On January 1, 2013, Monica Company acquied 70 percent of young Company's outstanding common stock for $665,000.

Assignment 3.2.1

Problems 5-33 & 5-36 (Chapter 5)

By: Charles Shannon

Problem 5-33:

On January 1, 2013, Monica Company acquied 70 percent of young Company's outstanding common stock for $665,000.

The fair value of the noncontrolling interest at the acquisiton date was $285,000. Young reported stockholder's equity accounts

on that date as follows:

Common stock - $10 par value

$300,000

Additional paid-in capital

90,000

Retained earnings

410,000

In establishing the acquisition value, Monica appraised Young's assets and ascertained that the accounting records undervalued

a building (with a 5-year remaining life) by $50,000. Any remaining excess acquisition-date fair value was allocated to a franchise agreement

to be amortized over 10 years.

During the subsequent years, Young sold Monica inventory at a 30 percent gross profit rate. Monica consistently resold this merchandise in the year of ac-

quisition or in the period immediately following. Transfers for the three years after this business combination was created amounted to the following:

Transfer

Inventory Remaining

Year

Price

at year-end (at transfer price)

2013

60,000

10,000

2014

80,000

12,000

2015

90,000

18,000

In addition, Monica sold Yound several pieces of fully depreciated equipment on January 1, 2014, for $36,000. The equipment had originally cost Monica

$50,000. Young plans to depreciate these assets over a 6-year period.

in 2015, Young earns a net income of $160,000 and declares and pays $50,000 in cash dividends. Thes figures increase the subsidiary's Retained earnings

to a $740,000 balance at the end of 2015. During this same year, Monica reported dividend income of $35,000 and an investment account containing the initial

value balance of $665,000. No changes in Young's common stock accounts have occurred since Monica's acquisition..

Required:

Prepare the 2015 consolidation worksheet entries for Monica and Young. In addition, compute the net income attributable to the noncontrolling

interest for 2015.

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