2. Difference between Implied and Book Value 180,000
Computation and Allocation of Difference Schedule
Parent Non- Entire
Share Controlling Value
Share
Purchase price and implied value $585, , ,000 *
Less: Book value of equity acquired 450, , ,000
Difference (IV&BV) 135,000 45, ,000
Equipment ($705,000 – $525,000) (135,000) (45,000) (180,000)
Balance
Part A Equipment ,000
Difference between Implied and Book Value 180,000
Depreciation Expense ($180,000/10) 18,000
Accumulated Depreciation 18,000

3. Part B
Allocated to Equipment = ÷10/15 = 270,000
Allocated to Accumulated Depreciation = 270,000 * 5/15= 90,000
Equipment ,000
Accumulated Depreciation 90,000
Difference (IV&BV) ,000
Depreciation Expense ($180,000/10) 18,000
Accumulated Depreciation ,000

5. Part A Investment in Saddler Corporation 525,000 Cash 525,000
Exercise 5-3
Part A Investment in Saddler Corporation ,000
Cash ,000
Part B Computation and Allocation of Difference Schedule
Parent Non- Entire
Share Controlling Value
Share
Purchase price and implied value $525, , ,250 *
Less: Book value of equity acquired 480, , ,000
Difference between implied and book value 45,000 11,250 56,250
Inventory (16,000) (4,000) (20,000)
Marketable Securities (20,000) (5,000) (25,000)
Plant and Equipment (24,000) (6,000) (30,000)
Balance (excess of FV over implied value) (15,000) (3,750) (18,750)
Gain 15,000
Increase Noncontrolling interest to fair value of assets 3,750
Total allocated bargain 18,750
Balance

7. Computation and Allocation of Difference Schedule
Parent Non- Entire
Share Controlling Value
Share
Purchase price and implied value $260,000 65, ,000 *
Less: Book value of equity acquired 270,000 67, ,500
Difference between implied and book value (10,000) (2,500) (12,500)
Inventory (4,000) (1,000) (5,000)
Current Assets (4,000) (1,000) (5,000)
Equipment (net) (40,000) (10,000) (50,000)
Balance (excess of FV over implied value) (58,000) (14,500) (72,500)
Gain 58,000
Increase Noncontrolling interest to fair value of assets 14,500
Total allocated bargain 72,500
Balance

8. Part B
(1) Common Stock ,000
Beginning Retained Earnings ,500
Difference (IV&BV) ,500
Investment in Salem Company ,000
Noncontrolling interest ,000
(2) Difference (IV&BV) 12,500
Inventory 5,000
Current Assets 5,000
Equipment (net) 50,000
Gain on acquisition 58,000
Noncontrolling interest ,500

10. aPresent Value on 1/1/2010 of 10% Bonds Payable
Computation and Allocation of Difference Schedule
Parent Non- Entire
Share Controlling Value
Share
Purchase price and implied value $2,000, , ,500,000 *
Less: Book value of equity acquired 1,760, , ,200,000
Difference between (IV&BV) 240,000 60, ,000
Land ($100,000 – $ 80,000) (16,000) (4,000) (20,000)
Premium on Bonds Payablea 31,941 7, ,926
Balance 255,941 63, ,926
Goodwill (255,941) (63,985) (319,926)
Balance
aPresent Value on 1/1/2010 of 10% Bonds Payable
Discounted at 8% over 5 periods
Principal ($500,000 * ) $340,290
Interest ($50,000 * ) ,636
Fair value of bond $539,926
Face value of bond ,000
Bond premium ,926

11. Unamortized Premium on Bonds Payable 39,926
Land ,000
Goodwill ,926
Unamortized Premium on Bonds Payable 39,926
Difference between (IV&BV) ,000
Unamortized Premium on Bonds Payable 6,806
Interest Expense ($50,000 – ($539,926 * 0.08)) 6,806
a Effective Interest (($539,926 * 0.08) $(43,194)
Nominal Interest (0.10 * $500,000) ,000
Difference $6806

12. Exercise 5-10

13. a Present Value on 1/2/2007 of 9% Bonds Payable
Part A
Computation and Allocation of Difference Schedule
Parent Non- Entire
Share Controlling Value
Share
Purchase price and implied value $3,500, ,889 3,888,889 *
Less: Book value of equity acquired 3,150, ,000 3,500,000
Difference between (IV&BV) 350,000 38, ,889
Land ($200,000 - $ 120,000) (72,000) (8,000) (80,000)
Premium on Bonds Payablea 56,867 6,319 63,186
Balance 334,867 37, ,075
Goodwill (334,867) (37,208) (372,075)
Balance
a Present Value on 1/2/2007 of 9% Bonds Payable
Discounted at 6% for 5 periods
Principal ($500,000 * ) $373,630
Interest ($45,000 * ) ,556
Fair value of bond $563,186
Face value of bond ,000
Premium on bond payable ,186

14. Land ,000
Goodwill ,075
Unamortized Premium on Bonds Payable 63,186
Difference between(IV&BV) ,889
Unamortized Premium on Bonds Payable 11,209
Interest Expense ,209a
a Effective Interest (0.06 *$563,186) $(33,791)
Nominal Interest (0.09 * $500,000) ,000
Difference ,209

15. Exercise 5-11

16. Dividends Declared (0.80 ×$20,000) 16,000
Part 1 – Cost Method
Computation and Allocation of Difference Schedule
Parent Non- Entire
Share Controlling Value
Share
Purchase price and implied value $2,276, ,000 2,845,000 *
Less: Book value of equity acquired 2,000, ,000 2,500,000
Difference (IV&BV) , , ,000
Inventory (36,000) (9,000) (45,000)
Equipment (40,000) (10,000) (50,000)
Balance 200,000 50, ,000
Goodwill (200,000) (50,000) (250,000)
Balance
2010
(1) Dividend Income 16,000
Dividends Declared (0.80 ×$20,000) 16,000
To eliminate intercompany dividends

17. 2) Beginning Retained Earnings 700,000
Capital Stock 1,800,000
Difference between Implied and Book Value 345,000
Investment in Sand Company 2,276,000
Noncontrolling interest 569,000
(3) Cost of Goods Sold (Beginning Inventory) 45,000
Equipment (net) ,000
Goodwill ,000
Difference between (IV&BV) 345,000
(4) Depreciation Expense ($50,000/8) 6,250
Equipment (net) 6,250

18. 2011 (1) Investment in Sand Company ($80,000 ×0.80) 64,000
Beginning Retained Earnings 64,000
To establish reciprocity/convert to equity method as of 1/1/2008
(2) Dividend Income ($30,000 * 0.80) 24,000
Dividends Declared 24,000
To eliminate intercompany dividends
(3) Beginning Retained Earnings ($700,000 + $100,000 – $20,000) 780,000
Capital Stock ,800,000
Difference between Implied and Book Value 345,000
Investment in Sand Company ($2,276,000 + $64,000) 2,340,000
NCI ($569, ) ,000

19. (4) Beginning Retained Earnings-Piper Company 36,000
Noncontrolling Interest 9,000
Equipment (net) ,000
Goodwill ,000
Difference between Implied and Book Value 345,000
(5) Beginning Retained Earnings-Piper Company 5,000
Noncontrolling Interest 1,250
Depreciation Expense ($50,000/8) 6,250
Equipment (net) ,500

20. 2012 (1) Investment in Sand Company ($200,000 *0.80) 160,000
Beginning Retained Earnings-Piper Company 160,000
To establish reciprocity/convert to equity method as of 1/1/2009
(2) Dividend Income ($15,000 * 0.80) 12,000
Dividends Declared 12,000
To eliminate intercompany dividends
(3) Beginning Retained Earnings($780,000 + $150,000 – $30,000) 900,000
Common Stock- Sand Company 1,800,000
Difference between Implied and Book Value 345,000
Investment ($2,276,000 + $160,000) ,436,000
NCI ($569,000 + ($900,000 – $700,000) x 0.20) ,000
To eliminate investment account and create noncontrolling interest account

21. (4) Beginning Retained Earnings-Piper Company 36,000
Noncontrolling Interest 9,000
Equipment (net) ,000
Goodwill ,000
Difference between (IV&BV) 345,000
(5) Beginning Retained Earnings-Piper Company 10,000
Noncontrolling Interest 2,500
Depreciation Expense ($50,000/8) 6,250
Equipment (net) ,750

23. (1) Investment in Saxton Corporation 225,000
Computation and Allocation of Difference Schedule
Parent Non- Entire
Share Controlling Value
Share
Purchase price and implied value $3,750, , ,166,667 *
Less: Book value of equity acquired 3,600, , ,000,000
Difference between (IV&BV) , , ,667
Inventory (90,000) (10,000) (100,000)
Land (360,000) (40,000) (400,000)
Balance (excess of FV over implied value) (300,000) (33,333) (333,333)
Gain 300,000
Increase NCI to fair value of assets 33,333
Total allocated bargain ,333
Balance
(1) Investment in Saxton Corporation 225,000
Beginning Retained Earnings-Palm Inc. 225,000
To establish reciprocity/convert to equity (0.90 *($1,250,000 – $1,000,000))

24. (2) Beginning Retained Earnings-Saxton Co.1/1/2012 1,250,000
Capital Stock- Saxton Co. 3,000,000
Difference between Implied and Book Value 166,667
Investment ($3,750,000 + $225,000) 3,975,000
Noncontrolling Interest ,667
To eliminate the investment amount and create noncontrolling interest account
(3) Beginning Retained Earnings-Palm Inc. 90,000
Noncontrolling Interest 10,000
Land ,000
Difference between (IV&BV) 166,667
Gain on Acquisition 300,000
Noncontrolling Interest 33,333
To allocate and depreciate the difference between implied and book value