Business, 06.02.2022 01:20, brillamontijo

Assume that ABC Company acquires 80 percent of XYZ Company’s 120,000 outstanding voting shares on January 1, 2020, for Br 8 per share or a total of Br 768,000 cash consideration. Further assume that the 20 percent non-controlling interest shares traded both before and after the acquisition date at an average of Br 8 per share. The following are assets and liabilities of XYZ at book values and fair values; Book values Fair Values
Assets
Cash 100,000 100,000
Inventory 200,000 220,000
Trademarks (indefinite life) 120,000 200,000
Patented technology (10-year life) 200,000 300,000
Building (20- years life) 180,000 150,000
Liabilities -80,000 -90,000 768000
Net assets 720,000 880,000 704000
Common Stock 420,000 64000
Additional Paid-in Capital 100,000
Retained Earnings 200,000

§Assume the subsidiary earned net income of Br 200,000 during the period and paid cash dividend of Br 30,000. Assume ABC used equity method.
Required:
1. Record the necessary entries on the book of ABC
2. Prepare consolidated financial statement at the end of the year; December 31, 202

Assume in the following slides are separate financial statements for the parent and the subsidiary at the end of the accounting period

ABC COMPANY AND XYZ COMPANY
Financial Statements
For Year Ending December 31, 2020
ABC XYZ
Company Company
Income Statement
Revenues 1,000,000 500,000
-Cost of goods sold 500,000 200,000
-Amortization expense 100,000 25,000
-Depreciation expense 80,000 75,000
+Equity in subsidiary earnings 153,200 –0–
Net income 473,200 200,000
Statement of Retained Earnings
Retained earnings, 1/1/20 800,000 200,000
Net income (above) 473,200 200,000
Dividends paid 100,000 30,000
Retained earnings, 12/31/20 1,173,200 370,000

Statement of Financial Position

Cash 800,000.00 270,000.00
Inventory 262,000.00 200,000.00
Investment in XYZ Company (at equity) 897,200.00 0.00
Trademarks 700,000.00 120,000.00
Patented technology 300,000.00 200,000.00
Goodwill
Building 200,000.00 180,000.00
Total assets 3,159,200.00 950,000.00
Liabilities -86,000.00 -80,000.00
Common stock -900,000.00 -420,000.00
Additional paid-in capital -1,000,000.00 -100,000.00
Retained earnings, 12/31/20 (above) -1,173,200.00 -370,000.00
Non Controlling Interest
Total liabilities and equity -3,159,200.00 -950,000.00
0.00 0.00

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Assume that ABC Company acquires 80 percent of XYZ Company’s 120,000 outstanding voting shares on Ja...