Sold 471400 313200 $62,640 $784,600 Depreciation expenses 199800 29200 2200 $5,840 $231,200 Amortization expenses 22300 2200 $4,460 $24,500 Equity in Income of Stanford -276000 276000 $0 $0 Net Income ($457,500) ($349,400) $280,400 $0 ($69,880) ($526,500) Consolidated Net Income ($526,500) NCI share of CNI ($69,880) Plaza share of CNI ($456,620) Retained earnings,1/1 ($1,009,100) ($418,900) 418900 ($1,009,100) Net Income ($457,500) ($349,400) ($456,620) Dividends declared 237400 22000 -17600 4400 237400 Retained earnings, 31/12 ($1,229,200) ($746,300) $418,900 ($17,600) $4,400 ($1,228,320) Current Assets $680,500 $341,700 $1,022,200 Investment in Stanford $1,311,300 -1311300 $0 Tradenames $190,000 284600 137600 $612,200 Property and equipment (net) $815,500 204400 17600 -2200 $1,035,300 Patents $0 112600 30800 -2200 $141,200 Goodwill 323000 $323,000 Total Assets $2,997,300 $943,300 $509,000 ($1,315,700) $0 $3,133,900 Accounts payable ($112,500) -72000 ($184,500) Common Stock ($237,500) -80000 80000 ($237,500) Additional paid in Capital ($1,418,100) -45000 45000 ($1,418,100) Noncontrolling Interest ($65,480.00) Retained earnings, 31/12 ($1,229,200) -746300 ($1,228,320) Total Liabilities and Equity ($2,997,300) ($943,300) $125,000 $0 $0 ($3,133,900) $1,333,300 ($1,333,300) ($65,480) Fair market value of Stanford $1,316,125 80% of fair market value $1,052,900 Price paid by Plaza Inc. $1,052,900 Price paid over book value Price paid by Palza, Inc $1,052,900 Book value at the date of acquisition $543,900 Excess of price paid over book value $509,000 Allocation of excess of price paid Tradeanmes $137,600 Property and equipment $17,600 Patent $30,800 Goodwill $323,000 Investment in Subsidiary, 31/12 Price paid for acquisition $1,052,900 Add: Income from Stanford $276,000 Less: Dividend declared ($17,600) Investment in Subsidiary, 31/12 $1,311,300 Depreciation on property & equipment = $17600/8 = $2200 Amortization of Patent = $30800/14 = $2200