. Prepare the determination and distribution schedule for this business combination
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On December 31, 20X1, Parent Company purchased 80% of the common stock of Subsidiary Company for $280,000. On this date, Subsidiary had total owners' equity of $250,000 (common stock $20,000; other paid-in capital, $80,000; and
Required:
b. |
Prepare the determination and distribution schedule for this business combination |
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- Alford Company and its 80 percent-owned subsidiary, Knight, have the following income statements for 2021: Knight $ (230,000) Alford $ (500,000) 300,000 40,000 140,000 10,000 20,000 20,000 (30,000) (36,200) $ (206, 200) Revenues Cost of goods sold Depreciation and amortization Other expenses Gain on sale of equipment Equity in earnings of Knight Net income 0 0 $ (60,000) Additional Information for 2021 • Intra-entity inventory transfers during the year amounted to $90,000. All intra-entity transfers were downstream from Alford to Knight. • Intra-entity gross profits in inventory at January 1 were $6,000, but at December 31, they are $9,000. • Annual excess amortization expense resulting from the acquisition is $11,000. • Knight paid dividends totaling $20,000. • The noncontrolling interest's share of the subsidiary's income is $9,800. . During the year, consolidated inventory rose by $11,000 while accounts receivable and accounts payable declined by $8,000 and $6,000, respectively. Net…On 1/1/19, Major Company purchased 10% of Minor Company's common stock for $100,000. Minor's book value of equity at that date consisted of $200,000 common stock and $450,000 retained earnings. On 1/1/19, the difference between the fair value and book value of equity of Minor's stock is attributable to land for $100,000 and the remaining difference is attributable to equipment. The equipment has a 10 year remaining life at 1/1/19. During 2019, Minor reported income of $150,000 and paid dividends of $50,000. The fair value of Major’s investment in Minor stock on 12/31/19 is $125,000. Assuming that Major is investing in Minor because it has excess cash and thinks Minor stock price prospects are good, answer the following questions (use the $XXX,XXX) format. The investment will be sold within a month after year-end. Round to the nearest dollar. The total asset amount related to the Investment in Minor on Major’s 12/31/2019 balance sheet is ________ The Minor investment increased…Phelps Co. uses the sophisticated equity method to account for the 80% investment in its subsidiary Shore Corp. At the time of the acquisition, the fair values of the net asset required approximated their book values. Based upon the following information, what is consolidated net income? Phelps internally generated income: $250,000 Shore internally generated income: $ 50,000 Intercompany profit on Shore beginning inventory: $ 10,000 Intercompany profit on Shore ending inventory: $ 15,000 a. $300,000 b. $295,000 c. $286,000 d. $305,000
- Lorn Corporation purchased inventory from Dresser Corporation for P120,000 on September 20, 20x2, and resold 80% of the purchased inventory to unaffiliated companies prior to December 31, 20x2, for P140,000. Dresser produced the inventory sold to Lorn for P75,000. Lorn owns 70% of Dresser’s voting common stock. The companies had no other transactions during 20x2. What amount of cost of goods sold will be reported in the 20x2 consolidated income statement? A. P60,000 C. P96, 000B. P75, 000 D. P120, 000 E. P171, 000The following are several figures reported for Allister and Barone as of December 31, 2021: Allister Inventory Sales Investment income Cost of goods sold Operating expenses $ 620,000 $ Barone 420,000 1,240,000 1,040,000 not given 620,000 290,000 520,000 360,000 Allister acquired 90 percent of Barone in January 2020. In allocating the newly acquired subsidiary's fair value at the acquisition date, Allister noted that Barone had developed a customer list worth $80,000 that was unrecorded on its accounting records and had a four-year remaining life. Any remaining excess fair value over Barone's book value was attributed to goodwill. During 2021, Barone sells inventory costing $142,000 to Allister for $204,000. Of this amount, 10 percent remains unsold in Allister's warehouse at year- end. Determine balances for the following items that would appear on Allister's consolidated financial statements for 2021: Inventory Sales Cost of goods sold Operating expenses Net income attributable to…Phone Corporation acquired 70 percent of Smart Corporation’s common stock on December 31, 20X4, for $98,000. At that date, the fair value of the noncontrolling