chapter06 solutions

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CHAPTER 6CONSOLIDATED FINANCIAL STATEMENTS:

ON DATE OF BUSINESS COMBINATION

The title of each problem is followed by the estimated time in minutes required for completion and by adifficulty rating. The time estimates are applicable for students using the partially filled-in working papers.

Pr. 61 Parr Corporation(20 minutes, easy)

Journal entries for business combination (parent and partially owned subsidiary relationship)and working paper elimination on date of business combination. Goodwill is involved.

Pr. 62 Philly Corporation(30 minutes, easy)

reparation of !ournal entries for business combination involving partially owned subsidiary."orking paper elimination and working paper for consolidated balance sheet. Goodwillacquired by parent company.

Pr. 63 Pellman Corporation(25 minutes, easy)

Journal entries for business combination with wholly owned subsidiary. #argain-purchasee$cess is involved. reparation of working paper for consolidated balance sheet and relatedworking paper elimination.

Pr. 64 Powell Corporation(40 minutes, medium)

Journal entries for business combination in which partially owned subsidiary paid out-of-pocket costs of the combination. Goodwill acquired by parent company. reparation ofworking paper elimination and working paper for consolidated balance sheet.

Pr. 65 Pyr Corporation(30 minutes, easy)

reparation of !ournal entries for business combination involving wholly owned subsidiarywith unimpaired goodwill. reparation of working paper for consolidated balance sheet andworking paper elimination.

Pr. 66 Pali Corporation(45 minutes, strong)

Given unconsolidated and consolidated balance sheets of parent company and partially ownedsubsidiary% reconstruct working paper elimination. Goodwill is involved.

Pr. 67 Pagel Corporation(40 minutes, easy)

Journal entries for business combination with partially owned subsidiary. "orking paperelimination and working paper for consolidated balance sheet. Goodwill is involved.

Pr. 68 Porcino Corporation(45 minutes, medium)

Journal entries for business combination with wholly owned subsidiary involving bargain-purchase e$cess. reparation of working paper elimination and working paper for consolidatedbalance sheet.

Pr. 69 Pandit Corporation(45 minutes, strong)

Journal entries to correct inventories errors in subsidiary&s accounting records% which have notbeen closed. reparation of working paper elimination and working paper for consolidatedbalance sheet. #argain-purchase e$cess and minority interest are involved.

The McGraw-Hill Companies, Inc., 2006

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Pr. 610 Pliny Corporation(45 minutes, medium)

Journal entry for business combination with wholly owned subsidiary. art of consideration forsubsidiary is bonds issued by parent company at a discount that must be computed.reparation of working paper elimination and working paper for consolidated balance sheet.*ubsidiary has outstanding bonds that must be valued at present value. Goodwill is involved.

Pr. 611 Parthenia Corporation(45 minutes, medium)

Given erroneous parent company !ournal entry for business combination and erroneousworking paper for consolidated balance sheet% prepare a correcting !ournal entry and correct

working paper elimination and working paper for consolidated balance sheet. *ubsidiary ispartially owned. Goodwill is involved.

ANSWERS TO REVIEW QUESTIONS

'. +onsolidated financial statements for a parent company and its subsidiaries are similar tocombined financial statements for home office and branches of a single legal entity in that bothtypes of financial statements include the total revenue% e$penses% assets% and liabilities of theconstituent segments after all intracompany and intercompany transactions% profits or gains% andbalances have been eliminated. The two types of financial statements are dissimilar because theseparate legal entity status of a parent company and its subsidiaries necessitates more comple$

financial statement items% such as minority interest in net assets of subsidiary.,. subsidiary may be e$cluded from consolidated financial statements if it is undergoing court-

supervised bankruptcy reorganiation/ if it is in a foreign country having severe production%monetary% or income ta$ restrictions/ or if it has a participative minority interest.

0. 1o% a consolidated income statement is not required for the year ended on the date of a businesscombination. purchase represents a fresh start for accounting purposes/ thus% only a consolidatedbalance sheet is appropriate on the date of a business combination.

2. 1o% the subsidiary does not enter the current fair values of its identifiable net assets in itsaccounting records on the date of a business combination. To do so would violate the valuationprinciple of historical cost. 3nstead% working paper eliminations are used to reflect differencesbetween carrying amounts and current fair values of the subsidiary&s identifiable net assets in theconsolidated balance sheet.

4. 5liminations for the preparation of consolidated financial statements are working paper entriesonly. They are not entered in the accounting records of either the parent company or the subsidiary.

6. woring !a!er "or #onso$idated %a$an#e s&eetis used by an accountant to combine theseparate balance sheets of a parent company and its subsidiaries into a single balance sheet for thecombined enterprise. ' #onso$idated %a$an#e s&eetis the formal financial statement issued tostockholders of the parent company and other interested parties/ it is prepared from data in theworking paper for consolidated balance sheet.

7. 8ollowing are the three methods that have been proposed for valuing minority interest and goodwillin the consolidated balance sheet of a parent company and its partially owned subsidiary9

et&od 1 :easure minority interest based on current fair value of subsidiary&s identifiable netassets/ compute goodwill as difference between parent company&s cost and its share of current fair

value of subsidiary&s identifiable net assets.et&od 2 :easure minority interest based on carrying amount of subsidiary&s identifiable netassets/ compute goodwill as in et&od 1.

et&od 3 :easure minority interest and goodwill based on current fair value of ';;< ofsubsidiary&s total net assets% based on independent measurement of minority interest or by inferencefrom the cost of parent company&s investment in the subsidiary.

. =nder the !arent #om!any #on#e!tof consolidated financial statements% the minority interest innet assets of subsidiary is considered to be a $ia%i$ity that is increased each accounting period bythe minority interest in net income of subsidiary (an e!ense)and decreased by dividends paid to


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minority stockholders. =nder the e#onomi# unit #on#e!tof consolidated financial statements% theminority interest in net assets of subsidiary is treated as a !art o" #onso$idated sto#&o$ders*e+uity,and the minority interest in net income of subsidiary is considered to be a distri%ution o"#onso$idated net in#ome.

. The principal limitation of consolidated financial statement results in the following problems%among others9

(') =sers of consolidated financial statements cannot determine from them the operating results%financial position% or cash flows of individual subsidiaries.

(,) +reditors of the constituent companies comprising the combined enterprise cannot ascertain theasset coverages for their respective claims.

(0) sset liens that affect the rights of creditors are difficult to disclose and e$plain in consolidatedfinancial statements.

(2) #ecause consolidated financial statements are a composite% a weak subsidiary is difficult todistinguish from a strong one.

';. Pus&down a##ountingis the valuation of net assets (and related revenue and e$penses) in theseparate financial statements of a subsidiary at their current fair values as reflected in theconsolidated financial statements.

