1. On January 1, 2021, P Inc. purchases all of the common stock of S. Company for $450,000 cash. At the acquisition date, S stockholders' equity consisted of Common Stock, $300,000, and Retained Earmings, $20,000. It was determined that the investee's balance sheet included land undervalued by $30,000 and equipment undervalued by $5,000. P is a private company and elects the Goodwill Amortization Exception. It estimates a 10-year life for any goodwill. a. Show the calculation to determine goodwill at the date of acquisition. b. What is the entry to record the goodwill amortization under the equity method of accounting?

1. On January 1, 2021, P Inc. purchases all of the common stock of S. Company for $450,000 cash. At the acquisition date, S stockholders' equity consisted of Common Stock, $300,000, and Retained Earmings, $20,000. It was determined that the investee's balance sheet included land undervalued by $30,000 and equipment undervalued by $5,000. P is a private company and elects the Goodwill Amortization Exception. It estimates a 10-year life for any goodwill. a. Show the calculation to determine goodwill at the date of acquisition. b. What is the entry to record the goodwill amortization under the equity method of accounting?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

iller Company acquired an 80 percent interest in Taylor Company on January 1, 2022. Miller paid $744,000 in cash to the owners of Taylor to acquire these shares. In addition, the remaining 20 percent of Taylor shares continued to trade at a total value of $186,000 both before and after Miller's acquisition. On January 1, 2022, Taylor reported a book value of $530,000 (Common Stock = $265,000; Additional Paid-In Capital = $79,500; Retained Earnings = $185,500). Several of Taylor's buildings that had a remaining life of 20 years were undervalued by a total of $70,600. During the next three years, Taylor reports income and declares dividends as follows: Year Net Income Dividends 2022 $ 61,900 $ 8,900 2023 80, 100 13,400 2024 89,300 17,900 Required: Determine the appropriate answers for each of the following questions: a. What amount of excess depreciation expense should be recognized in the consolidated financial statements for the initial years following this acquisition? b. If a…
On July 1, 2019, Killearn Company acquired 105,000 of the outstanding shares of Shaun Company for $19 per share. This acquisition gave Killearn a 40 percent ownership of Shaun and allowed Killearn to significantly influence the investee’s decisions. As of July 1, 2019, the investee had assets with a book value of $5 million and liabilities of $1,101,500. At the time, Shaun held equipment appraised at $280,000 more than book value; it was considered to have a seven-year remaining life with no salvage value. Shaun also held a copyright with a five-year remaining life on its books that was undervalued by $650,000. Any remaining excess cost was attributable to goodwill. Depreciation and amortization are computed using the straight-line method. Killearn applies the equity method for its investment in Shaun. Shaun's policy is to declare and pay a $1 per share cash dividend every April 1 and October 1. Shaun's income, earned evenly throughout each year, was $640,000 in 2019, $670,600 in…
ABC owns 29% of XYZ Corp. During 2020, XYZ reported a net income of $415,000 and did not declare any dividends. Additionally, XYZ sold a piece of land, with a carrying value of $140,000 to ABC for $345,000. ABC still holds the land. ABC accounts for its investment in XYZ Corp using the equity method. Required: On December 31, 2022, a journal entry is required to record the impact of the above transactions. What is the net debit to the Investment in XYZ Corp account / the net credit to the Equity Income.
Rohan Limited is a privately owned company and has 31 December year-end. The company elected to apply ASPE for its financial reporting. On January 1, 2017, Rohan Limited purchased 30 shares of the 100 outstanding common shares of another privately held company, Bassett Company, for $165,000 cash. Rohan Limited has significant influence as a result of this acquisition. At that date, the statement of financial position of Bassett Company reflected the following: Non-depreciable assets $155,400 (fair value, $199,000); Depreciable assets (net), $178,000 (fair value, $250,000); and Total liabilities, $101,900 (book value equaled fair value); The depreciable assets had remaining useful life of 5 years and had been depreciated using straight-line method. On December 31, 2017, Bassett Company reported net income of $88,400. Bassett Company also declared and paid cash dividend in the amount of $20,000 on December 31, 2017. Goodwill was not impaired over the time period in question. Required:…
On January 1, 2021, Brianne Company acquired 30% of the voting share capital of another entity for P5,000,000 which was equal to the book value of interest acquired. The investee reported net income of P4,000,000 for 2021 and P6,000,000 for 2022 but paid no dividends during the two-year period. On July 1, 2022, Brianne Company sold half of the investment for P4,500,000. The fair value of the retained investment was P4,800,000 on July 1, 2022 and P5,500,000 on December 31, 2022. The retained investment is to be held at FVTOCI. What is the gain on sale of investment that should be reported in 2022 income statement? What amount of gain from remeasurement of investment should be reported in the 2022 income statement?
