P4-1 (in thousands of $)

Preliminary computations

Investment in Sen (75%) January 1, 2009$2,400

Implied fair value of Sen ($2,400 / 75%)$3,200

Book value of Sen(2,400)

Total excess of fair value over book value$ 800

Excess allocated:

10% to inventories (sold in 2009)$ 80

40% to plant assets (use life 8 years) 320

50% to goodwill 400

Total excess of fair value over book value$ 800

1Goodwill at December 31, 2013 (not amortized)$ 400

2Noncontrolling interest share for 2013

Net income ($1,000 sales - $600 expenses)$ 400

Less: Amortization of excess

Plant assets ($320 / 8 yrs.) (40)

Adjusted Sen income$ 360

25% Share$ 90

3Consolidated retained earnings December 31, 2012

Equal to Peas December 31, 2012 retained earningsSince this a trial balance, reported retained earnings equals beginning of 2013 retained earnings.

$1,670

4Consolidated retained earnings December 31, 2013

Peas retained earnings December 31, 2012$1,670

Add: Peas net income for 2013 1,085

Less: Peas dividends for 2013 (500)

Consolidated retained earnings December 31$2,255

5Consolidated net income for 2013

Consolidated sales$5,000

Less: Consolidated expenses ($3,785 + $40 depreciation)(3,825)

Total consolidated income 1,175

Less: Noncontrolling interest share (90)

Controlling share of consolidated net income for 2013$1,085

6Noncontrolling interest December 31, 2012

Sens stockholders equity at book value$2,400

Unamortized excess after four years:

Inventory 0

Plant assets ($320 - $160) 160

Goodwill 400

Sens stockholders equity at fair value$2,960

25% Sens stockholders equity at fair value$ 740

7Noncontrolling interest December 31, 2013

Sens stockholders equity at book value$2,600

Unamortized excess after five years:

Inventory 0

Plant assets ($320 - $200) 120

Goodwill 400

Sens stockholders equity at fair value$3,120

25% Sens stockholders equity at fair value$ 780

P4-5

Preliminary computations

Allocation of excess fair value over book valueCost of 70% interest January 1$490,000

Implied fair value of Sul ($490,000 / 70%)$700,000

Book value of Sul(600,000)

Excess fair value over book value$100,000

Noncontrolling interest 30% of fair value at acquisition$210,000

Excess allocated

Undervalued inventory items sold in 2009$ 5,000

Undervalued buildings (7 year life) 14,000

Undervalued equipment (3 year life) 21,000

Patents 40,000

Remainder to Goodwill 20,000

Excess fair value over book value$100,000

Calculation of income from Sul

Suls net income$100,000

Less: Undervalued inventories sold in 2009 (5,000)

Less: Additional Depreciation on building ($14,000/7 years) (2,000)

Less: Additional Depreciation on equipment ($21,000/3 years) (7,000)

Less: Patent amortization ($40,000/40 years) (1,000)

Suls adjusted income$ 85,000

Pars 70% share$ 59,500

Noncontrolling interests 30% share$ 25,500

Working paper entries for 2009

aIncome from Sul 59,500

Dividends (Sul) 35,000

Investment in Sul 24,500

bCapital stock (Sul) 500,000

Retained earnings (Sul) January 1 100,000

Unamortized excess 100,000

Investment in Sul 490,000

Noncontrolling interest January 1 210,000

cCost of sales (for inventory items) 5,000

Buildings net 14,000

Equipment net 21,000

Patents 40,000

Goodwill 20,000

Unamortized excess 100,000

dDepreciation expense 2,000

Buildings net 2,000

eDepreciation expense 7,000

Equipment net 7,000

fOther expenses 1,000

Patents 1,000

gAccounts payable 10,000

Accounts receivable 10,000

hDividends payable 14,000

Dividends receivable 14,000

iNoncontrolling Interest Share 25,500

Dividends Sul 15,000

Noncontrolling Interest 10,500

Par Corporation and SubsidiaryConsolidation Working Papersfor the year ended December 31, 2009(in thousands)ParSul 70%Adjustments andEliminationsConsolidatedStatements