SOLUTIONS TO EXERCISES-. 61 '. a . c>(?';;%;;; @ ?'4%;;;) A ?';%;;; B ?';4%;;;C

,. a ';. a0. a ''. a2. d ',. #4. c '0. c6. a '2. #7. d '4. a>?'%,;;%;;; A (?'%,4;%;;; $ ;.;) B ?,;;%;;;/ ?'%,4;%;;; $ ;.,; B ?,4;%;;;C. # '6. c

-. 62 +omputation of amount of goodwill in :ar. 0'% ,;;4% consolidated balance sheet of rye+orporation and subsidiary9

+ost of rye +orporation&s investment in *tark +ompany common stock ?%,;;%;;;Dess9 +urrent fair value of *tark&s identifiable net assets(?6%2;;%;;; @ ?'%4;;%;;; A ?0;;%;;; @ ?2;;%;;;) %;;;%;;;

mount of goodwill ? ,;;%;;;


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-. 63 a. +omputation of amount of goodwill in Eec. 0'% ,;;4% consolidated balance sheet ofhyll +orporation and subsidiary9

+ost of hyll +orporation&s investment in *ingle +ompanycommon stock ?'%46;%;;;

Dess9 *ingleFs total stockholdersF equity(?';;%;;; @ ?,;;%;;; @ ?6;;%;;;) ?;;%;;;

5$cess of carrying amount of *ingleFs inventoriesover current fair value (?4';%;;; A ?24;%;;;) (6;%;;;)

5$cess of current fair value of *ingle&s plant assetsover carrying amount (?'%;;;%;;; A ?;;%;;;) ';;%;;;

+urrent fair value of *ingle&s identifiable net assets 2;%;;;mount of goodwill ? 6,;%;;;

#. +onsolidated retained earnings on the date of a businesscombination includes the parent company&s retained earningsonly/ therefore% consolidated retained earnings on the date ofthe hyll +orporation-*ingle +ompany businesscombination is9 ?,%4;;%;;;

-. 64 a. +omputation of amount of goodwill in Eec. 0'% ,;;4% consolidated balance sheet of

elerin +orporation and subsidiary9+ost of elerin +orporationFs investment in *outh +ompany common

stock ?,%;;;%;;;Dess9 +urrent fair value of *outh&s identifiable net assets

(?';;%;;; @ ?,;;%;;; @ ?'%4;;%;;; A ?';;%;;;) '%7;;%;;;Goodwill in consolidated balance sheet ? 0;;%;;;

#. +omputation of amount of plant assets in Eec. 0'% ,;;4% consolidated balance sheet ofelerin +orporation and subsidiary9lant assets (net) of elerin +orporation ?4%;;;%;;;dd9 +urrent fair value of *outh +ompany&s plant assets

(net) ?'%4;;%;;;Dess9 5$cess of current fair value of *outh&s identifiable net

assets (?'%7;;%;;;) over cost of elerin&s investment in*outh (?'%6;;%;;;) ';;%;;; '%2;;%;;;

lant assets (net) in consolidated balance sheet ?6%2;;%;;;

-. 65 P'/- P'/ '/ '

onso$idated a$an#e &eet

ay 31, 2005

'ssets+urrent assets9

3nventories (?6;%;;; @ ?2;%;;;) ?';;%;;;ther (?'2;%;;; @ ?'';%;;;) ,4;%;;;

Total current assets ?04;%;;;lant assets (net) (?,,;%;;; @ ?';%;;;) 2;;%;;;Goodwill >?';%;;; @ (?,4;%;;; A ?,0;%;;;)C 0;%;;;

Total assets ?7;%;;;

(continued)

ia%i$ities : to#&o$ders* -+uityDiabilities


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+urrent liabilities (?';;%;;; @ ?7;%;;;) ?'7;%;;;#onds payable (?';2%;;; @ ?0;%;;;) '02%;;;

Total liabilities ?0;2%;;;*tockholders& equity9

+ommon stock% ?' par ?,;;%;;;dditional paid-in capital ''6%;;;Hetained earnings '6;%;;;

Total stockholders& equity ?276%;;;Total liabilities I stockholders& equity ?7;%;;;

-. 66 "orking paper elimination for ristine +orporation and subsidiary% :ay 0'% ,;;49

+ommon *tock*uperb ';;%;;;

dditional aid-in +apital*uperb ,;;%;;;

Hetained 5arnings*uperb 24;%;;;

3nventories*uperb 6;%;;;

Dand*uperb 2;%;;;

#uilding (net) *uperb 4;%;;;

Goodwill*uperb 4;%;;;

3nvestment in *uperb +ompany +ommon *tockristine 4;%;;;

-. 67 "orking paper elimination for erth +orporation and subsidiary% June 0;% ,;;49

+ommon *tock*ykes ,;;%;;;

dditional aid-in +apital*ykes ,';%;;;

3nventories*ykes (?6';%;;; A ?4;%;;;) ,;%;;;

lant ssets (net)*ykes (?'%22;%;;; A ?'%06;%;;;) ;%;;;

Goodwill*ykes (?',;%;;; A ?';;%;;;) ,;%;;;

3nvestment in *ykes +ompany +ommon *tockerth 22;%;;;

Hetained 5arnings*ykes ;%;;;To eliminate intercompany investment and equity accounts ofsubsidiary on date of business combination and to establishdifference between current fair values and carrying amounts ofsubsidiary&s inventories and plant assets% with remainder togoodwill. (3ncome ta$ effects are disregarded.)

-. 68 Journal entries for ro$ +orporation% 1ov. '% ,;;49

3nvestment in *enna +ompany +ommon *tock (';%;;; $ ?0;) 0;;%;;;+ommon *tock (';%;;; $ ?';) ';;%;;;aid-in +apital in 5$cess of ar ,;;%;;;

To record issuance of ';%;;; shares of common stock for 4 ofthe ';; shares of *enna +ompany&s outstanding common stockin a business combination. (3ncome ta$ effects are disregarded.)

3nvestment in *enna +ompany +ommon *tock 06%;;aid-in +apital in 5$cess of ar ,;%;;;

+ash 46%;;To record payment of out-of-pocket costs of businesscombination with *enna +ompany.


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-. 69 a. Journal entries for loy +orporation% 8eb. ,% ,;;493nvestment in *kye +ompany +ommon *tock '4;%;;;

+ash 4;%;;;+ommon *tock (4%;;; $ ?';) 4;%;;;aid-in +apital in 5$cess of ar (4%;;; $ ?';) 4;%;;;

To record payment of cash and issuance of common stockfor %;; of the ';%;;; outstanding shares of *kye+ompany common stock in a business combination.

3nvestment in *kye +ompany +ommon *tock '4%;;;aid-in +apital in 5$cess of ar ';%;;;

+ash ,4%;;;To record payment of out-of-pocket costs of businesscombination with *kye +ompany.

#. +omputations for consolidated balance sheet of loy +orporation and subsidiary% 8eb.

