P1.7 Equity Method Investment, Intercompany Sales Harcker Corporation acquires 40 percent of LO 2Jackson Corporation's voting stock on January 3, 2017, for $40 million in cash. Jackson's net assets werefairly reported at $100 million at the date of acquisition. During 2017, Harcker sells $130 million in mer-chandise to Jackson at a markup of 30 percent on cost. Jackson still holds $26 million of this merchan-dise in its ending inventory. Also during 2017, Jackson sells $54 million in merchandise to Harcker at amarkup of 20 percent on cost. Harcker still holds $12 million of this merchandite in its ending inventory.Jackson reports 2017 net income of $10 million.Required.a. Calculate Harcker's equity in Jackson's net income for 2017..b. Assume Harcker reports total 2017 sales revenue and cost of sales of $310 million and $262 million,respectively, while Jackson reports total 2017 sales revenue and cost of sales of $254 million and$235 million, respectively. Compute each company's gross margin on sales as reported followingU.S. GAAP. Now compute gross margin on sales again, excluding intercompany sales. Comment onthe results.

It is the income earned by an entity after incurring all the expenses. It is the net revenue left…

Answered: Equity Method Investment, Intercompany…

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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EXERCISES On December 5, 2018, PepsiCo (PEP) acquired all the outstanding shares of SodaStream, a man- ufacturer and distributor of sparkling water makers, for $144.00 per share in cash, in a transaction valued at approximately $3.3 billion. As of the balance sheet date, $1,997 million of the consider- ation was held by the paying agent in connection with this acquisition and reports as restricted cash as of December 29, 2018. E4.10 The restricted cash associated with this acquisition is detailed in Note 13, and the correspond- ing payable is reported in Note 15. Note 13-Restricted Cash The following table provides a reconciliation of cash and cash equivalents and restricted cash as re- ported within the balance sheet to the same items as reported in the cash flow statement. 2018 $ 8,721 1,997 51 $10,769 Cash and cash equivalents Restricted cash. Restricted cash included in other assets Total cash and cash equivalents and restricted cash. Note 15 Supplemental Financial Information…
Astris Company acquires an 80% interest in Exile Company for P250,000 in cash on January 1, 2022, when Exile Company has the following balance sheet: Assets Liabilities and Equity Current assets Non-current assets P100,000 2000,000 Current liabilities P50,000 Common stock, P10 par 100,000 Retained earnings 150,000 Total assets P300,000 Total liabilities and equity P300,000 Any excess of the price paid over the book value is attributable to fixed assets, which have a 10-year remaining life, Astris Company uses the cost method to record its investment in Exile Company. The following trail balances of the two companies are prepared on December 31, 2022: Astris Company Exile Company Current assets Non-current assets Investment in Exile Company Current liabilities P60,000 P130,000 294,000 180,000 250,000 (60,000) (40,000) Common stock, P10 par (300,000) (100,000) Retained earnings, January 1, 2022 (200,000) (150,000) Sales (150,000) (100,000) Expenses 110,000 75,000 Dividend income (from…
CONSOLIDATED FINANCIAL STATEMENTS INTERCOMPANY SALE OF FIXED ASSETS PROBLEM J. Peter Corporation owns 80% of the outstanding stocks of Simon Company acquired at book value during 2021. Selected information from the accounts of both entities for 2021 and 2022 are as follows: PETER Corporation SIMON Company 2021 2022 2021 2022 P 900,000 P 450,000 (248,000) (140,000) (20,000) Sales P 800,000 P 500,000 Cost of goods sold Operating expenses Loss on sale of equipment (480,000) (180,000) (30,000) 50,000 (540,000) (190,000) (20,000) 60,000 (310,000) (145,000) (10,000) Gain on sale of land 65,000 75,000 Gain on sale of patent 10,000 12,000 5,000 7,000 Equipment Accumulated depreciation 1,180,000 (320,000) 900,000 820,00 700,000 (260,000) 2,500,000 (200,000) 1,500,000 (170,000) 1,100,000 Land 2,800,000 520,000 (110,000) Patent 560,000 480,000 420,000 Accumulated amortization (80,000) (90,000) (70,000) On April 30, 2021, PETER Corp sold equipment to SIMON Comp for P120,000. The said equipment was…
On January 1, 2015 P company acquired 80% interest in S Company for P2,000,000 cash. The stockholders' equity of S at the time of acquisition is P 1,875,000. On January 1, 2015, NCI is measured at its implied fair value. The excess of cost over book value of interest acquired is allocated to the following assets: Inventories: 100,000 (sold in 2013) Building: 200,000 (5-year remaining life) During 2015, S company reported total comprehensive income of 500,000 and paid dividends of P 100,000. How much goodwill (gain on bargain purchase) is reported in the consolidated statement of financial position on January 1, 2015? A. 325,000 B. 200,000 C. (325,000) D. (375,000)