Income StatementSales$ 800$ 700$1,500

Income from Sul 59.5a 59.5

Cost of sales 300* 400*c 5 705*

Depreciation expense 154* 60*d 2e 7 223*

Other expenses 160* 140*f 1 301*

Consolidated NI$ 271

Noncontrolling sharei 25.5* 25.5*

Controlling share of NI$ 245.5$ 100$ 245.5

Retained EarningsRetained earnings Par$ 300$ 300

Retained earnings Sul$ 100b 100

Net income 250 100 245.5

Dividends 200* 50*a 35

i 15 200*

Retained earnings Dec 31$ 345.5$ 150$ 345.5

Balance SheetCash$ 86$ 60$ 146

Accounts receivable 100 70g 10 160

Dividends receivable 14h 14

Inventories 150 100 250

Other current assets 70 30 100

Land 50 100 150

Buildings net 140 160c 14d 2 312

Equipment net 570 330c 21e 7 914

Investment in Sul 514.5a 24.5b 490

Patentsc 40f 1 39

Goodwillc 20 20

Unamortized excessb 100c 100

$1,694.5$ 850$2,091

Accounts payable$ 200$ 85g 10$ 275

Dividends payable 100 20h 14 106

Other liabilities 49 95 144

Capital stock, $10 par 1,000 500b 500 1,000

Retained earnings 345.5 150 345.5

$1,694.5$ 850

Noncontrolling interest January 1b 210

Noncontrolling interest December 31i 10.5 220.5

$2,091

*Deduct

P4-6

Supporting computations

Ownership percentage 13,500/15,000 shares = 90%

Investment cost (13,500 shares $15)$202,500

Implied fair value of Syn ($202,500 / 90%)$225,000

Book value of Syn 165,000

Excess fair value over book value$ 60,000

Excess allocated to

Land$ 20,000

Remainder to patents 40,000

Excess fair value over book value$ 60,000

Income from Syn

Syns reported net income$ 24,000

Less: Patents amortization (4,000)

Syns adjusted income$ 20,000

Pens share of Syns income (90%)$ 18,000

Noncontrolling interest share (10%)$ 2,000

Investment in Syn December 31, 2010

Cost January 1, 2009$202,500

Pens share of the change in Syns retained earnings

($42,000 - $15,000) 90% 24,300

Less: Pens share (90%) of Patents amortization for 2 years (7,200)

Investment in Syn December 31$219,600

Pen Corporation and SubsidiaryConsolidation Working Papersfor the year ended December 31, 2010(in thousands)Pen90% SynAdjustments andEliminationsConsolidatedStatements

Income StatementSales$ 400$ 100$ 500

Income from Syn 18a 18

Cost of sales 250* 50* 300*

Other expenses 100.6* 26*c 4 130.6*

Consolidated NI$ 69.4

Noncontrolling shareg 2 2 *

Controlling share of NI$ 67.4$ 24$ 67.4

Retained EarningsRetained earnings Pen$ 177$ 177

Retained earnings Syn$ 34b 34

Net income 67.4 24 67.4

Dividends 50* 16*a 14.4

g 1.6 50*

Retained earnings Dec 31$ 194.4$ 42$ 194.4

Balance SheetCash$ 18$ 15$ 33

Accounts receivable 80 20f 5 95

Dividends receivable 7.2d 7.2

Inventories 95 10 105

Note receivable Pen 5e 5

Investment in Syn 219.6a 3.6b 216

Land 65 30b 20 115

Buildings net 170 80 250

Equipment net 130 50 180

Patentsb 36c 4 32

$ 784.8$ 210$ 810

Accounts payable$ 85.4$ 10f 5$ 90.4

Note payable to Syn 5e 5

Dividends payable 8d 7.2 .8

Capital stock 500 150b 150 500

Retained earnings 194.4 42 194.4

$ 784.8$ 210

Noncontrolling interest January 1b 24

Noncontrolling interest December 31g .4 24.4

$ 810

*Deduct