Run Co.

ASSETS
Cash 750,000
Accounts Receivable 260,000
Inventory 200,000
Investment in Subsidiary (at cost) 520,000
Building, net 950,000
Goodwill
TOTAL ASSETS 2,680,000

LIABILITIES AND EQUITY

Accounts Payable 80,000

Share Capital 1,000,000

Share Premium 300,000
Retained Earnings 1,300,000
Non-Controlling Equity
Total Equity 2600000
TOTAL LIABILITIES AND EQUITY 2,680,000

Carrying Amount
Inventory 80,000
Building, net 300,000
Totals 380,000

STEP 1: Analysis of Subsidiary's net assets

Walk Co. Jan. 1, 20x1 (a)
Net assets at carrying amount 480,000
Fair value adjustments 120,000
Net assets at Fair value 600,000

STEP 2: Goodwill Computation

Consideration Transferred 520,000
NCI in the acquiree (600k x 20%) step 1 120,000
Previously held equity interest in the acquiree 0
TOTAL 640,000
FV of net identifiable assets acquired - step 1 600,000
Goodwill - Jan. 1, 20x1 40,000
Less: Accumulated impairement losses 0
Goodwill - Dec. 31, 20x1 40,000

STEP 3: NCI in net assets

Subsidiary's net assets at fair value - Dec.31, 20x1 - step 1 658,000
Multiply by: NCI percentage 20%
NCI in net assets - Dec. 31,20x1 131,600

STEP 4: Consolidated retained earnings

Parent's retained earnings - Dec. 31,20x1 1,300,000
Parent's share in the net change in subsidiary's net assets (d) 46,400
Consolidated retained earnings - Dec. 31,20x1 1,346,400

STEP 5: Consolidated profit or loss

Profits of Run Co. & Walk Co. (420k + 88k) 508,000
Less: Depreciation of FVA - step 1 30,000
Consolidated Profit 478,000

CJE #1: Eliminating Entries

Dec. 31,20x1 Debit
Inventory 20,000
Building 100,000
Share capital 200,000
Share Premium 100,000
Retained earnings (480k - 200k - 100k) 180,000
Goodwill 40,000
Investment in subsidiary
NCI (600k x 20%)

CJE #2: Depreciation of fair value adjustments

Dec. 31,20x1
Cost of sales 20,000
Depreciation expense on Building 10,000
Inventory
Accumulated Depreciation

note:
Dec. 31,20x2
Retained earnings - Run Co.(30k x 80%) 24,000
Retained earnings - Walk Co. (30k x 20%) 6,000
Depreciatio expense 10,000
Inventory
Accumulated Depreciation

CJE #3: Adjust parent's and subsidiary's RE for the Depreciation of FVA During the year
Dec. 31,20x1
Retained earnings - Run Co.(20,000+10,000)x 80% 24,000
Retained earnings - Walk Co.(20,000+10,000)x 20% 6,000
Income summary - working paper

CJE #4: NCI post-acquisition change in Walk Co's net assets

Dec. 31,20x1
Retained earnings - Walk Co. 82,000
 Retained earnings - Run Co. (d)
NCI (post-acquisition -e)

#1 ANSWER
Consolidated Statement of Financial Position
December 31, 20x1
ASSETS
Cash 1008000
Accounts Receivable 310000
Inventory 220000
Investment in Subsidiary (at cost) 0
Building, net 1290000
Goodwill 40000
TOTAL ASSETS 2868000

LIABILITIES AND EQUITY

Accounts Payable 90000

Share Capital 1000000

Share Premium 300000
Retained Earnings 1346400
Non-Controlling Equity 131600
Total Equity 2778000
TOTAL LIABILITIES AND EQUITY 2868000
 Consolidation Worksheet
December 31, 20x1
Walk Co. CJE Ref. # Consolidation Adjustments / Eliminating Entries
Debit

258,000
50,000
20,000 1 20,000

250,000 1 100,000
1 40,000
578,000

10,000

200,000 1 200,000
100,000 1 100,000
268,000 1,3, & 4 292,000

568,000
578,000 752,000

Fair Value Fair Value Adjustment

100,000 20,000
400,000 100,000
500,000 120,000

Dec. 31, 20x1 (b) Net change

568,000
90,000
658,000 58,000
 Credit

520,000
120,000

20,000
10,000

20,000
20,000

uring the year

30,000
70,400
11,600
n Adjustments / Eliminating Entries CJE Ref # Consolidated
Credit

1,008,000
310,000
20,000 2 220,000
520,000 1 0
10,000 2 1,290,000
40,000
2,868,000

90,000

1,000,000
300,000
70,400 4 1,346,400
131,600 1&4 131,600
2,778,000
752,000 2,868,000
 Statement of profit or loss
December 31,20x1

Sales
Less: Cost of goods sold
Gross profit
Less:
Depreciation expense
Distribution costs
Profit for the year

Inventory
Building
Totals

(a) FVA at acquisition date

(b) FVA at acquisition date less subsequent depreciation

(d) Net change in Walk Co.'s net assets - step 1

Multiply: Run Co's interest in Walk Co.
Run Co.'s share in the net change in Walk Co.'s net assets

NCI computed in Step 3 can be reconciled as follows:

NCI at acquisition date
NCI's share net change (58k x 20%)

Consolidated profit is attributed to the owners of the parent and NCI:

Parent's profit before FVA

Share in XYZ's profit before FVA - e
Less: Depreciation of FVA (f)
TOTALS

e - (88k profit of Walk Co. x 80% = 70,400 share of Run Co.

(88,000 x 20% = 17,600 share of Walk Co.

(f) - (30,000 dep. of FVA x 80% = 24,000 share of Run Co.

(30,000 x 20% = 6,000 share of Walk Co.
 Run Co. Walk Co.
800,000 200,000
200,000 60,000
600,000 140,000

50,000 50,000
130,000 2,000
420,000 88,000

FVA, 1/1/X1 (a) Useful Life Depreciation

20,000 N/A 20,000
100,000 10 yrs 10,000
120,000 30,000

58,000
80%
46,400

120,000
11,600
131,600

parent and NCI:

Owners of parents NCI Consolidated
420,000 N/A 420,000
70,400 17,600 88,000
24,000 6,000 30,000
466,400 11,600 478,000
FVA, 12/31/X1 (b)

90,000
90,000