On December 18, 2017, Stephanie Corporation acquired 100 percent of a Swiss company for 4.0 million Swiss francs (CHF), which is indicative of book and fair value. At the acquisition date, the exchange rate was $1.00 = CHF 1. On December 18, 2017, the book and fair values of the subsidiary’s assets and liabilities were: Cash CHF 804,000 Inventory 1,304,000 Property, plant & equipment 4,000,000 Notes payable (2,108,000 ) Stephanie prepares consolidated financial statements on December 31, 2017. By that date, the Swiss franc has appreciated to $1.10 = CHF 1. Because of the year-end holidays, no transactions took place prior to consolidation. Determine the translation adjustment to be reported on Stephanie’s December 31, 2017, consolidated balance sheet, assuming that the Swiss franc is the Swiss subsidiary’s functional currency. What is the economic relevance of this translation adjustment? Determine the remeasurement gain or loss to be…
If CARDO Co purchases the net assets of SYANO Co by issuing 5,000 shares of their P20 par valueshares with a fair value of P40 per share, incurs a mortgage loan for P90,000, pays P150,000 cash andpaying direct, indirect and stock issue costs of P75,000, P50,000 and P40,000 respective. REQUIREMENTS:A. GoodwillB. Consolidated Total Assets at the date of acquisition
Intercompany Transactions Facts: Sub Co is a 90% owned subsidiary of Parent Co, acquired for $94,500 cash on July 1, 2016, when Sub’s net assets consisted of $100,000 capital stock and $5,000 retained earnings. The cost of Parent Co.’s 90% interest in Sun was equal to book value and fair value of the interest acquired. Parent Co sells inventory items to Sub Co on a regular basis, and the intercompany transaction data for 2019 are as follows: Sales to Sub Co in 2019 (cost $15,000), selling price $20,000 Unrealized profit in Sub Co.'s inventory at December 31, 2018 (inventory was sold during 2019) 2,000 Unrealized profit in Sub Co.'s inventory at December 31, 2019 2,500 Sub Co.'s accounts payable to Parent Co at December 31, 2019 10,000 At December 31, 2018, Parent Co.'s investment in subsidiary account had a balance of $128,500. This balance consisted of Parent Co's 90% equity in Sub's $145,000 net…
On January 1, 2015, Pub Corporation made a significant acquisition, purchasing 75 percent of SubCorporation's outstanding voting stock for a total of $4,200,000. Sub Corporation's stockholders'equity at that time was made up of the following components (all values in thousands):Capital stock with a par value of $10: $2,000Additional paid-in capital: $1200Retained earnings as of December 31, 2014: $1500Total stockholders' equity: $4700The surplus fair value of the net assets obtained from this acquisition was allocated as follows: 10percent to underappreciated inventory (which was subsequently sold in 2015), 40 percent tounderappreciated plant assets with a remaining useful life of eight years, and the remaining 50 percentto goodwill.Fast forward to December 31, 2019, and we have the comparative trial balances for both PubCorporation and Sub Corporation. Pub SubOther assets—net $5,845 $4500Investment in Sub—75% 3,640 —Expenses (including cost of sales) 5,285 800Dividends 600 300 $15370…
The solution must be under the GAAP standards
Davis acquires 100% of Ramos on January 1, 2009, Ramos will be operated as a separate subsidiary. Davis will use the equity method to account for its investment in Ramos. In 2013, Davis has net income of $400,000 and pays dividends of $100,000. Ramos has net income of $200,000 and pays dividends of $75,000. At acquisition date, Davis has a building with a book value of $3,000,000 and a fair value of $4,000,000. At that date, Ramos had a building witha book value of $800,000 and fair value of $900,000. Both buildings have a remaining useful life of 5 years (assume straight line depreciation). At Dec. 3, 2013 Davis had book value of building of 5,000,000 and Fair Value of 6,000,000.Ramos had book value building of 2,000,000 and fair value of 1,500,000 a. Prepare consolidation worksheet "D" to reflect the necessary adjustment for dividends. b. How much are consolidated dividends for 2013 c. Prepare worksheet entry "A" at December 31, 2013 (assume there is no goodwill). d. How much is…
Upstream sales Pam Corporation owns an 80 percent interest in Sun Corporation acquired several years ago. Sun regularly sells mer- chandise to Pam at 125 percent of Sun's cost. Gross profit data of Pam and Sun for 2017 are as follows: Pam Sun Sales $1,000 $800 Cost of goods sold Gross profit 800 640 $ 200 $160 During 2017, Pam purchased inventory items from Sun at a transfer price of $400. Pam's December 31, 2016 and 2017, inventories included goods acquired from Sun of $100 and $125, respectively. Assume Pam sells the inventory purchased from Sun in the following year. 1. Consolidated sales of Pam Corporation and Subsidiary for 2017 were: a $1,800 b $1,425 c $1,400 d $1,240 2. The unrealized profits in the year-end 2016 and 2017 inventories were: a $100 and $125, respectively b $80 and $100, respectively c $20 and $25, respectively d $16 and $20, respectively 3. Consolidated cost of goods sold of Pam Corporation and Subsidiary for 2017 was: a $1,024 b $1,045 c $1,052.8 d $1,056
Roku Company held 25% stake in Kyoshi Company on 1 January 2015 for 50,000 it purchased 20% additional holding in Kyoshi Company on 31 December 2016 for 30,000 and 15% on 31 December 2017 for 32,000. The book value of Roku Company’s total investment just before acquisition was 85,000 and the fair value of net identifiable assets of Kyoshi Company is 200,000 as at acquisition date. NCI is measured at fair value. How much is the non-controlling interest in the consolidated financial statements at the date of business combination? (Round off answer to nearest peso)

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