,% ,;;49

(') Goodwill9+ost of loy&s investment in *kye (?'4;%;;; @ ?'4%;;;) ?'64%;;;Dess9 loy&s share of current fair value of *kye&s identifiable netassets >(?';%;;; @ ?0;%;;; @ ?6;%;;; @ ?,;%;;; @ ?;%;;; A

?0;%;;;) $ ;.C '2%6;;Goodwill ? '4%2;;

(,) :inority interest in net assets of subsidiary9+urrent fair value of *kye&s identifiable net assets >from (')C ?'7;%;;;:inority share (';;< A


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-. 611 +omputation of debit to Goodwill and credit to :inority 3nterest in 1et ssets of *ubsidiary9

3mplied value of ';;< of subsidiary&s net assets (?;;%;;; ;.;) ?'%;;;%;;;Dess9 +urrent fair value of subsidiary&s identifiable net assets (?4;%;;; @

?6;%;;; @ ?2;%;;; @ ?4;%;;; @ ?';;%;;;) 74;%;;;Eebit to Goodwill ? ,4;%;;;

3mplied value of ';;< of subsidiary&s net assets (above) ?'%;;;%;;;:inority interest percentage ;.,;+redit to :inority 3nterest in 1et ssets of *ubsidiary (?'%;;;%;;; $ ;.,;) ? ,;;%;;;

-. 612 +omputation of minority interest in net assets of subsidiary and goodwill by three alternativemethods9

et&od 1 3dentifiable net assets recognied at current fair value/ minority interest based oncurrent fair value of identifiable net assets9

:inority interest9 ?;;%;;; $ ;.,; B ?'6;%;;;

Goodwill9 ?7;;%;;; A (?;;%;;; $ ;.;) B ?6;%;;;

et&od 2 3dentifiable net assets recognied at current fair value only to e$tent of parentcompany&s interest/ remainder of net assets and minority interest reflected at carrying amounts9

:inority interest9 ?6;;%;;; $ ;.,; B ?',;%;;;

Goodwill9 ?7;;%;;; A (?;;%;;; $ ;.;) B ?6;%;;;

et&od 3 +urrent fair value (through inference) assigned to total net assets of subsidiary%including goodwill9

:inority interest9 (?7;;%;;; ;.;) $ ;.,; B ?'74%;;;

Goodwill9 (?7;;%;;; ;.;) A ?;;%;;; B ?74%;;;

-. 613 "orking paper elimination for ismo +orporation and subsidiary% :ay 0'% ,;;49

+ommon *tock*obol 0;;%;;;

Hetained 5arnings*obol 2;;%;;;

3nventories*obol 2;%;;;

Dand*obol 4;%;;;

#uilding (net)*obol 6;%;;;

Goodwillismo >?76;%;;; A (?4;%;;; $ ;.;)C ;%;;;

3nvestment in *obol +ompany +ommon*tockismo 76;%;;;

:inority 3nterest in 1et ssets of *ubsidiary(?4;%;;; $ ;.,;) '7;%;;;

-. 614 a. +ost of investment in subsidiaryFs common stock ?'64%66;Dess9 Goodwill (4%,; )+ost attributable to identifiable net assets of subsidiary ?'6;%0;+urrent fair value of identifiable net assets of subsidiary (?6;%;;; @

?04%,4; @ ?4;%';; @ ?0%;; @ ?,%4;; @ ?2%4;;) ?',%,4;ercentage of subsidiary&s outstanding common stock acquired by parent

company (?'6;%0; ?',%,4;) TChe cost of a nonmonetary asset acquired in e$change for another nonmonetary assetis the fair value of the asset surrendered to obtain it% and a gain or loss should berecognied on the e$change. The fair value of the asset received should be used tomeasure the cost if it is more clearly evident than the fair value of the assetsurrendered.

The price of ?'%;;; a share in an unrelated sale of nearly the same number of shares of*aye +ompany common stock as the shares acquired by aley +orporation provides anappropriate measure of the current fair value of the *aye common stock acquired by aleybecause a current fair value for the transferred research and development pro!ects isunavailable.

'A%& 'pinion (o. 2), Mccounting for 1onmonetary Transactions%M 3+ (1ew Nork9 '70)% par. '.

#. The ?44%;;; gain was realied in a transaction between the parent company and theformer stockholder of the subsidiary/ thus% the gain is not an intercompany gain requiringelimination. 8urther% only a consolidated balance sheet is appropriate for aley+orporation and *aye +ompany on July 0'% ,;;4% because purchase accounting isrequired for the aley-*aye business combination. ssuming that the two companies


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adopted a July 0' fiscal year% the gain would not appear in a consolidated incomestatement for aley +orporation and subsidiary for the year ended July 0'% ,;;4.

ase 65 lthough atrick +orporation does not own more than 4;< of *tear +ompany&s outstandingcommon stock% and thus in $ega$ "ormdoes not have a ma?ority owners&i!of *tear% atrick&sofficers constitute a ma!ority of *tear&s board of directors. 8urther% atrick has only to convertthe ?4;;%;;; face amount of *tear&s bonds to *tear common stock in order to obtain a ma!ority(4;%;;; of ;%;;; shares) of *tear&s outstanding common stock. 8or the foregoing reasons%atrick su%stanti;e$ycontrols *tear% and consolidated financial statements are appropriate foratrick +orporation and *tear +ompany.

ase 66 a. urchase accounting requires a fresh start with respect to accounting for the net assets ofthe subsidiary. This fresh start necessitates stating net assets of the subsidiary at their#urrent "air ;a$uesin the consolidated balance sheet on the date of the businesscombination. *imilar treatment should be given to the subsidiary&s net assets in its separatebalance sheet% for the sake of consistency if for no other reason. 8urther% to state the netassets of a wholly owned subsidiary at their carrying amounts in the subsidiary&saccounting records would imply that the subsidiary was the same going concern it wasbefore the business combination. *uch an inference is unwarranted.

#. Generally accepted accounting principles do not sanction write-ups of assets of a goingconcern to their current fair values. The fact that *ilver +ompany has become a subsidiaryof inch +orporation does not change its separate legal e$istence or its status as a goingconcern. :oreover% increasing *ilver&s asset valuations would necessitate an ad!ustment of*ilver&s stockholdersF equity in a manner that has not yet been standardied by the 8*#.8urther% recogniing goodwill in *ilver&s balance sheet would violate the principle thatgoodwill should be recognied only when !ur#&ased.inch% not *ilver% acquired thegoodwill.

c. Eespite the *ecurities and 5$change +ommission&s sanctioning of push-downaccountingK for certain subsidiaries of parent companies that report to the *5+% the authorsupports the position of *ilver&s controller. rior to the action by the 8*#% too manyunresolved problems are associated with write-ups of assets to make this course of actionfeasible. Lowever% a note to *ilver&s separate balance sheet should disclose the businesscombination with inch and the current fair values included in the consolidated balancesheet for *ilver&s assets.

