38a.

The relevant initial test would be to compare the equity

method balance of the carrying value as of 12/31
($120,070,000) and the 12/31 fair value
($110,000,000). Because the fair value is less than the
carrying value, Prine would be required to test further to
see whether goodwill is impared
38b.
12/31 fair value for Lydia
12/31 Total fair values of assets and liabilities
Implied fair value for goodwill
Carrying value for goodwill
Impairment loss
38c.
Combined revenues
Combined expenses
Income before impairment loss
Goodwill impairment loss
Net loss
38d.
Goodwill
Impairment loss
Consolidated balance for goodwill as of 12/31:
38e.
Consolidated broadcast licenses

$110,000,000
$93,106,000
$16,894,000
$50,000,000
$33,106,000

$30,000,000
$22,200,000
$7,800,000
($33,106,000)
($25,306,000)

$50,000,000
$33,106,000
$16,894,000

$14,364,000

38f.
Prine and Lydia
Consolidated Worksheet
31-Dec
Accounts
Revenues
Expenses
Equity in Lydia earnings
Impairment Loss
Net income (loss)
Retained Earnings 1/1
Dividends paid
Net Income

Prine Inc
Lydia Co
(18,000,000) (12,000,000)
10,350,000
11,800,000
(150,000)
0
33,106,000
0
25,306,000
(200,000)
(52,000,000)
300,000
25,306,000

(2,000,000)
80,000
(200,000)

Retained earnings 12/31

(26,394,000)

Cash
Receivables (net)
Invenstment in Lydia Co.

260,000
210,000
86,964,000

109,000
897,000
0

350,000
365,000
136,000,000
0
224,149,000

14,014,000
45,000,000
17,500,000
0
77,520,000

Broadcast licenses
Movie library
Equipment (net)
Goodwill
Total assets
Current liabilities
Long-term debt
Common stock
Retained earnings 12/31
Total liabilities and equity

(2,120,000)

(755,000)
(650,000)
(22,000,000) (7,250,000)
(175,000,000) (67,500,000)
(26,394,000) (2,120,000)
(224,149,000) (77,520,000)

Adjusting Entires
Debit
Credit
50,000
150,000

2,000,000
80,000

Totals
(30,000,000)
22,200,000
0
33,106,000
25,306,000
(52,000,000)
300,000
25,106,000

(26,594,000)

80,000

500,000
16,894,000

87,044,000

50,000

67,500,000
87,114,000

87,114,000

369,000
1,107,000
0
14,364,000
45,365,000
153,950,000
16,894,000
232,049,000
(1,405,000)
(29,250,000)
175,000,000
(26,394,000)
(232,049,000)

36a.
trademarks
patented technology
life of patented technology
Annual amortization

30,000
120,000
8 years
15,000

Inventory being held (50,000 x .72)

Gross profit rate (20,000/50,000)
Unrealized gross profit 1/1

36,000
0.4
14,400

Inventory being held

Gross profit rate (40,000/80,000)
Unrealized gross profit 12/31

28,000
0.5
14,000

Skyline net income

Patented technology amortization
Beginning inventory gross profit recognized
Ending inventory gross profit deferred
Deferral of land gain on sale
Equity in Skyline's earning

(88,000)
15,000
(14,400)
14,000
18,000
(55,400)

36b.
fair value of shares issued
Book value of subsidiary
Fair value in excess of book value

450,000
300,000
150,000

Consolidation entries:
Retained Earnings 1/1 (skyline)
Cost of goods sold

14,400
14,400

Common stock (skyline)

Additional Paid-in Captial (skyline)
Retained earnings 1/1 (skyline)
Investment in Skyline

120,000
30,000
277,600

Trademarks
Patented Technology
Investment in skyline

30,000
105,000

Investment income
Investment in skyline

55,400

Investment in skyline
Dividends distributed

20,000

427,600

135,000

55,400

20,000

Other operating expenses

Patented technology

15,000

Revenues
Cost of goods sold

80,000

Cost of goods sold

Inventory

14,000

Gain on sale of land

Land

18,000

Accounts payable
Accounts receivable

65,000

15,000

80,000

14,000

18,000

65,000
Parkway and Skyline
Consolidation Worksheet
Year Ending 12/31/2015

Accounts
Revenues
Cost of goods sold

Consolidation Entries
Parkway
Skyline
Debit
(627,000) (358,000)
80,000
289,000
195,000
14,000

Other operating expenses

Gain on sale of land
Investment Income
Net income

170,000
(18,000)
(55,400)
(241,400)

Retained Earnings 1/1

Net Income
Dividends distributed
Retained earnings 12/31

(314,600) (292,000)
(241,400)
(88,000)
70,000
20,000
486,000
360,000

Cash and receivables

inventory
Investment in Skyline
Trademarks
Patented technology
Land, buildings and equipment
Total assets
Liabilities
Common stock
Additional paid-In capital

134,000
28,100
598,000

637,000
1,650,000

75,000

15,000
18,000
55,400

(88,000)
292,000

150,000
112,000
20,000
50,000
130,000
283,000
725,000

(463,000) (215,000)
(410,000) (120,000)
(291,000)
(30,000)

30,000
105,000

65,000
120,000
30,000

Retained earnings
Total liabilities and stockholders' equity

(486,000) (360,000)
(1,650,000) (725,000)

844,400

Consolidation Entries
Credit

Consolidated Totals
(905,000)
94,400
403,600
260,000
0
0
(241,400)

20,000

65,000
14,000
618,000

15,000
18,000

(314,600)
(241,400)
70,000
486,000
219,000
379,000

80,000
220,000
902,000
1,800,000
(613,000)
(410,000)
(291,000)

844,400

(486,000)
(1,800,000)

1.
Fair Value Allocation Schedule 1/1/2014
Consideration transferred
1,000,000
Common Stock
500,000
Retained Earnings
185,000
Tradename
315,000
Tradename
Useful life
Amortization

315,000
25
12,600
Intra-entity Inventory transfers
Sales
Inventory (60%)
Intra. Profit (30%)
2014
190,000
57,000
34,200
2015
210,000
63,000
37,800

Equity in Shawn Co. Earnings

2014
78,000
Profit
(34,200)
Amortization
(12,600)
Equity Earnings
31,200
2015
2014 profit
2015 profit
Amortization
Equity Earnings

85,000
34,200
(37,800)
(12,600)
68,800

Investment Account
Cost
2014 equity earnings
Dividends 2014
12/31/2014
2015 equity earnings
Dividends 2015
12/31/2015

1,000,000
31,200
(25,000)
1,006,200
68,800
(27,000)
1,048,000

2.
Worksheet adjustments
Retained Earnings- Shawn Co.
Cost of goods sold

34,200

Common Stock- Shawn Co.

Retained Earnings- Shawn Co.

500,000
203,800

34,200

Investment in Shawn CO.

703,800

Tradename
Investment in Shawn. Co.

302,400

Equity in earnings of Shawn Co.

Investment in Shawn Co.

68,800

Investment in Shawn Co.

Dividends Paid

27,000

Amortization Expense
Tradename

12,600

Sales

302,400

68,800

27,000

12,600
210,000

Cost of goods sold

Cost of goods sold
Inventory

210,000
37,800
37,800