interest was $42,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition: Item Phone Corporation Smart Corporation Cash $ 52,300 $ 39,000 Accounts Receivable 99,000 59,000 Inventory 136,000 92,000 Land 66,000 49,000 Buildings & Equipment 417,000 268,000 Less: Accumulated Depreciation (151,000) (73,000) Investment in Smart Corporation 98,000 Total Assets $ 717,300 $ 434,000 Accounts Payable $ 141,500 $ 27,000 Mortgage Payable 300,800 288,000 Common Stock 72,000 40,000 Retained Earnings 203,000 79,000 Total Liabilities & Stockholders’ Equity $ 717,300 $ 434,000 At the date of the business combination, the book values of Smart’s assets and liabilities approximated fair value except for inventory, which had a fair value of…
- Peanut Company acquired 90 percent of Snoopy Company's outstanding common stock for $310,500 on January 1, 20X8, when the book value of Snoopy's net assets was equal to $345,000. Peanut uses the equity method to account for investments. Trial balance data for Peanut and Snoopy as of December 31, 20X8, follow: Cash Accounts Receivable Inventory Investment in Snoopy Company Land Buildings and Equipment Cost of Goods Sold Depreciation Expense Selling & Administrative Expense Dividends Declared Accumulated Depreciation Accounts Payable Bonds Payable Common Stock Retained Earnings Sales Income from Snoopy Company Total Peanut Company Debit $ 174,000 181,000 211,000 353,700 206,000 707,000 187,000 41,000 220,000 89.000 $2,369,700 Credit $450,000 63,000 188,000 492,000 313,900 789,000 73.800 $2,369,700 Snoopy Company Debit $ 87,000 82,000 76,000 95,000 188,000 120,000 9,000 27,000 34,000 $718,000 Credit $18,000 48,000 69,000 196,000 149,000 238,000 0 $718,000 Required: a. Prepare any equity…In 20X6, Vines Inc. (Vines) purchased 40% of the common shares of Bottles Inc. (Bottles). At the time, there were no fair value differentials. In 20X7, Vines sold inventory to Bottles for $80,000. $25,000 of this remained at year end. This inventory was sold by Bottles in 20X8. Also during 20X8, Vines sold additional inventory to Bottles for $60,000 of which $30,000 remains in inventory. Vines earns a gross profit of 30% on sales of its inventory. Both companies pay income taxes at 25%. During 20X8, Bottles earned net income of $200,000. What is the amount of equity income reported by Vines in 20X8? A. $79,400 B. $79,550 C. $80,000 D. $80,450Parent Corporation acquired an 80% interest in Sub Corporation for $380,000 on January 1, 20X4 when Sub's stockholders' equity consisted of $200,000 capital stock and $75,000 retained earnings. The excess cost over book value acquired was allocated to inventory that was overvalued by $50,000 and sold in 20X4, to equipment that was undervalued by $100,000 and to goodwill. The undervalued equipment had an 8-year remaining useful life. Parent regularly sells inventory to Sub at 125% of cost. Intercompany sales were $200,000 in 20X5 and $100,000 in 20X6. Sub's inventory included $35,000 of this merchandise at 12/31/20X5 and $20,000 of this merchandise at 12/31/20X6. On October 1, 20X4 Sub sold Parent a building for $110,000. Sub had originally paid $150,000 for the building and had accumulated depreciation as of the date of sale of $90,000. Parent is depreciating the building at a rate of $22,000 per 12-month period. During 20X4 Sub sold land for which it had paid $50,000 to Parent…
- Lorn Corporation purchased inventory from Dresser Corporation for P 120,000 on September 20, 20x2, and resold 80% of the purchased inventory to unaffiliated companies prior to December 31, 20x2, for P140,000. Dresser produced the inventory sold to Lorn for P75,000. Lorn owns 70% of Dresser’s voting common stock. The companies had no other transactions during 20x2. What amount of cost of goods sold will be reported in the 20x2 consolidated income statement? A. P60, 000 B. P75, 000 C. P96, 000 D. P120, 000 E. P171, 000On January 1, 20X1, Cleo Company purchased an 80% interest in Sai Inc. for $1,000,000. The equity balances of Sai at the time of the purchase were as follows: Common stock ($10 par) $100,000 Paid-in capital in excess of par 400,000 Retained earnings 500,000 Any excess of cost over book value is attributable to goodwill. No dividends were paid by either firm during 20X6. The following trial balances were prepared for CLeo Company and its subsidiary, Sai Inc., on December 31, 20X6: Pinto Sands Cash 120,000 70,000 Accounts receivable 240,000 197,000 Inventory 200,000 176,000 Land 600,000 180,000 Buildings and equipment 1,100,000 800,000 Accumulated depreciation (180,000) (120,000) Investment in Sands 1,000,000 Accounts payable (110,000) (50,000) Common stock, $10 par (800,000) (100,000) Paid-in capital in excess of par…