ase 67 The controller of urdido +orporation may ethically comply with the +8&s instructions onlyif it isprobablethat a business combination will be enacted soon enough to permit use of thematerials and services attributable to the abandoned *5+ filing in a filing in connection with acompleted combination. Lowever% it seems likely that many of the costs incurred in theabandoned filing related solely to services and materials with respect to *ontee +ompany/ if so%such costs should be recognied as a loss. n additional paid-in capital ledger account may bedebited only for costs directly associated with a specific issuance of common stock.

ase 68 3t is not unusual for opinions of the staff of the 3+ to be at variance with those of the*5+/ a publicly owned company is sub!ect to that agency&s !urisdiction. The +8 shouldcarefully analye the facts regarding the +5&s planned corporation investment and comparethose facts with the issues inAA$R 34and Heporting on +ompany "here ptions tocquire +ontrol 5$ists.K 3f% substantively% the corporation established by the +5 iscontrolled by the +8&s corporate employer% consolidated financial statements are required.

ase 69 *tudent :ichael is probably correct in asserting that the minority interest in net assets of asubsidiary is not a $ia%i$ity,as that element is defined in paragraph 04 ofStatement o%Financial Accounting Concepts No. &,5lements of 8inancial *tatementsK (+1 6).Lowever% given the definition ofe+uityin paragraph 2 of +1 6 as the residual interest inthe assets of an entity that remains after deducting its liabilities and the positions taken by the8*#% as described on page $$$ of the te$tbook% :ichael&s statement that minority interest isnot a part of consolidated stockholders& equity may be challenged. 1onetheless% for many yearsproponents of the parent company concept have maintained that minority stockholders of a


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subsidiary% who e$ercise no significant influence on either the subsidiary or the parentcompany% are in substance a special class of creditors of the consolidated entity.

3n view of the foregoing% student Hoger&s suggestion that minority interest in net assets of asubsidiary be displayed between liabilities and stockholders& equity in a consolidated balancesheet has merit. 8inancial statement users could decide whether minority interest is debt orequity when they compute the consolidated enterprise&s debt-to-equity ratio.


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,; :inutes% 5asyParr Corporation Pr 6!"

a. Parr Corporation

#o$rna% Entri&'

20 05

Sept 30 Investment in Sane Company Common Stock 1 0 0 0 0 0 0

Cash 1 0 0 0 0 0 0

To record acquisition of 90,000 of the 100,000

outstandin shares Sane Company in a !usiness

com!ination"

30 Investment in Sane Company Common Stock # 0 0 0 0

Cash # 0 0 0 0

To record payment of out$of$pocket costs of !usiness

com!ination %ith Sane Company"

b. Parr Corporation an( S$)'i(iar*

Wor+in, Pap&r E%i-ination

S&pt&-)&r ./0 1//2

&a' Common Stock(Sane ) 0 0 0 0 0

*etained +arnins(Sane 5 0 0 0 0 0

Inventories(Sane 3 0 0 0 0

-ant .ssets(Sane / 0 0 0 0

ood%i--(arr 1,0#0,000 &990,000 4 0"90' 1 # 9 0 0 0

Investment in Sane Company Common Stock

(arr &1,000,000 6 #0,000' 1 0 # 0 0 0 0

7inority Interest in 8et .ssets of Su!sidiary

&990,000 4 0"10' 9 9 0 0 0To e-iminate intercompany investment and equity

accounts of su!sidiary on date of !usiness

com!ination to a--ocate e4cess of cost over carryin

amount of identifia!-e net assets acquired, %ith

remainder to ood%i-- and to esta!-ish minority

interest in net assets of su!sidiary on date of !usiness

com!ination" &Income ta4 effects are disrearded"'


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0; :inutes% 5asyP3i%%* Corporation Pr 6!1

a. P3i%%* Corporation

#o$rna% Entri&'

20 05

Sept 30 Investment in Stype Company Common Stock

&100,000 4 12' 1 2 0 0 0 0 0

Common Stock, no par 1 2 0 0 0 0 0

To record issuance of 100,000 shares of common

stock for 1#,#00 of the 20,000 outstandin shares of

Stype Company common stock in a !usiness

com!ination"

30 Investment in Stype Company Common Stock

&150,000 4 0"/0' 9 0 0 0 0

Common Stock, no par &150,000 4 0")0' / 0 0 0 0

Cash 1 5 0 0 0 0


com!ination %ith Stype Company"

b. &:orkin paper for conso-idated !a-ance sheet is

on pae 210"'

P3i%%* Corporation an( S$)'i(iar*


S&pt&-)&r ./0 1//2

&a' Common Stock(Stype ) 0 0 0 0 0

*etained +arnins(Stype ; 0 0 0 0 0

Inventories(Stype &3)0,000 300,000' ) 0 0 0 0

-ant .ssets(Stype &1,100,000 1,000,000' 1 0 0 0 0 0


13/33

P3i%%* Corporation 45on5%$(&( Pr 6!1

P3i%%* Corporation an( S$)'i(iar*

Wor+in, Pap&r 7or Con'o%i(at&( Ba%an5& S3&&t

S&pt&-)&r ./0 1//2

E%i-ination'

P3i%%* St*p& in5r&a'&

Corporation Corporation 4(&5r&a'& Con'o%i(at&(

.ssetsCash 5 0 0 0 0 1 0 0 0 0 0 1 5 0 0 0 0

Trade accounts receiva!-e &net' ) 0 0 0 0 0 2 0 0 0 0 0 / 0 0 0 0 0

Inventories &net' / 0 0 0 0 0 3 0 0 0 0 0 &a' ) 0 0 0 0 9 ) 0 0 0 0

Investment in Stype Company

common stock 1 2 9 0 0 0 0 &a'&1 2 9 0 0 0 0 '

-ant assets &net' 1 3 0 0 0 0 0 1 0 0 0 0 0 0 &a' 1 0 0 0 0 0 2 ) 0 0 0 0 0

ood%i-- &a' 1 1 5 0 0 0 1 1 5 0 0 0

Tota- assets 3 / ) 0 0 0 0 1 / 0 0 0 0 0 &1 0 3 5 0 0 0 ' ) 2 0 5 0 0 0

=ia!i-ities > Stockho-ders? +quity

Current -ia!i-ities # 0 0 0 0 0 ) 0 0 0 0 0 1 2 0 0 0 0 0

=on$term de!t 1 0 0 0 0 0 1 0 0 0 0 0

stockho-ders? equity"


$olutions Manual, Chapter 6 ,';


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,4 :inutes% 5asyP&%%-an Corporation Pr 6!.

a. P&%%-an Corporation

#o$rna% Entri&'

20 05

7ay 31 Investment in Shire Company Common Stock 3 0 0 0 0 0

Cash 3 0 0 0 0 0

To record acquisition of a-- 10,000 outstandin shares

of Shire Company common stock in a !usiness

com!ination"

31 Investment in Shire Company Common Stock 5 0 0 0 0

Cash 5 0 0 0 0


com!ination %ith Shire Company"

b. &:orkin paper for conso-idated !a-ance sheet is on

pae 212"'

