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Lucy Co land - undervalued			10,000
Lucy Co buildings with 10 year life-undervalued		12,000
	Seth	Lucy	Lucy
	Company	Company	Company
	Book	Book	fair value
	Value	Value
Cash	$ 40,000	$ 20,000	$ 20,000
Inventory	220,000	110,000	$ 110,000
Land	100,000	180,000	$ 190,000
Buildings (net)	240,000	80,000	$ 92,000
Equipment (net)	160,000	50,000	$ 50,000
Accounts payable	(50,000)	(40,000)	$ (40,000)
Long-term debt	(430,000)	(200,000)	$ (200,000)
Common stock	(150,000)	(80,000)	222000
Retained earnings, 1/1/09	(130,000)	(120,000)	Net fair value

Use information in the following table for the two consolidation questions
	Seth	Lucy	Lucy
	Company	Company	Company
	Book	Book	fair value
	Value	Value
Cash	$ 50,000	$ 20,000	$ 20,000
Inventory	210,000	110,000	$ 110,000
Land	100,000	180,000	$ 190,000
Buildings (net)	240,000	80,000	$ 92,000
Equipment (net)	160,000	50,000	$ 46,000
Patent			$ 10,000
Accounts payable	(50,000)	(40,000)	$ (40,000)
Long-term debt	(430,000)	(200,000)	$ (200,000)
Common stock	(150,000)	(80,000)	228000
Retained earnings, 1/1/2020	(130,000)	(120,000)	Net fair value
1. On 01/01/2020, Seth Co. purchase all assets and liabilities of Lucy Co. by paying $40,000 cash and 20,000 shares of its own newly issued stock with $10 per share market price. Seth also paid $2000 cash for investment banking fee and $1,000 to issue the stock that is used as part of the purchase price. Please use the acquisition method to consolidate Seth and Lucy Co. on the date of acquisition, assuming that Lucy was DISSOLVED after the acquisition.
	Acquisition method
	Debit	Credit
Cash
Inventory
Land
Buildings (net)
Equipment (net)
Patent
Goodwill
Gain on bargain purchase
Accounts payable
Long-term Debt
Common stock
Cash
Common stock
Cash
Combination expense
Cash
2. Use the above financial information and the acquisition method to consolidate Seth and Lucy Co. on the date of acquisition, assuming that Arhtur Co. purchased 100% of Lucy common stock. The purchase price and fee payments are the same as above. Lucy was NOT dissolved after the acquisition.
Journal entries recorded by Seth Company related to the acquisition on 01/01/2020
		Debit	Credit
Investment in Lucy
Goodwill
Cash
Common stock
Gain on bargain purchase
Consolidation expense
Cash
Common stock
Cash
Fair Value Adjustment Schedule
Fair value of 100% Lucy
Total equity of Lucy (BV)
Excess of fair value over book value
Adjustment of Lucy's identifiable assets and liabilities
	Adjustment to FV	Worksheet Key
Land
Building
Equipment
Patent
Goodwill
Total
Seth COMPANY AND CONSOLIDATED SUBSIDIARY
Consolidation Worksheet
January 1, 2013
	Seth	Lucy	Consolidation Entries	Consolidated
Accounts	Company	Company		Debit		Credit	Totals
Debit Balances
Cash		20000
Inventory	210000	110000
Land	100000	180000
Buildings (net)	240000	80000
Equipment (net)	160000	50000
Patent
Investment in Lucy
Goodwill
Total debits		440000
Credit Balances
Accounts payable	-50000	-40000
Long-term liabilities	-430000	-200000
Common stock		-80000
Retained earnings, 01/01/13, adjusted for acquisition		-120000
Total credits		-440000

Question 3. On 01/01/2020, Corina's Co. purchase 90% of Joe's Co. common stock for $35,000 cash and $200,000 long-term note. Corina's also paid $3000 cash for investment banking fee. Joe's was not dissolved after the purchase. During 2020, Joe's reported net income of $50,000 and paid dividends of $30,000. During 2021, Joe's reported net income of $75,000 and paid dividends of $45,000. Corina's Co. uses the EQUITY method to track its investment in Joe's.
Note: At the time of acquisition, Joe's had land with fair value higher than book value by $8,000, an equipment with fair value lower than book value by $4,000 and a building with fair value higher than book value by $12,000. The equipment and building has 5 years and 10 years of useful life each. Joe's has a book value of $204,000 on 01/01/2020. The fair value of Joe's's net assets was $220,000 at time of acquisition.
Hint: The ending balance of "Investment in Joe's" account in 2013 need to be calculated all the way starting from 01/01/2020 and making adjustments in 2020 and then in 2021.
Please use the acquisition method to consolidate the books of Corina's and Joe's Co. on 12/31/2021.
Value Analysis Schedule
		Total price		Corina's's price	NCI implied price
		(100%)		(90%)		(10%)
Market price of Joe's
Joe's's net assets fair value
Difference -Goodwill
Fair Value Adjustment Schedule
Fair value of 100% Joe's
Total equity of Joe's (BV)
Excess of fair value over book value
Adjustment of Chase's identifiable accounts
	Adjustment to FV	Worksheet Key	Amortization
	Life	Current year	Prior year	Total	WorksheetKey
Land
Building
Equipment
Goodwill
Total
Journal entries related to adjustments to its investment interest in Joe's using EQUITY method during 2021 before consolidation
		Debit	Credit
Investment in Joe's				subsidary's current year net income
Equity in Joe's's earnings
Cash				dividdend received in current year
Investment in Joe's
Equity in subisidiary earnings				building's current year depreciation expense
Investment in Joe's
Investment in Joe's				equipment's current year depreciation expense
Equity in subisidiary earnings
Corina's COMPANY AND CONSOLIDATED SUBSIDIARY
Consolidation Worksheet
December 31, 2021
	Seth	Joe's	Consolidation Entries	Noncontrolling	Consolidated
Accounts	Company	Company		Debit		Credit	Interest	Totals
Revenue	-546000	-273000
Cost of goods sold	370000	185000
Gross Profit	-176000	-88000
SGA expenses	34600	13000
Equity in subsidairy earnings
Noncontrolling interest earning
Net income	-141400	-75000
		Changes in Retained earnings
Retained earnings-begining balance---Corina's	-180024
Retained earnings-begining balance---Joe's		-144000
Net income		-75000
Dividends paid	84840	45000
Retained earnings-ending balance		-174000
Cash	40,784	51,000
Inventory	298,600	134,000
Land	150,000	170,000
Buildings	370,760	117,000
Accum. Depre - Buildijng	(50,000)	(30,000)
Equipment	194,440	69,000
Accum. Depre - Equipment	(30,000)	(20,000)
Investment in Joe's
Goodwill
Total debits		491,000
Credit Balances
Accounts payable	(286,620)	(47,000)
Long-term liabilities	(554,020)	(190,000)
Noncontrolling interest-beg.
Noncontrolling interest-end.
Common stock	(150,000)	(80,000)
Retained earnings, ending		(174,000)
Total credits		(491,000)
		-

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