6. ABC and XYZ Inc had the following balance sheets on December 31, 2021: (see image below) On January 1, 2022 ABC purchased all of XYZ Inc’s Common Shares for P40,000 in cash. On that date, XYZ’s Current Assets and Fixed Assets were worth P26,000 and P54,000, respectively. Assuming that Consolidated Financial Statements were prepared on that date, determine the value of the current assets of the combined entity: *
Blue Ray Bhd. acquired all the assets and liabilities of Sharp Bhd. on 1 July 2021. Given below are the statements of financial position of Blue Ray and Sharp Bhd. as at 1 July 2021: Blue Ray (RM’000) Sharp (RM’000) Non-Current Tangible Assets 400,000 230,000 Goodwill 50,000 Shares in Sharp (30,000) 40,000 490,000 230,000 Current Asset 56,000 36,000 Total Assets 546,000 266,000 Current Liabilities (40,000) (20,000) 506,000 246,000 Ordinary Share capital at RM1 ach 400,000 150,000 Retained Profits 106,000 96,000 506,000 246,000 The acquisition was undertaken under the following terms: Blue Ray agreed to issue 200,000,000 ordinary shares. It was agreed that the fair value of the shares of Blue Ray for the acquisitions is RM1.60. Sharp will go into liquidation. The fair value of the assets and liabilities of Sharp were estimated to be: Tangible Assets…
Ukelele Company paid PHP68 Million on January 2, 2021, for 4 million shares of Guitar Corporation ordinary shares. The investment represents a 25% interest in the assets of Guitar and gave Ukelele the ability to exercise significant influence over Guitar Corporation. On the date of acquisition the following data are available: a. The book value of Guitar Corporation's Net Assets was P192 Million. b. The fair value of Guitar Corporation's depreciable assets exceeded their book value by 32 million. These assets had an average remaining usefule life of eight years. c. The remainder of the excess of the cost of the investment over the book value of net assets purchased was attributable to goodwill. Guitar Corp paid P1.5 per share dividends on August 25, 2021. Guitar reported net income of P40 Million for the year ended December 31, 2021. The market value of Guitar's ordinary shares at December 31, 2021 was P18.5 per share. Required: 1. Prepare all appropriate journal entries related to the…
On August 31, 2020, Laida Corporation purchased all the net assets of Magtalas Corporation by transferring cash of P500,000 and issuing 40,000 ordinary shares with par value of P50 (current fair value is P60). The following are expenses incurred and paid by Laida Corporation in connection with the business combination on the date of acquisition: Underwriting costsP10,000Consultant’s fees20,000Newspaper publication fees5,000SEC registration fees8,000Stock exchange listing fees5,000Indirect acquisition costs12,000How much expense is charged to share premium?
Runner Corporation, which reports under IFRS, has the following investments at December 31, 2024: 2. 3. 4. Trading investments: common shares of National Bank, cost $36,500, fair value $43,400. Investment in an associate (40% ownership): common shares of Sword Corp., cost $218,200, fair value cannot be determined because the shares do not trade publicly. Runner purchased the investment on January 1, 2024. For the year ended December 31, 2024, Sword Corp. reported net income of $46,600 and declared and paid dividends of $15,800. Equity investment: common shares of Epee Inc. (19% ownership) purchased on July 1, 2024, cost $423,300, fair value at December 31, 2024, $545,200. Management intends to purchase more shares of Epee in two years. Epee earned $39,900 for the year ended December 31, 2024, and declared and paid dividends of $1,800, which Runner received at the end of each quarter in 2024. Bond investment to be held to maturity: bonds of Ghoti Ltd., purchased at a cost equal to its…
Gadubhai
On January 1, 2021, PARKSOOYOUNG acquired all the outstanding shares ofSUNGJAE for P600,000. The shareholders’ equity of SUNGJAE on this dateamounted to P600,000. The net assets of SUNGJAE on this day were fairly valuedexcept for inventories which were overstated by P50,000, equipment which wasunderstated by P75,000, and building which was overstated by P125,000. Only half ofthe inventories were sold during 2021. The useful lives of the equipment and thebuilding at the beginning of 2021 were 3 years and 5 years remaining, respectively.On December 31, 2021, the statements of financial position of PARKSOOYOUNGand SUNGJAE are as follows:PARKSOOYOUNG SUNGJAECash 300,000 300,000Inventory 400,000 250,000Equipment 1,000,000 900,000Building 600,000 500,000Liabilities 1,100,000 500,000Share capital 600,000 600,000Retained earnings 600,000 850,000How much is the consolidated total assets as of December 31, 2021? A. 4,125,000B. 4,250,000C. 4,150,0004, D. 275,000