P&%%-an Corporation an( S$)'i(iar*


Ma* ."0 1//2

&a' Common Stock(Shire 1 0 0 0 0 0

.dditiona- aid$in Capita-(Shire ) 0 0 0 0

*etained +arnins(Shire 1 # 0 0 0 0

Inventories(Shire &1)0,000 120,000' 2 0 0 0 0

-ant .ssets &net'(Shire &/90,000 /10,000

3#0,000 6 350,000' 5 0 0 0 0

remium on =on$Term


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P&%%-an Corporation an( S$)'i(iar*


Ma* ."0 1//2

E%i-ination'

P&%%-an S3ir& in5r&a'&


.ssets

Cash 2 0 0 0 0 0 1 0 0 0 0 2 1 0 0 0 0Trade accounts receiva!-e &net' ; 0 0 0 0 0 / 0 0 0 0 ; / 0 0 0 0

Inventories &net' 1 ) 0 0 0 0 0 1 2 0 0 0 0 &a' 2 0 0 0 0 1 5 ) 0 0 0 0

Investment in Shire Company

common stock 3 5 0 0 0 0 &a'& 3 5 0 0 0 0 '

-ant assets &net' 2 # 5 0 0 0 0 / 1 0 0 0 0 &a' 5 0 0 0 0 3 5 1 0 0 0 0

Tota- assets 5 5 0 0 0 0 0 # 0 0 0 0 0 & 2 # 0 0 0 0 ' / 0 2 0 0 0 0


Current -ia!i-ities 5 0 0 0 0 0 # 0 0 0 0 5 # 0 0 0 0

=on$term de!t 1 0 0 0 0 0 0 ) 0 0 0 0 0 1 ) 0 0 0 0 0

remium on -on$term de!t &a' ) 0 0 0 0 ) 0 0 0 0

Common stock, 10 par 1 5 0 0 0 0 0 1 0 0 0 0 0 &a'& 1 0 0 0 0 0 ' 1 5 0 0 0 0 0

.dditiona- paid$in capita- 1 2 0 0 0 0 0 ) 0 0 0 0 &a' & ) 0 0 0 0 ' 1 2 0 0 0 0 0*etained earnins 1 3 0 0 0 0 0 1 # 0 0 0 0 &a'& 1 # 0 0 0 0 ' 1 3 0 0 0 0 0

Tota- -ia!i-ities >

stockho-ders? equity 5 5 0 0 0 0 0 # 0 0 0 0 0 & 2 # 0 0 0 0 ' / 0 2 0 0 0 0


$olutions Manual, Chapter 6 ,',


16/33

2; :inutes% 5asyPo8&%% Corporation Pr 6!9

a. S&a&r Co-pan*

#o$rna% Entri&'

20 05

.pr 30 *eceiva!-e from o%e-- Corporation ; 0 0 0 0

Cash ; 0 0 0 0

To record payment, on !eha-f of o%e-- Corporation,

of out$of$pocket costs of !usiness com!ination %ith

o%e--"

b. Po8&%% Corporation

#o$rna% Entri&'

20 05

.pr 30 Investment in Seaver Company Common Stock

&30,000 4 20' / 0 0 0 0 0Common Stock, no par / 0 0 0 0 0

To record issuance of 30,000 shares of common stock

for #,000 of the 10,000 outstandin shares of Seaver

Company common stock in a !usiness com!ination"

30 Investment in Seaver Company Common Stock ) 0 0 0 0

Common Stock, no par 3 0 0 0 0

aya!-e to Seaver Company ; 0 0 0 0

To record -ia!i-ity to Seaver Company for Seaver?s

payment of out$of$pocket costs of !usiness

com!ination %ith Seaver" Ainder?s and -ea- fees

re-atin to the com!ination are recorded as additiona-

costs of the investment costs associated %ith the S+Creistration statement are recorded as an offset to the

previous-y recorded proceeds from the issuance of

common stock"


,'0 Modern Advanced Accountin, !0"e


17/33

Po8&%% Corporation 45on5%$(&( Pr 6!9

c. Po8&%% Corporation an( S$)'i(iar*


Apri% ./0 1//2

E%i-ination'

Po8&%% S&a&r in5r&a'&


.ssetsCash 5 0 0 0 0 # 0 0 0 0 1 3 0 0 0 0

Trade accounts receiva!-e &net' 2 3 0 0 0 0 2 0 0 0 0 0 ) 3 0 0 0 0

Intercompany receiva!-es

&paya!-es' & ; 0 0 0 0 ' ; 0 0 0 0

Inventories ) 0 0 0 0 0 3 5 0 0 0 0 &a' 9 0 0 0 0 # ) 0 0 0 0

Investment in Seaver Company

common stock / ) 0 0 0 0 &a'& / ) 0 0 0 0 '

-ant assets &net' 1 3 0 0 0 0 0 5 / 0 0 0 0 &a' 2 2 0 0 0 0 2 0 # 0 0 0 0

ood%i-- &a' # 0 0 0 0 # 0 0 0 0

Tota- assets 2 5 5 0 0 0 0 1 2 / 0 0 0 0 & 2 5 0 0 0 0 ' 3 5 / 0 0 0 0


Current -ia!i-ities 3 1 0 0 0 0 2 5 0 0 0 0 5 / 0 0 0 0=on$term de!t # 0 0 0 0 0 / 0 0 0 0 0 1 ) 0 0 0 0 0

remium on -on$term de!t &a' 2 0 0 0 0 2 0 0 0 0

Common stock, no par 1 0 ; 0 0 0 0 1 0 ; 0 0 0 0

Common stock, 10 par 1 0 0 0 0 0 &a'& 1 0 0 0 0 0 '

.dditiona- paid$in capita- 3 / 0 0 0 0 &a'& 3 / 0 0 0 0 '

7inority interest in net assets

of su!sidiary &a' 1 ) 0 0 0 0 1 ) 0 0 0 0

*etained earnins &deficit' 3 ; 0 0 0 0 & 5 0 0 0 0 ' &a' 5 0 0 0 0 3 ; 0 0 0 0

Tota- -ia!i-ities >

stockho-ders? equity 2 5 5 0 0 0 0 1 2 / 0 0 0 0 & 2 5 0 0 0 0 ' 3 5 / 0 0 0 0

&:orkin paper e-imination is on pae 215"'


$olutions Manual, Chapter 6 ,'2


18/33

Po8&%% Corporation 45on5%$(&( Pr 6!9

Po8&%% Corporation an( S$)'i(iar*


Apri% ./0 1//2

&a' Common Stock(Seaver 1 0 0 0 0 0

.dditiona- aid$In Capita-(Seaver 3 / 0 0 0 0

Inventories(Seaver &))0,000 350,000' 9 0 0 0 0

-ant .ssets &net'(Seaver &;#0,000 5/0,000' 2 2 0 0 0 0

ood%i--(o%e-- /)0,000 &;00,000 4 0"#0' # 0 0 0 0

*etained +arnins(Seaver 5 0 0 0 0

remium on =on$Term


19/33

0; :inutes% 5asyP*r Corporation Pr 6!2

a. P*r Corporation

#o$rna% Entri&'

