cash. At the acquisition date, Gardena's total fair value, including the noncontrolling interest, was asse
cash. At the acquisition date, Gardena's total fair value, including the noncontrolling interest, was asse
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Carson, Inc., acquires 80 percent of the outstaniding common stock of Gardena corporation on January 1, 2020, in exchange for $900,000 cash. | ||||||||||||||
At the acquisition date, Gardena's total fair value, including the noncontrolling interest, was assessed at $1,125,000. Also at the acquisition date, | ||||||||||||||
Gardena's book value was $690,000. | ||||||||||||||
Several individual items on Gardena's financial records had fair values that differed from their book values as follows: | ||||||||||||||
Book value | Fair value | |||||||||||||
Trademark (indefinite life) | $360,000 | $383,000 | ||||||||||||
Property and equipment (net, 8-year remaining useful life) | 290,000 | 330,000 | ||||||||||||
Patent (14-year remaining useful life) | 132,000 | 272,000 | ||||||||||||
For internal reporting purposes, Carson, inc., employs the equity method to account for this investment. The following account balances are for the year | ||||||||||||||
ending December 31, 2020, for both companies. At year-end, there were no intra-entity receivables or payables. | ||||||||||||||
Carson | Gardena | |||||||||||||
Revenues | ($1,400,000) | ($825,000) | ||||||||||||
Cost of goods sold | 774,000 | 395,750 | ||||||||||||
328,000 | 36,250 | |||||||||||||
Amortization expense | 0 | 28,000 | ||||||||||||
Equity in income of Gardena | ($280,000) | 0 | ||||||||||||
Net income | ($578,000) | ($365,000) | ||||||||||||
($1,275,000) | ($530,000) | |||||||||||||
Net income | ($578,000) | ($365,000) | ||||||||||||
Dividends declared | 300,000 | 50,000 | ||||||||||||
Retained earnings (12/31/2020) | ($1,553,000) | ($845,000) | ||||||||||||
Current assets | $860,000 | $432,250 | ||||||||||||
Investment in Gardena | 1,140,000 | 0 | ||||||||||||
Trademark | 240,000 | 360,000 | ||||||||||||
Property and equipment (net) | 1,030,000 | 253,750 | ||||||||||||
Patents | 0 | 104,000 | ||||||||||||
Total assets | 3,270,000 | 1,150,000 | ||||||||||||
Accounts payable | ($142,000) | ($145,000) | ||||||||||||
Common stock | ($300,000) | ($120,000) | ||||||||||||
Additional paid-in capital | ($1,275,000) | ($40,000) | ||||||||||||
Retained earnings (12/31/2020) | ($1,553,000) | ($845,000) | ||||||||||||
Total liabilities and equities | ($3,270,000) | ($1,150,000) | ||||||||||||
1. What is the total fair value of Gardena ? | Hint: | Included in the question | ||||||||||||
Your answer : | ||||||||||||||
2. What is the |
||||||||||||||
Your answer: | ||||||||||||||
3.What is the amount of Non-Controlling Interest at acquisition (1/1/2020)? | ||||||||||||||
Your answer: | ||||||||||||||
4. The working paper entry to eliminate any dividend earned from Gardena Corporation during 2020 (consolidation JE D) | ||||||||||||||
Your answer: | ||||||||||||||
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