At the start of the current year, SBC Corp. purchased 30% of Sky Tech Inc. for $51 million. At the time of purchase, the carrying value of Sky Tech's net assets was $80 million. The fair value of Sky Tech's depreciable assets was $20 million in excess of ther book value. For this yeat Sky Tech reported a net income of $80 million and declared and paid $20 milion in dividends. The total amount of additional depreciation to be recognized by SBC over the remaining ife of the assets is: Multiple Choice $6.0 million. $20 million

At the start of the current year, SBC Corp. purchased 30% of Sky Tech Inc. for $51 million. At the time of purchase, the carrying value of Sky Tech's net assets was $80 million. The fair value of Sky Tech's depreciable assets was $20 million in excess of ther book value. For this yeat Sky Tech reported a net income of $80 million and declared and paid $20 milion in dividends. The total amount of additional depreciation to be recognized by SBC over the remaining ife of the assets is: Multiple Choice $6.0 million. $20 million

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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At the start of the current year, SBC Corp. purchased 30% of Sky Tech Inc. for $51 million. At the time of purchase, the carrying value of Sky Tech's net assets was $80 million. The fair value of Sky Tech's depreciable assets was $20 million in excess of their book value. For this year, Sky Tech reported a net income of $80 million and declared and paid $20 million in dividends. The total amount of additional depreciation to be recognized by SBC over the remaining life of the assets is: Multiple Choice O $6.0 million. $20 million. $30 million. None of these answer choices are correct.
At the start of the current year, SBC Corp. purchased 30% of Sky Tech Inc. for $45 million. At the time of purchase, the carrying value of Sky Tech's net assets was $75 million. The fair value of Sky Tech's depreciable assets was $15 million in excess of their book value. For this year, Sky Tech reported a net income of $75 million and declared and paid $15 million in dividends.The total amount of additional depreciation to be recognized by SBC over the remaining life of the assets is:
Matrix, Inc., acquired 25% of Neo Enterprises for $2,000,000 on January 1,2021. The fair value and book value of 25% of Neo's identifiable net assets was$2,000,000 and $1,600,000 on that date, and the difference was attributable toassets that would be depreciated over 10 years. During 2021 Neo recognized netincome of $500,000 and paid dividends of $400,000. Neo had a total fair value of$10,000,000 as of December 31, 2021.Required:Prepare the journal entries necessary to account for the Neo investment, assuming thatMatrix accounts for that investment as an equity method investment.2. Prepare the journal entries necessary to account for the Neo investment, assuming thatMatrix elects the fair-value option.
On July 1, 2018, Gupta Corporation bought 25% of the outstanding common stock of VB Company for $100 million cash. At the date of acquisition of the stock, VB’s net assets had a total fair value of $350 million and a bookvalue of $220 million. Of the $130 million difference, $20 million was attributable to the appreciated value ofinventory that was sold during the last half of 2018, $80 million was attributable to buildings that had a remainingdepreciable life of 10 years, and $30 million related to equipment that had a remaining depreciable life of 5 years.Between July 1, 2018, and December 31, 2018, VB earned net income of $32 million and declared and paid cashdividends of $24 million.Required:1. Prepare all appropriate journal entries related to the investment during 2018, assuming Gupta accounts forthis investment by the equity method.2. Determine the amounts to be reported by Gupta:a. As an investment in Gupta’s December 31, 2018, balance sheetb. As investment revenue or loss in…
Twilight Co. paid $2,800,000 to acquire all of the common stock of Aurna Corp. on January 1, 2022. Aurna's reported earnings for 2022 totaled $512,000, and it paid $160,000 in dividends during the year. The amortization of allocations related to the investment was $28,000. Twilight's net income, not including any income from this investment, was $3,310,000, and it paid dividends of $930,000. On the consolidated financial statements for 2022, what amount should be shown for consolidated dividends? OL $160,000 O. $902,000 O.$930,000 OV.$950,000 OV. $1,090,000
On January 1, 2018, Harrison Ltd acquired 90 percent of Starr Company in exchange for $1,125,000 fair-value consideration. The fair value of the total net assets of Starr Company was assessed at $1,200,000. Starr Company reported a net profit of $70,000 in 2018 and $90,000 in 2019, with dividend declarations of $30,000 each year. Apart from its investment in Starr Company, Harrison had a net profit of $220,000 in 2018 and $260,000 in 2019 and declared dividends of $40,000 each year. During the year ending 31 December 2019, Harrison sold inventory to Starr for a price of $90,000. The inventory costs Harrison Ltd $50,000 to produce. 40% of the inventory is still on hand of Starr Company as at 31 December 2019. The management of Harrison Ltd measures non-controlling interest at fair value. Required: Based on the information given, what should be the total balance of the non-controlling interests reported in the consolidated financial statement as at December 31 2019 (Ignore the…
On January 1, 2022, Green Corporation purchased 25% of the outstanding voting common stock of Gold Company for $500,000. The book value of Gold Company as a whole was $1,700,000. The excess of cost over book value is attributable to a license (intangible asset) to be amortized over fifteen years. For the year ended December 31, 2022, Gold reported net income of $300,000 and paid cash dividends of $12,000. What is the carrying value of Green's investment in Gold at December 31, 2022? O $417,000. O $567,000. O $572,000. O $550,000.
