The Christopher Corporation Acquired 100% of the Lowell Corporation on December 31, 1999

1

Problem 3.1 Name ______

The Christopher Corporation acquired 100% of the Lowell Corporation on December 31, 1999. The Christopher Corporation estimates the Lowell Corporation's buildings have a 20-year remaining useful life and its equipment has a 10-year remaining useful life. Any goodwill will have an indefinite life. Immediately before the acquisition, the following information was available.

Accounts / Christopher
Corporation
Book Value / Lowell
Corporation
Book Value / Lowell
Corporation
Market Value
Cash / $125,000 / $12,000 / $12,000
Accounts Receivable / 60,000 / 15,000 / 15,000
Land / 50,000 / 10,000 / 12,000
Buildings / 85,000 / 23,000 / 27,000
Equipment / 205,000 / 45,000 / 51,000
Accounts Payable / 50,000 / 28,000 / 28,000
Common Stock, $1 par / 80,000 / 9,000
Additional Paid-in Capital / 257,000 / 33,000
Retained Earnings, 1/1/99 / 123,000 / 26,000
Dividends / 13,000 / 0
Revenues / 218,000 / 55,000
Expenses / 190,000 / 46,000

1.The Christopher Corporation paid $105,000 cash to acquire the Lowell Corporation on December 31, 1999. The Christopher Corporation also paid $2,000 to consultants for services related to the acquisition. The Christopher Corporation accounted for the acquisition as a purchase and uses the cost method to account for its investment. Prepare the Christopher Corporation's consolidation worksheet for the year ended December 31, 2000.

Accounts / Christopher
Corp.
12/31/00 / Lowell
Corp.
12/31/00 / Debits / Credits / Consoli-
dated
Totals
12/31/00
Income Statement
Revenues / $230,000 / $61,000
Expenses / 199,000 / 47,000
Dividend Income / 3,000 / 0
Net Income / $34,000 / $14,000
St. of Retained Earn.
R/E, 1/1/00 / $138,000 / $35,000
Plus: Net Income / 34,000 / 14,000
Less: Dividends / 14,000 / 3,000
R/E, 12/31/00 / $158,000 / $46,000
Balance Sheet
Cash / $56,000 / $24,000
Accounts Receivable / 75,000 / 22,000
Investment in Lowell / 107,000 / 0
Land / 50,000 / 10,000
Buildings / 80,000 / 21,000
Equipment / 180,000 / 40,000
Total assets / $548,000 / $117,000
Accounts Payable / 53,000 / 29,000
Common Stock / 80,000 / 9,000
Add. Paid-in Capital / 257,000 / 33,000
R/E, 12/31/00 / 158,000 / 46,000 / 168,200
Total Liab. & St. Eq. / $548,000 / $117,000 / $587,200

2.The Christopher Corporation accounted for the acquisition as a purchase and uses the cost method to account for its investment. Prepare the Christopher Corporation's consolidation worksheet for the year ended December 31, 2001.

Accounts / Christopher
Corp.
12/31/01 / Lowell
Corp.
12/31/01 / Debits / Credits / Consoli-
dated
Totals
12/31/01
Income Statement
Revenues / $245,000 / $69,000
Expenses / 210,000 / 52,000
Dividend Income / 4,000 / 0
Net Income / $39,000 / $17,000
St. of Retained Earn.
R/E, 1/1/01 / $158,000 / $46,000
Plus: Net Income / 39,000 / 17,000
Less: Dividends / 16,000 / 4,000
R/E, 12/31/01 / $181,000 / $59,000
Balance Sheet
Cash / $63,000 / $42,000
Accounts Receivable / 78,000 / 25,000
Investment in Lowell / 107,000 / 0
Land / 50,000 / 10,000
Buildings / 75,000 / 19,000
Equipment / 202,000 / 35,000
Total assets / $575,000 / $131,000
Accounts Payable / 57,000 / 30,000
Common Stock / 80,000 / 9,000
Add. Paid-in Capital / 257,000 / 33,000
R/E, 12/31/01 / 181,000 / 59,000 / 203,400
Total Liab. & St. Eq. / $575,000 / $131,000 / $627,400

3.The Christopher Corporation accounted for the acquisition as a purchase and uses the equity method to account for its investment. Prepare the Christopher Corporation's consolidation worksheet for the year ended December 31, 2000.

Accounts / Christopher
Corp.
12/31/00 / Lowell
Corp.
12/31/00 / Debits / Credits / Consoli-
dated
Totals
12/31/00
Income Statement
Revenues / $230,000 / $61,000
Expenses / 199,000 / 47,000
Equity in Low. Earn. / 13,200 / 0
Net Income / $44,200 / $14,000
St. of Retained Earn.
R/E, 1/1/00 / $138,000 / $35,000
Plus: Net Income / 44,200 / 14,000
Less: Dividends / 14,000 / 3,000
R/E, 12/31/00 / $168,200 / $46,000
Balance Sheet
Cash / $56,000 / $24,000
Accounts Receivable / 75,000 / 22,000
Investment in Lowell / 117,200 / 0
Land / 50,000 / 10,000
Buildings / 80,000 / 21,000
Equipment / 180,000 / 40,000
Total assets / $558,200 / $117,000
Accounts Payable / 53,000 / 29,000
Common Stock / 80,000 / 9,000
Add. Paid-in Capital / 257,000 / 33,000
R/E, 12/31/00 / 168,200 / 46,000 / 168,200
Total Liab. & St. Eq. / $558,200 / $117,000 / $587,200

4.The Christopher Corporation accounted for the acquisition as a purchase and uses the equity method to account for its investment. Prepare the Christopher Corporation's consolidation worksheet for the year ended December 31, 2001.

Accounts / Christopher
Corp.
12/31/01 / Lowell
Corp.
12/31/01 / Debits / Credits / Consoli-
dated
Totals
12/31/01
Income Statement
Revenues / $245,000 / $69,000
Expenses / 210,000 / 52,000
Equity in Low. Earn. / 16,200 / 0
Net Income / $51,200 / $17,000
St. of Retained Earn.
R/E, 1/1/01 / $168,200 / $46,000
Plus: Net Income / 51,200 / 17,000
Less: Dividends / 16,000 / 4,000
R/E, 12/31/01 / $203,400 / $59,000
Balance Sheet
Cash / $63,000 / $42,000
Accounts Receivable / 78,000 / 25,000
Investment in Lowell / 129,400 / 0
Land / 50,000 / 10,000
Buildings / 75,000 / 19,000
Equipment / 202,000 / 35,000
Total assets / $597,400 / $131,000
Accounts Payable / 57,000 / 30,000
Common Stock / 80,000 / 9,000
Add. Paid-in Capital / 257,000 / 33,000
R/E, 12/31/01 / 203,400 / 59,000 / 203,400
Total Liab. & St. Eq. / $597,400 / $131,000 / $627,400

5.Assume the Christopher Corporation acquired the Lowell Corporation by exchanging 10,000 shares of its $1 par value common stock instead of paying $105,000 cash. Prepare the Christopher Corporation's consolidation worksheet for the year ended December 31, 2000 assuming the Christopher Corporation accounted for the acquisition as a pooling of interests and uses the cost method to account for its investment.

Accounts / Christopher
Corp.
12/31/00 / Lowell
Corp.
12/31/00 / Debits / Credits / Consoli-
dated
Totals
12/31/00
Income Statement
Revenues / $230,000 / $61,000
Expenses / 199,000 / 47,000
Dividend Income / 3,000 / 0
Net Income / $34,000 / $14,000
St. of Retained Earn.
R/E, 1/1/00 / $162,000 / $35,000
Plus: Net Income / 34,000 / 14,000
Less: Dividends / 14,000 / 3,000
R/E, 12/31/00 / $182,000 / $46,000
Balance Sheet
Cash / $161,000 / $24,000
Accounts Receivable / 75,000 / 22,000
Investment in Lowell / 68,000 / 0
Land / 50,000 / 10,000
Buildings / 80,000 / 21,000
Equipment / 180,000 / 40,000
Total assets / $614,000 / $117,000
Accounts Payable / 53,000 / 29,000
Common Stock / 80,000 / 9,000
Add. Paid-in Capital / 289,000 / 33,000
R/E, 12/31/00 / 182,000 / 46,000 / 202,000
Total Liab. & St. Eq. / $614,000 / $117,000 / $663,000

6.The Christopher Corporation accounted for the acquisition as a pooling of interests and uses the cost method to account for its investment. Prepare the Christopher Corporation's consolidation worksheet for the year ended December 31, 2001.

