Questions -

Q1. On January 1, 2014, Jannison Inc. acquired 90% of Techron Co. by paying $477,000 cash. There is no active trading market for Techron stock. Techron Co. reported a Common Stock account balance of $140,000 and Retained Earnings of $280,000 at that date. The fair value of Techron Co. was appraised at $530,000. The total annual amortization was $11,000 as a result of this transaction. The subsidiary earned $98,000 in 2014 and $126,000 in 2015 with dividend payments of $42,000 each year. Without regard for this investment, Jannison had income of $308,000 in 2014 and $364,000 in 2015. Use the economic unit concept to account for this acquisition.

What is the non-controlling interest balance as of December 31, 2015?

Q2. On January 1, 2014, Glenville Co. acquired an 80% interest in Acron Corp. for $500,000. There is no active trading market for Acron's stock. The fair value of Acron's net assets was $600,000 and Glenville accounts for its interest using the acquisition method.

Determine the value assigned to the non-controlling interest as of the date of the acquisition.

Q3. On January 1, 2015, John Doe Enterprises (JDE) acquired a 55% interest in Bubba Manufacturing, Inc. (BMI). JDE paid for the transaction with $3 million cash and 500,000 shares of JDE common stock (par value $1.00 per share). At the time of the acquisition, BMI's book value was $16,970,000.

On January 1, JDE stock had a market value of $14.90 per share and there was no control premium in this transaction. Any consideration transferred over book value is assigned to goodwill. BMI had the following balances on January 1, 2015.

For internal reporting purposes, JDE employed the equity method to account for this investment.

The following account balances are for the year ending December 31, 2015 for both companies.

Required: Prepare a consolidation worksheet for this business combination. Assume goodwill has been reviewed and there is no goodwill impairment.

Q4. Beta Corp. owns less than one hundred percent of the voting common stock of Shedds Co. Under what conditions will Beta be required to prepare consolidated financial statements?

Q5. What is the purpose of the adjustments to depreciation expense within the consolidation process when there has been an intra-entity transfer of a depreciable asset?

Q6. Fraker, Inc. owns 90 percent of Richards, Inc. and bought $200,000 of Richards' inventory in 2013. The transfer price was equal to 30 percent of the sales price. When preparing consolidated financial statements, what amount of these sales is eliminated?

Q7. Several years ago Polar Inc. acquired an 80% interest in Icecap Co. The book values of Icecap's asset and liability accounts at that time were considered to be equal to their fair values. Polar's acquisition value corresponded to the underlying book value of Icecap so that no allocations or goodwill resulted from the transaction.

The following selected account balances were from the individual financial records of these two companies as of December 31, 2013:

Assume that Icecap sold inventory to Polar at a markup equal to 25% of cost. Intra-entity transfers were $70,000 in 2012 and $112,000 in 2013. Of this inventory, $29,000 of the 2012 transfers were retained and then sold by Polar in 2013, whereas $49,000 of the 2013 transfers were held until 2014.

Required: For the consolidated financial statements for 2013, determine the balances that would appear for the following accounts: (1) Cost of Goods Sold, (2) Inventory, and (3) Non-controlling Interest in Subsidiary's Net Income.

Q8.Blanton Corporation is comprised of five operating segments. Information about each of these segments is as follows (in thousands):

Required:

(a) Which operating segments are reportable under the revenue test?

(b) What is the total amount of revenues in applying the revenues test?

(c) Which operating segments are reportable under the profit or loss test?

(d) In applying the profit or loss test, what is the minimum amount an operating segment must have in order to meet the profit or loss test for a reportable segment?

(e) Which operating segments are reportable under the asset test?

(f) In applying the asset test, what is the minimum amount an operating segment must have in order to meet the asset test for a reportable segment?

(g) Which operating segments are reportable?

(h) According to the test results for reportable segments, is there a sufficient number of reported segments or should any additional segments also be disclosed? Explain the reason for your conclusion.

Q9. Why are quarterly financial statements required to be published for publicly traded companies in the U.S.?

Q10. What two disclosure guidelines for operating segment information are designed to ensure the consistency of data reported from year to year?

Q11. Reed, Sharp, and Tucker were partners with capital account balances of $80,000, $100,000, and $70,000, respectively. They agreed to admit Upton to the partnership. Upton purchased 30% of each partner's interest, with payments directly to Reed, Sharp, and Tucker of $32,000, $40,000, and $28,000, respectively. Before the admission of Upton, the profit and loss sharing ratio was 2:3:2. The partners agreed to use the book value method to account for the admission of Upton to the partnership.

Required: Prepare the journal entry to record the admission of Upton to the partnership.

Q12. Jipsom and Klark were partners with capital account balances of $80,000 and $100,000, respectively. Looney directly paid $32,000 to Jipsom and $40,000 to Klark for 30% of their interests in the partnership. Jipsom and Klark shared income in the ratio of 2:3. They believed that revaluation of the partnership was appropriate when a new partner was admitted.

Required: Prepare the journal entries to record the admission of Looney to the partnership.

Q13. Norr and Caylor established a partnership on January 1, 2012. Norr invested cash of $100,000 and Caylor invested $30,000 in cash and equipment with a book value of $40,000 and fair value of $50,000. For both partners, the beginning capital balance was to equal the initial investment. Norr and Caylor agreed to the following procedure for sharing profits and losses:

- 12% interest on the yearly beginning capital balance

- $10 per hour of work that can be billed to the partnership's clients

- the remainder divided in a 3:2 ratio

The Articles of Partnership specified that each partner should withdraw no more than $1,000 per month.

For 2012, the partnership's income was $70,000. Norr had 1,000 billable hours, and Caylor worked 1,400 billable hours. In 2013, the partnership's income was $24,000, and Norr and Caylor worked 800 and 1,200 billable hours respectively. Each partner withdrew $1,000 per month throughout 2012 and 2013.

Determine the amount of net income allocated to each partner for 2012.