Book Value Fair Value Current assets Land..... Buildings (net) (6-year remaining life) Equipment (net) (4-year remaining life) Patent (10-year remaining life) . Liabilities... $150,000 200,000 300,000 300,000 $150,000 200,000 280,000 100,000 (400,000) -0- (400,000) Nascent Sea-Breeze $ (600,000) 410,000 $ (300,000) Revenues. Operating expenses. 210,000 Investment income (42,000) $ (232,000) $ (700,000) (232,000) 92,000 $ (840,000) $ 330,000 220,000 700,000 Net income.. 2$ (90,000) Retained earnings, 1/1/18. Net income... Dividends declared.. $ (300,000) (90,000) 70,000 $ (320,000) $ 100,000 200,000 200,000 500,000 Retained earnings, 12/31/18 Current assets . Land...... Buildings (net) Equipment (net) . Investment in Sea-Breeze. 400,000 414,000 -0- $ 2,064,000 $ (500,000) (724,000) (840,000) $(2,064,000) $ 1,000,000 $ (200,000) (480,000) (320,000) $(1,000,000) Total assets Liabilities.. Common stock Retained earnings, 12/31/18 Total liabilities and equities..

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

Nascent, Inc., acquires 60 percent of Sea-Breeze Corporation for $414,000 cash on January 1, 2015. The remaining 40 percent of the Sea-Breeze shares traded near a total value of $276,000 both before and after the acquisition date. On January 1, 2015, Sea-Breeze had the following assets and liabilities:
The companies’ financial statements for the year ending December 31, 2018, follow:
Answer the following questions:
a. How can the accountant determine that the parent has applied the initial value method?
b. What is the annual excess amortization initially recognized in connection with this acquisition?
c. If the parent had applied the equity method, what investment income would the parent have recorded in 2018?
d. What amount should the parent report as retained earnings in its January 1, 2018, consolidated balance sheet?
e. What is consolidated net income for 2018 and what amounts are attributable to the controlling and noncontrolling interests?
f. Within consolidated statements at January 1, 2018, what balance is included for the subsidiary’s Buildings account?
g. What is the consolidated Buildings reported balance as of December 31, 2018?

Book Value
Fair Value
Current assets
Land.....
Buildings (net) (6-year remaining life)
Equipment (net) (4-year remaining life)
Patent (10-year remaining life) .
Liabilities...
$150,000
200,000
300,000
300,000
$150,000
200,000
280,000
100,000
(400,000)
-0-
(400,000)
Transcribed Image Text:Book Value Fair Value Current assets Land..... Buildings (net) (6-year remaining life) Equipment (net) (4-year remaining life) Patent (10-year remaining life) . Liabilities... $150,000 200,000 300,000 300,000 $150,000 200,000 280,000 100,000 (400,000) -0- (400,000)
Nascent
Sea-Breeze
$ (600,000)
410,000
$ (300,000)
Revenues.
Operating expenses.
210,000
Investment income
(42,000)
$ (232,000)
$ (700,000)
(232,000)
92,000
$ (840,000)
$ 330,000
220,000
700,000
Net income..
2$
(90,000)
Retained earnings, 1/1/18.
Net income...
Dividends declared..
$ (300,000)
(90,000)
70,000
$ (320,000)
$ 100,000
200,000
200,000
500,000
Retained earnings, 12/31/18
Current assets .
Land......
Buildings (net)
Equipment (net) .
Investment in Sea-Breeze.
400,000
414,000
-0-
$ 2,064,000
$ (500,000)
(724,000)
(840,000)
$(2,064,000)
$ 1,000,000
$ (200,000)
(480,000)
(320,000)
$(1,000,000)
Total assets
Liabilities..
Common stock
Retained earnings, 12/31/18
Total liabilities and equities..
Transcribed Image Text:Nascent Sea-Breeze $ (600,000) 410,000 $ (300,000) Revenues. Operating expenses. 210,000 Investment income (42,000) $ (232,000) $ (700,000) (232,000) 92,000 $ (840,000) $ 330,000 220,000 700,000 Net income.. 2$ (90,000) Retained earnings, 1/1/18. Net income... Dividends declared.. $ (300,000) (90,000) 70,000 $ (320,000) $ 100,000 200,000 200,000 500,000 Retained earnings, 12/31/18 Current assets . Land...... Buildings (net) Equipment (net) . Investment in Sea-Breeze. 400,000 414,000 -0- $ 2,064,000 $ (500,000) (724,000) (840,000) $(2,064,000) $ 1,000,000 $ (200,000) (480,000) (320,000) $(1,000,000) Total assets Liabilities.. Common stock Retained earnings, 12/31/18 Total liabilities and equities..
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps with 8 images

Blurred answer
Knowledge Booster
Accounting for Business Combinations
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education