Assume a parent company acquired 80% of the outstanding voting common stock of a subsidiary on January 1, 2021. On the acquisition date, the identifiable net assets of the subsidiary had fair values that approximated their recorded book values except for a patent, which had a fair value of $156,000 and no recorded book value. On the date of acquisition, the patent had five years of remaining useful life and the parent company amortizes its intangible assets using straight line amortization. During the year ended December 31, 2022, the subsidiary recorded sales to the parent in the amount of $187,200 On these sales, the subsidiary recorded pre-consolidation gross profits equal to 25%. Approximately 30% of this merchandise remains in the parent's inventory at December 31, 2022. The following summarized pre-consolidation financial statements are for the parent and the subsidiary for the year ended December 31, 2022: Investor Investee Income statement: Revenues Income from Investee Expenses Net Income Statement of retained earnings: Beginning retained earnings Net income Dividends declared Ending retained earnings Balance sheet: Current assets Equity investment Noncurrent assets Total assets Liabilities Common stock & APIC Retained earnings Total liabilities and equity $3,744,000 $624,000 163,488 O b. $6,676,800 O c. $6,801,600 O d. $6,832,800 (3,120.000) (374,400) $787 488 $249,600 $1,160,640 $62,400 787488 249.600 (99,840) (62,400) $1,848,288 $249,600 $1,248,000 $156,000 363,168 6,240,000 468.000 $7,851,168 $624,000 $4,754,880 $249,600 1,248,000 124,800 1,848,288 249,600 $7,851,168 $624,000 Based on this information, determine the balance for Noncurrent Assets: Select one: O a $6,708,000
Assume a parent company acquired 80% of the outstanding voting common stock of a subsidiary on January 1, 2021. On the acquisition date, the identifiable net assets of the subsidiary had fair values that approximated their recorded book values except for a patent, which had a fair value of $156,000 and no recorded book value. On the date of acquisition, the patent had five years of remaining useful life and the parent company amortizes its intangible assets using straight line amortization. During the year ended December 31, 2022, the subsidiary recorded sales to the parent in the amount of $187,200 On these sales, the subsidiary recorded pre-consolidation gross profits equal to 25%. Approximately 30% of this merchandise remains in the parent's inventory at December 31, 2022. The following summarized pre-consolidation financial statements are for the parent and the subsidiary for the year ended December 31, 2022: Investor Investee Income statement: Revenues Income from Investee Expenses Net Income Statement of retained earnings: Beginning retained earnings Net income Dividends declared Ending retained earnings Balance sheet: Current assets Equity investment Noncurrent assets Total assets Liabilities Common stock & APIC Retained earnings Total liabilities and equity $3,744,000 $624,000 163,488 O b. $6,676,800 O c. $6,801,600 O d. $6,832,800 (3,120.000) (374,400) $787 488 $249,600 $1,160,640 $62,400 787488 249.600 (99,840) (62,400) $1,848,288 $249,600 $1,248,000 $156,000 363,168 6,240,000 468.000 $7,851,168 $624,000 $4,754,880 $249,600 1,248,000 124,800 1,848,288 249,600 $7,851,168 $624,000 Based on this information, determine the balance for Noncurrent Assets: Select one: O a $6,708,000
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA2: Investments
Section: Chapter Questions
Problem 30E
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Transcribed Image Text:Acquisition Accounting Premium
Assume a parent company acquired 80% of the outstanding voting common stock of a subsidiary on January 1, 2021. On the acquisition date, the
identifiable net assets of the subsidiary had fair values that approximated their recorded book values except for a patent, which had a fair value of
$156,000 and no recorded book value. On the date of acquisition, the patent had five years of remaining useful life and the parent company
amortizes its intangible assets using straight line amortization. During the year ended December 31, 2022, the subsidiary recorded sales to the parent
in the amount of $187,200 On these sales, the subsidiary recorded pre-consolidation gross profits equal to 25%. Approximately 30% of this
merchandise remains in the parent's inventory at December 31, 2022. The following summarized pre-consolidation financial statements are for the
parent and the subsidiary for the year ended December 31, 2022:
Investor Investee
Income statement:
Revenues
Income from Investee
Expenses
Net income
Statement of retained earnings:
Beginning retained earnings
Net income
Dividends declared
Ending retained earnings
Balance sheet:
Current assets
Equity investment
Noncurrent assets
Total assets
Liabilities
Common stock & APIC
Retained earnings
Total liabilities and equity
$3,744,000 $624,000
163,488
(3,120,000) (374,400)
$787,488 $249,600
Select one:
O a $6,708,000
O b. $6,676,800
O
c. $6,801,600
O
d. $6,832,800
$1,160,640 $62,400
787,488 249,600
(99,840) (62,400)
$1,848,288 $249,600
$1,248,000 $156,000
363,168
6,240,000 468,000
$7,851,168 $624,000
$4,754,880 $249,600
1,248,000 124,800
1,848,288 249,600
$7,851,168 $624,000
Based on this information, determine the balance for Noncurrent Assets:
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