20 05

Bu-y 31 Investment in Soper Company Common Stock

&20,000 4 10' 2 0 0 0 0 0

Common Stock &20,000 4 2' ) 0 0 0 0

aid$in Capita- in +4cess of ar 1 / 0 0 0 0

To record issuance of 20,000 shares of common stock

for a-- 5,000 outstandin shares of common stock of

Soper Company in a !usiness com!ination"

31 Investment in Soper Company Common Stock 2 0 0 0 0

aid$in Capita- in +4cess of ar 1 0 0 0 0

Cash 3 0 0 0 0


com!ination %ith Soper Company"


pae 21;"'

P*r Corporation an( S$)'i(iar*


#$%* ."0 1//2

4a Common Stock(Soper 2 5 0 0 0

.dditiona- aid$in Capita-(Soper 5 0 0 0 0

*etained +arnins(Soper ; 5 0 0 0

Current .ssets &Inventories'(Soper &/5,000

/0,000' 5 0 0 0

-ant .ssets &net'(Soper &3)0,000 300,000' ) 0 0 0 0


20/33

P*r Corporation 45on5%$(&( Pr 6!2

P*r Corporation an( S$)'i(iar*


#$%* ."0 1//2

E%i-ination'

P*r Sop&r in5r&a'&


.ssetsCurrent assets ; ; 0 0 0 0 1 5 0 0 0 0 &a' 5 0 0 0 9 2 5 0 0 0

Investment in Soper Company

common stock 2 2 0 0 0 0 &a'& 2 2 0 0 0 0 '

-ant assets &net' 2 ) 0 0 0 0 0 3 0 0 0 0 0 &a' ) 0 0 0 0 2 ; ) 0 0 0 0

ood%i-- 2 0 0 0 0 &a' 1 5 0 0 0 3 5 0 0 0

Tota- assets 3 3 9 0 0 0 0 ) ; 0 0 0 0 & 1 / 0 0 0 0 ' 3 ; 0 0 0 0 0


Current -ia!i-ities ) 0 0 0 0 0 1 2 0 0 0 0 5 2 0 0 0 0

=on$term de!t 1 0 0 0 0 0 0 2 0 0 0 0 0 1 2 0 0 0 0 0

stockho-ders? equity 3 3 9 0 0 0 0 ) ; 0 0 0 0 & 1 / 0 0 0 0 ' 3 ; 0 0 0 0 0

@.n in5r&a'&in discount on -on$term de!t and a (&5r&a'&in tota- -ia!i-ities > stockho-ders? equity"


,'7 Modern Advanced Accountin, !0"e


21/33

24 :inutes% *trongPa%i Corporation Pr 6!6

Pa%i Corporation an( S$)'i(iar*


A$,$'t ."0 1//2

&a' Common Stock(Soda 2 0 0 0 0 0 &1'

.dditiona- aid$in Capita-(Soda 1 2 0 0 0 0 &2'

*etained +arnins(Soda 2 ) 0 0 0 0 &3'

Inventories(Soda 3 0 0 0 0 &)'-ant .ssets &net'(Soda 5 0 0 0 0 &5'

ood%i--(a-i # 0 0 0

remium on =on$Term


22/33

Not& to In'tr$5tor: Soda Company?s separate !a-ance sheet on .uust 31, 2005, may !e reconstructed as fo--o%sE

So(a Co-pan*

S&parat& Ba%an5& S3&&t

A$,$'t ."0 1//2

A''&t'

Cash &1/0,000 120,000' ) 0 0 0 0

Trade accounts receiva!-e &net' &5)0,000 3#0,000' 1 / 0 0 0 0

Inventories &;30,000 );0,000 30,000' 2 3 0 0 0 0

-ant assets &net' &1,);0,000 #50,000 50,000' 5 ; 0 0 0 0

Tota- assets 1 0 0 0 0 0 0

Lia)i%iti&' ; Sto5+3o%(&r'< E=$it*

Current -ia!i-ities &/90,000 )30,000' 2 / 0 0 0 0

=on$term de!t &;30,000 550,000' 1 # 0 0 0 0

Common stock, 1 par 2 0 0 0 0 0

.dditiona- paid$in capita- 1 2 0 0 0 0*etained earnins 2 ) 0 0 0 0

Tota- -ia!i-ities > stockho-ders? equity 1 0 0 0 0 0 0


,' Modern Advanced Accountin, !0"e


23/33

2; :inutes% 5asyPa,&% Corporation Pr 6!>

a. Pa,&% Corporation

#o$rna% Entri&'

20 05

Fct 31 Investment in Sayre Company Common Stock

&50,000 4 10' 5 0 0 0 0 0

Common Stock, no par &50,000 4 2' 1 0 0 0 0 0

aid$in Capita- in +4cess of Stated Ga-ue ) 0 0 0 0 0

To record issuance of 50,000 shares of common

stock for #3H of outstandin common stock of Sayre

Company in a !usiness com!ination"

31 Investment in Sayre Company Common Stock 3 ) ; 5 0

aid$in Capita- in +4cess of Stated Ga-ue 5 5 2 5 0

Cash 9 0 0 0 0

To record payment of out$of$pocket costs of

!usiness com!ination %ith Sayre Company"


pae 221"'

Pa,&% Corporation an( S$)'i(iar*


O5to)&r ."0 1//2

&a' Common Stock(Sayre 1 0 0 0 0 0

*etained +arnins(Sayre 3 3 / 0 0 0

Inventories(Sayre &/20,000 /00,000' 2 0 0 0 0

-ant .ssets &net'(Sayre &1,550,000 1,500,000' 5 0 0 0 0

atents &net'(Sayre &95,000 #0,000' 1 5 0 0 0


24/33

Pa,&% Corporation 45on5%$(&( Pr 6!>

Pa,&% Corporation an( S$)'i(iar*


O5to)&r ."0 1//2

E%i-ination'

Pa,&% Sa*r& in5r&a'&


.ssets

Cash 1 / 0 0 0 0 1 5 0 0 0 0 3 1 0 0 0 0Inventories # / 0 0 0 0 / 0 0 0 0 0 &a' 2 0 0 0 0 1 ) # 0 0 0 0

Fther current assets 5 0 0 0 0 0 2 / 0 0 0 0 ; / 0 0 0 0

Investment in Sayre Company

common stock 5 3 ) ; 5 0 &a'& 5 3 ) ; 5 0 '

-ant assets &net' 3 ) 0 0 0 0 0 1 5 0 0 0 0 0 &a' 5 0 0 0 0 ) 9 5 0 0 0 0

atents &net' # 0 0 0 0 &a' 1 5 0 0 0 9 5 0 0 0

ood%i-- &a' # 9 # ; 0 # 9 # ; 0

Tota- assets 5 ) 5 ) ; 5 0 2 5 9 0 0 0 0 & 3 5 9 # # 0 ' ; / # ) # ; 0


Income ta4es paya!-e ) 0 0 0 0 / 0 0 0 0 1 0 0 0 0 0

Fther current -ia!i-ities 3 9 0 0 0 0 # 5 ) 0 0 0 1 2 ) ) 0 0 0

=on$term de!t 9 5 0 0 0 0 1 2 ) 0 0 0 0 2 1 9 0 0 0 0 stockho-ders? equity"