On January 1, 2018, Harrison Ltd acquired 90 percent of Starr Company in exchange for $1,125,000 fair-value consideration. The fair value of the total net assets of Starr Company was assessed at $1,200,000. Starr Company reported a net profit of $70,000 in 2018 and $90,000 in 2019, with dividend declarations of $30,000 each year. Apart from its investment in Starr Company, Harrison had a net profit of $220,000 in 2018 and $260,000 in 2019 and declared dividends of $40,000 each year. During the year ending 31 December 2019, Harrison sold inventory to Starr for a price of $90,000. The inventory costs Harrison Ltd $50,000 to produce. 40% of the inventory is still on hand of Starr Company as at 31 December 2019. The management of Harrison Ltd measures non-controlling interest at fair value. Required: Based on the information given, what should be the total balance of the non-controlling interests reported in the consolidated financial statement as at December 31 2019 (Ignore the…
Matrix, Inc. acquired 25% of Neo Enterprises for $2,000,000 on January 1, 2014. The fair value and book value of 25% of Neo's identifiable net assets was $2,000,000 and $1,600,000 on that date, and the difference was attributable to assets that would be depreciated over 10 years. During 2014 Neo recognized net income of $500,000 and paid dividends of $400,000. Matrix’s portion of Neo’s fair value was $2,500,000 as of December 31, 2014. Required: Prepare the journal entries necessary to account for the Neo investment, assuming that Matrix accounts for that investment as (1) an equity method investment, and (2) elects the fair-value option. Show entries for the purchase of the investment, recognition of net income, receipt of dividends, and adjustment at year-end, as appropriate. DATE ACCOUNTS DEBIT CREDIT EQUITY METHOD FAIR…
On January 1, 2022, Sun Company acquired 85% of outstanding shares of Moon Corp. The consideration transferred includes cash payment of P2,000,000 and issuance of 50,000 shares with a market price of P45 per share. The book value of Moon Corp.’s identifiable net assets approximate its fair value, except for the following: Merchandise inventory’s fair value is lower than the book balance by 150,000. Equipment-A, with 2 years remaining useful life, costing P300,000 is understated by P50,000. Land with a fair value of P500,000 is recognized in the books amounting to P350,000. The following events happened to Moon Corp. Equipment-A was sold in June 30, 2023 for P320,000. 60% of merchandise inventory were sold in 2022. There is no movement as to the ordinary shares of Moon Corp during the year. The unadjusted trial balance as of December 31, 2022 were as follows: Sun Company Moon Corp Cash 2,240,000 1,800,000 Trade Receivables 1,000,000 960,000…
At the beginning of current year, Small company purchased 25% of Big Company. No "excess" resulted from the purchase. Small company appropriately carried this investment at equity and the carrying amount of the investment was P1,900,000 at year-end. Big company reported net income of P1,200,000 for the current year and paid cash dividend of P480,000 at year-end. What amount did Small Company pay for the 25% interest in Big Company?
Riverbed Inc acquired 108,000 common shares, which is 25% of the outstanding common shares, of Tahiti Ltd. on January 1, 2023 for $637,200. At the time of purchase, Tahiti Ltd's depreciable assets were undervalued by $35,840. The depreciable assets had a remaining useful life of 5 years with no salvage value. Tahiti Ltd. declared and paid a cash dividend of $0.35 per share on July 31, 2023. Tahiti Ltd. reported $1.3 million as net income on December 31, 2023 for the year ending on this date. Assume that Riverbed Inc. is in a position to exercise significant influence over Tahiti Ltd, and that Riverbed follows IFRS. Prepare all the journal entries for 2023 in the books of Riverbed Inc. relating to above transactions. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit…