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Consolidation: Black Co Blue Co Rand Corp John Doe Ent

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1. The following are preliminary financial statements for Black Co. and Blue Co. for the year ending December 31, 20X1.

On December 31, 20X1 (subsequent to the preceding statements), Black exchanged 10,000 shares of its $10 par value common stock for all of the outstanding shares of Blue. Black's stock on that date has a fair value of $50 per share. Black was willing to issue 10,000 shares of stock because Blue's land was appraised at $204,000. Black also paid $14,000 to several attorneys and accountants who assisted in creating this combination.

(**Please see the word attachment for the full charts and formatted problems.)


Assuming that these two companies retained their separate legal identities, prepare a consolidation worksheet as of December 31, 20X1 assuming the transaction is treated as a purchase combination.

2. On January 1, 2009, Rand Corp. issued shares of its common stock to acquire all of the outstanding common stock of Spaulding Inc. Spaulding's book value was only $140,000 at the time, but Rand issued 12,000 shares having a par value of $1 per share and a fair value of $20 per share. Rand was willing to convey these shares because it felt that buildings (ten-year life) were undervalued on Spaulding's records by $60,000 while equipment (five-year life) was undervalued by $25,000. Any consideration transferred over fair value of identified net assets acquired is assigned to goodwill.
Following are the individual financial records for these two companies for the year ended December 31, 2012.

(**Please see the word attachment for the full charts and formatted problems.)


Prepare a consolidation worksheet for this business combination.

3. On January 1, 2011, 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, 2011.

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, 2011 for both companies.

(**Please see the word attachment for the full charts and formatted problems.)


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

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Solution Summary

Your tutorials are in separate excel files. Click in cells to see computations. The entries are coded so you can follow the process and instructional notes and analysis are shown to guide you.

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  • MSc, University of Virginia
  • PhD, Georgia State University
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