Question

Playoff Corporation acquired 80% ownership of Stadium Corporation on January 1, 2010 for $160,000. On that date, the fair value of the noncontrolling interest was $40,000, and Stadium reported retained earnings of $50,000 and had $100,000 of common stock outstanding. Playoff uses the equity method. On the date of acquisition, the fair value of Stadium’s depreciable assets was $50,000 more than book value and those assets had a 10 year remaining life. The pre-closing trial balance data for Playoff and Stadium on December 31, 2014, included the following:Playoff books:Stadium books:Investment in Stadium Co. Stock$188,000Dividends Declared$ 10,000Income from Subsidiary 20,000Common Stock 100,000Retained Earnings 90,000Net Income for the year 30,000Required: a. Provide all the journal entries recorded by Playoff during 2014 related to their investment in Stadium.Investment in Stadium24,000 Income from S24,000Cash8,000 Investment in Stadium8,000Income from S4,000 Investment in Stadium4,000b. Provide all workpaper entries needed to prepare a consolidation workpaper as of December 31, 2014. CAD: FV 200 – BV 150 = Diff 50 – Dep assets 50 / 10 yr life = $5,000Common Stock 100,000Retained Earnings 90,000 Investment in Stadium152,000 Noncontrolling Interest 38,000Buildings and Equipment50,000 Accumulated Depreciation25,000 Investment in Stadium NCI

Answer 1

A. Dr Investment in Stadium $24,000

Cr Income from S $24,000

Dr Cash $8,000

Cr Investment in Stadium $8,000

Dr Income from S $4,000

Cr Investment in Stadium $4,000

B. Dr Common Stock $100,000

Cr Retained Earnings $90,000

Cr Investment in Stadium $152,000

Cr Noncontrolling Interest $38,000

Dr Buildings and Equipment $50,000

Cr Accumulated Depreciation $25,000

Cr Investment in Stadium $20,000

Cr Noncontrolling Interest $5,000

Dr Depreciation expense $5,000

Cr Income from S $4,000

Cr Income to Noncontrolling Interest $1,000

Dr Income from S $24,000

Cr Investment in Stadium $24,000

Dr Investment in Stadium $8,000

Cr Dividend declared $8,000

Dr Income to Noncontrolling Interest $6,000

Cr Noncontrolling Interest $6,000

Dr Noncontrolling Interest $2,000

Cr Dividend declared $2,000

Step-by-step explanation:

a. Preparation of the journal entries recorded by Playoff during 2014 related to their investment in Stadium

Dr Investment in Stadium $24,000

Cr Income from S $24,000

($30,000*80%)

Dr Cash $8,000

Cr Investment in Stadium $8,000

($10,000*80%)

Dr Income from S $4,000

Cr Investment in Stadium $4,000

[($30,000*80%)-$20,000]

($24,000-$20,000)

b. Computation to Provide all workpaper entries needed to prepare a consolidation workpaper as of December 31, 2014.

CAD: Fair Value ($160,000+$40,000)– Book Value $150,000

=Fair Value $200,000– Book Value $150,000

= $50,000

Depreciation=$50,000 / 10 year life

Depreciation=$5,000

Dr Common Stock $100,000

Cr Retained Earnings $90,000

Cr Investment in Stadium $152,000

($160,000-$8,000)

Cr Noncontrolling Interest $38,000

($100,000+$90,000-$152,000)

Dr Buildings and Equipment $50,000

Cr Accumulated Depreciation $25,000

Cr Investment in Stadium $20,000

Cr Noncontrolling Interest $5,000

($50,000-$25,000-$20,000)

Dr Depreciation expense $5,000

Cr Income from S $4,000

($24,000-$20,000)

Cr Income to Noncontrolling Interest $1,000

($5,000-$4,000)

Dr Income from S $24,000

Cr Investment in Stadium $24,000

($30,000*80%)

Dr Investment in Stadium $8,000

Cr Dividend declared $8,000

($10,000*80%)

Dr Income to Noncontrolling Interest $6,000

($5,000+$1,000)

Cr Noncontrolling Interest $6,000

Dr Noncontrolling Interest $2,000

Cr Dividend declared $2,000

($8,000-$6,000)