Accounts / Christopher
Corp.
12/31/01 / Lowell
Corp.
12/31/01 / Debits / Credits / Consoli-
dated
Totals
12/31/01
Income Statement
Revenues / $245,000 / $69,000
Expenses / 210,000 / 52,000
Dividend Income / 4,000 / 0
Net Income / $39,000 / $17,000
St. of Retained Earn.
R/E, 1/1/01 / $182,000 / $46,000
Plus: Net Income / 39,000 / 17,000
Less: Dividends / 16,000 / 4,000
R/E, 12/31/01 / $205,000 / $59,000
Balance Sheet
Cash / $168,000 / $42,000
Accounts Receivable / 78,000 / 25,000
Investment in Lowell / 68,000 / 0
Land / 50,000 / 10,000
Buildings / 75,000 / 19,000
Equipment / 202,000 / 35,000
Total assets / $641,000 / $131,000
Accounts Payable / 57,000 / 30,000
Common Stock / 90,000 / 9,000
Add. Paid-in Capital / 289,000 / 33,000
R/E, 12/31/01 / 205,000 / 59,000 / 238,000
Total Liab. & St. Eq. / $641,000 / $131,000 / $704,000

7.Assume the Christopher Corporation accounted for the acquisition as a pooling of interests and uses the equity method to account for its investment. Prepare the Christopher Corporation's consolidation worksheet for the year ended December 31, 2000.

Accounts / Christopher
Corp.
12/31/00 / Lowell
Corp.
12/31/00 / Debits / Credits / Consoli-
dated
Totals
12/31/00
Income Statement
Revenues / $230,000 / $61,000
Expenses / 199,000 / 47,000
Equity in Low. Earn. / 14,000 / 0
Net Income / $45,000 / $14,000
St. of Retained Earn.
R/E, 1/1/00 / $171,000 / $35,000
Plus: Net Income / 45,000 / 14,000
Less: Dividends / 14,000 / 3,000
R/E, 12/31/00 / $202,000 / $46,000
Balance Sheet
Cash / $161,000 / $24,000
Accounts Receivable / 75,000 / 22,000
Investment in Lowell / 88,000 / 0
Land / 50,000 / 10,000
Buildings / 80,000 / 21,000
Equipment / 180,000 / 40,000
Total assets / $634,000 / $117,000
Accounts Payable / 53,000 / 29,000
Common Stock / 90,000 / 9,000
Add. Paid-in Capital / 289,000 / 33,000
R/E, 12/31/00 / 202,000 / 46,000 / 202,000
Total Liab. & St. Eq. / $634,000 / $117,000 / $663,000

8.The Christopher Corporation accounted for the acquisition as a pooling of interests and uses the equity method to account for its investment. Prepare the Christopher Corporation's consolidation worksheet for the year ended December 31, 2001.

Accounts / Christopher
Corp.
12/31/01 / Lowell
Corp.
12/31/01 / Debits / Credits / Consoli-
dated
Totals
12/31/01
Income Statement
Revenues / $245,000 / $69,000
Expenses / 210,000 / 52,000
Equity in Low. Earn, / 17,000 / 0
Net Income / $52,000 / $17,000
St. of Retained Earn.
R/E, 1/1/01 / $202,000 / $46,000
Plus: Net Income / 52,000 / 17,000
Less: Dividends / 16,000 / 4,000
R/E, 12/31/01 / $238,000 / $59,000
Balance Sheet
Cash / $168,000 / $42,000
Accounts Receivable / 78,000 / 25,000
Investment in Lowell / 101,000 / 0
Land / 50,000 / 10,000
Buildings / 75,000 / 19,000
Equipment / 202,000 / 35,000
Total assets / $674,000 / $131,000
Accounts Payable / 57,000 / 30,000
Common Stock / 90,000 / 9,000
Add. Paid-in Capital / 289,000 / 33,000
R/E, 12/31/01 / 238,000 / 59,000 / 238,000
Total Liab. & St. Eq. / $674,000 / $131,000 / $704,000