,,' Modern Advanced Accountin, !0"e


25/33

24 :inutes% :ediumPor5ino Corporation Pr 6!?

a. Por5ino Corporation

#o$rna% Entri&'

20 05

Ban 31 Investment in Secor Company Common Stock

50,000 6 &/,000 4 15' 6 50,000 1 9 0 0 0 0

Cash 5 0 0 0 0

Common Stock &/,000 4 2' 1 2 0 0 0

aid$in Capita- in +4cess of ar ; # 0 0 0

8otes aya!-e 5 0 0 0 0

To record issuance of cash, /,000 shares of common

stock, and five$year, 1)H note paya!-e for a-- 10,000

shares of Secor Company?s outstandin common

stock in a !usiness com!ination"

31 Investment in Secor Company Common Stock 1 0 0 0 0

Cash 1 0 0 0 0


com!ination %ith Secor Company"

b. &:orkin paper for conso-idated !a-ance sheet is

on pae 223"'

Por5ino Corporation an( S$)'i(iar*


#an$ar* ."0 1//2

&a' Common Stock(Secor 1 5 0 0 0 0

.dditiona- aid$in Capita-(Secor 1 / 0 0 0 0

Inventories(Secor &;0,000 /0,000' 1 0 0 0 0

-ant .ssets &net'(Secor 5)0,000 );0,000

&50,000 4 0"90' 2 5 0 0 0

Intani!-e .ssets &net'(Secor /0,000 )0,000 &50,000 4 0"10' 1 5 0 0 0

*etained +arnins(Secor 1 1 0 0 0 0

remium on =on$Term


26/33

Por5ino Corporation 45on5%$(&( Pr 6!?

Por5ino Corporation an( S$)'i(iar*


#an$ar* ."0 1//2

E%i-ination'

Por5ino S&5or in5r&a'&


.ssets

Inventories 3 # 0 0 0 0 / 0 0 0 0 &a' 1 0 0 0 0 ) 5 0 0 0 0Fther current assets 5 # 0 0 0 0 1 3 0 0 0 0 ; 1 0 0 0 0

Investment in Secor Company

common stock 2 0 0 0 0 0 &a'& 2 0 0 0 0 0 '

-ant assets &net' 1 5 2 0 0 0 0 ) ; 0 0 0 0 &a' 2 5 0 0 0 2 0 1 5 0 0 0

Intani!-e assets &net' 1 / 0 0 0 0 ) 0 0 0 0 &a' 1 5 0 0 0 2 1 5 0 0 0

Tota- assets 2 # ) 0 0 0 0 ; 0 0 0 0 0 & 1 5 0 0 0 0 ' 3 3 9 0 0 0 0


Current -ia!i-ities ) 2 0 0 0 0 2 0 0 0 0 0 / 2 0 0 0 0

=on$term de!t ; 0 0 0 0 0 3 0 0 0 0 0 1 0 0 0 0 0 0

remium on -on$term de!t &a' 5 0 0 0 0 5 0 0 0 0

Common stock, 2 par # 1 2 0 0 0 # 1 2 0 0 0

Common stock, 15 par 1 5 0 0 0 0 &a'& 1 5 0 0 0 0 '.dditiona- paid$in capita- 2 9 # 0 0 0 1 / 0 0 0 0 &a'& 1 / 0 0 0 0 ' 2 9 # 0 0 0

*etained earnins / 1 0 0 0 0 & 1 1 0 0 0 0 ' &a' 1 1 0 0 0 0 / 1 0 0 0 0

Tota- -ia!i-ities >

stockho-ders? equity 2 # ) 0 0 0 0 ; 0 0 0 0 0 & 1 5 0 0 0 0 ' 3 3 9 0 0 0 0


,,0 Modern Advanced Accountin, !0"e


27/33

24 :inutes% *trongPan(it Corporation Pr 6!@

a. Sin,3 Co-pan*

Corr&5tin, Entri&'

#$n& ./0 1//2

Income Ta4 *efund *eceiva!-e &/0,000 4 0")0' 2 ) 0 0 0

*etained +arnins &rior eriod .dustment'

&/0,000 2),000' 3 / 0 0 0Cost of oods So-d / 0 0 0 0

To correct Bu-y 1, 200), retained earnins !a-ance

for after$ta4 effect of overstatement of 200) net

income due to overstatement of inventories on

Bune 30, 200) to set up c-aim for refund of 200)

income ta4es overpaid !ecause of overstatement of

200) pre$ta4 income and to correct cost of oods so-d

due to overstatement of !einnin inventories on

Bu-y 1, 200)

Income Ta4es +4pense &/0,000 4 0")0' 2 ) 0 0 0

Income Ta4es aya!-e 2 ) 0 0 0

To increase income ta4es for 2005 for effects of

overstatement of 2005 cost of oods so-d"

Inventories in Transit 3 5 0 0 0

Trade .ccounts aya!-e 3 5 0 0 0

To correct accountin records for effect of omission of

merchandise in transit on Bune 30, 2005"


$olutions Manual, Chapter 6 ,,2


28/33

Pan(it Corporation 45ontin$&( Pr 6!@

b. Pan(it Corporation an( S$)'i(iar*


#$n& ./0 1//2

&a' Common Stock(Sinh 1 0 0 0 0 0

.dditiona- aid$In Capita-(Sinh 1 3 0 0 0 0

*etained +arnins(Sinh &120,000 6 /0,000

3/,000 2),000' 1 2 0 0 0 0

Inventories(Sinh &1#5,000 155,000' 3 0 0 0 0

-ant .ssets &net'(Sinh 2#0,000 2)0,000

&)20,000@ 4 0"#5' 6 320,000 3 0 0 0

Investment in Sinh Company Common

Stock(andit 3 2 0 0 0 0

7inority Interest in 8et .ssets of Su!sidiary

&)20,000@ 4 0"15' / 3 0 0 0

To e-iminate intercompany investment and equity

accounts of su!sidiary on date of !usiness

com!ination to increase su!sidiary inventories !y

difference !et%een current fair va-ue and carryin

amount to reduce current fair va-ue of su!sidiary?sp-ant assets !y e4cess of parent company?s share of

current fair va-ue of su!sidiary?s identifia!-e net assets

over parent company?s cost and to esta!-ish minority

interest in su!sidiary on date of !usiness com!ination"

&Income ta4 effects are disrearded"'

@ Current fair va-ue of Sinh Company?s identifia!-e

net assetsE

Sinh?s stockho-ders? equity

&100,000 6130,000 6

120,000' 350,000


29/33

Pan(it Corporation 45on5%$(&( Pr 6!@

Pan(it Corporation an( S$)'i(iar*


#$n& ./0 1//2

E%i-ination'

Pan(it Sin,3 in5r&a'&


.ssetsCash # 0 0 0 0 / 0 0 0 0 1 ) 0 0 0 0

Income ta4 refund receiva!-e 2 ) 0 0 0 2 ) 0 0 0

Trade accounts receiva!-e &net' 1 ; 0 0 0 0 9 0 0 0 0 2 / 0 0 0 0

Inventories 3 ; 0 0 0 0 1 5 5 0 0 0 @ 3 0 0 0 0 5 5 5 0 0 0

Investment in Sinh Company

common stock 3 2 0 0 0 0 &a'& 3 2 0 0 0 0 '

-ant assets &net' 5 ; 0 0 0 0 2 ) 0 0 0 0 &a' 3 0 0 0 # 1 3 0 0 0

ood%i-- 5 0 0 0 0 5 0 0 0 0

Tota- assets 1 5 / 0 0 0 0 5 / 9 0 0 0 & 2 # ; 0 0 0 ' 1 # ) 2 0 0 0


Trade accounts paya!-e 2 2 0 0 0 0 1 5 5 0 0 0 3 ; 5 0 0 0

Income ta4es paya!-e 1 0 0 0 0 0 / ) 0 0 0 1 / ) 0 0 0

15H note paya!-e 3 0 0 0 0 0 3 0 0 0 0 0

Common stock, 10 par 2 5 0 0 0 0 1 0 0 0 0 0 &a'& 1 0 0 0 0 0 ' 2 5 0 0 0 0

.dditiona- paid$in capita- ) 0 0 0 0 0 1 3 0 0 0 0 &a'& 1 3 0 0 0 0 ' ) 0 0 0 0 0

7inority interest in net assets

of su!sidiary &a' / 3 0 0 0 / 3 0 0 0

*etained earnins 2 9 0 0 0 0 1 2 0 0 0 0 &a'& 1 2 0 0 0 0 ' 2 9 0 0 0 0

Tota- -ia!i-ities >

stockho-ders? equity 1 5 / 0 0 0 0 5 / 9 0 0 0 & 2 # ; 0 0 0 ' 1 # ) 2 0 0 0

@Inc-udin 35,000 in transit"


$olutions Manual, Chapter 6 ,,6


30/33

24 :inutes% :ediumP%in* Corporation Pr 6!"/

a. P%in* Corporation

#o$rna% Entri&'

20 05


31/33

P%in* Corporation 45on5%$(&( Pr 6!"/

P%in* Corporation an( S$)'i(iar*


D&5&-)&r ."0 1//2

E%i-ination'

P%in* S*%ia in5r&a'&


.ssets

Inventories # 0 0 0 0 0 3 0 0 0 0 0 &a' 3 0 0 0 0 1 1 3 0 0 0 0Fther current assets 1 0 1 0 0 0 0 5 0 0 0 0 0 1 5 1 0 0 0 0

Investment in Sy--a Company

common stock 1 5 0 2 ; 2 ; &a'&1 5 0 2 ; 2 ; '

=on$term investments in

marketa!-e securities 2 0 0 0 0 0 &a' 3 0 0 0 0 2 3 0 0 0 0

-ant assets &net' 2 5 0 0 0 0 0 9 0 0 0 0 0 &a' ) 0 0 0 0 3 ) ) 0 0 0 0

Intani!-e assets &net' 1 0 0 0 0 0 2 0 0 0 0 0 &a' 2 0 0 0 0 3 2 0 0 0 0

ood%i-- &a' 1 5 / 2 / 1 5 / 2 /

Jond issue costs ) 0 0 0 0 ) 0 0 0 0

Tota- assets 5 9 5 2 ; 2 ; 2 1 0 0 0 0 0 &1 3 / ; 1 0 1 ' / / # 5 / 2 /


Current -ia!i-ities 1 ) 0 0 0 0 0 3 0 0 0 0 0 1 ; 0 0 0 0 010H note paya!-e 2 0 0 0 0 0 0 2 0 0 0 0 0 0

Jonds paya!-e 1 5 0 0 0 0 0 5 0 0 0 0 0 2 0 0 0 0 0 0



$olutions Manual, Chapter 6 ,,


32/33

24 :inutes% :ediumPart3&nia Corporation Pr 6!""

a. Part3&nia Corporation

Corr&5tin, #o$rna% Entr*

#$n& ./0 1//2

Investment in Storey Company Common Stock ; 0 0 0 0

ood%i-- / 0 0 0 0

+4penses of Jusiness Com!ination 1 0 0 0 0

To correct Bune 30, 2005, ourna- entries for

!usiness com!ination %ith Storey Company as

fo--o%sE

In&'t-&nt

in Stor&*

Co-pan* Ep&n'&' o7

5o--on )$'in&''

'to5+ oo(8i%% 5o-)ination

Ja-ance shou-d !e 290,000 $0$ $0$

Ja-ance per

accountin records 220,000 /0,000 10,000

Correction dr"&cr"' ;0,000 &/0,000' &10,000'

b. &:orkin paper for conso-idated !a-ance sheet is on pae 230"'

Part3&nia Corporation an( S$)'i(iar*


#$n& ./0 1//2

&a' Common Stock(Storey 5 0 0 0 0

.dditiona- aid$In Capita-(Storey ; 0 0 0 0

*etained +arnins(Storey 1 0 0 0 0 0

Inventories(Storey &1#0,000 1/0,000' 2 0 0 0 0-ant .ssets &net'(Storey &530,000 500,000' 3 0 0 0 0


33/33

Part3&nia Corporation 45on5%$(&( Pr 6!""

Part3&nia Corporation an( S$)'i(iar*


#$n& ./0 1//2

E%i-ination'

Part3&nia Stor&* in5r&a'&


.ssetsCash / 0 0 0 0 5 0 0 0 0 1 1 0 0 0 0

Trade accounts receiva!-e &net' 1 2 0 0 0 0 9 0 0 0 0 2 1 0 0 0 0

Inventories 2 5 0 0 0 0 1 / 0 0 0 0 &a' 2 0 0 0 0 ) 3 0 0 0 0

Investment in Storey Company

common stock 2 9 0 0 0 0 &a'& 2 9 0 0 0 0 '

-ant assets &net' 5 9 0 0 0 0 5 0 0 0 0 0 &a' 3 0 0 0 0 1 1 2 0 0 0 0

ood%i-- &a' ) 2 0 0 0 ) 2 0 0 0

Tota- assets 1 3 1 0 0 0 0 # 0 0 0 0 0 & 1 9 # 0 0 0 ' 1 9 1 2 0 0 0


Current -ia!i-ities 2 0 0 0 0 0 2 # 0 0 0 0 ) # 0 0 0 0

=on$term de!t 5 0 0 0 0 0 3 0 0 0 0 0 # 0 0 0 0 0



$olutions Manual, Chapter 6 ,0;

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