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Ford Corporation paid $10,200,000 for a 47% interest in Allen Corporation on January 1, 20X1 when Allen had the following identifiable assets and liabilities: Book Value Fair Value 3,000,000 $3,000,000 4,000,000 6,800,000 $7,000,000 $9,800,000 $2,000,000 $2,000,000 Current assets Fixed assets (net) Liabilities At the time of Ford's purchase, the fixed assets had a remaining life of 8 years. For the year ended December 31, 20x1, Allen reported sales of $9 million and expenses of $5 million and declared and paid dividends of $1 million. At December 31, 20X1, Allen reported the following balance sheet information: December 31, 20x1 Current assets Fixed assets (not) Liabilities Required: $4,000,000 5,500,000 9,500,000 $1,500,000 1. Determine the income statement and balance sheet accounts and amounts as they would appear on Ford's financial statements under the equity method for the year ended December 31, 20X1. Be sure to show calculations. 2. Explain how your answer to requirement 1 would change if Ford determined that it actually controlled Allen and had to consolidate its investment. Determine specific income statement and balance sheet accounts and amounts where possible. Be sure to show calculations

Ford Corporation paid $10,200,000 for a 47% interest in Allen Corporation on January 1, 20X1 when Allen had the following identifiable assets and liabilities: Book Value Fair Value 3,000,000 $3,000,000 4,000,000 6,800,000 $7,000,000 $9,800,000 $2,000,000 $2,000,000 Current assets Fixed assets (net) Liabilities At the time of Ford's purchase, the fixed assets had a remaining life of 8 years. For the year ended December 31, 20x1, Allen reported sales of $9 million and expenses of $5 million and declared and paid dividends of $1 million. At December 31, 20X1, Allen reported the following balance sheet information: December 31, 20x1 Current assets Fixed assets (not) Liabilities Required: $4,000,000 5,500,000 9,500,000 $1,500,000 1. Determine the income statement and balance sheet accounts and amounts as they would appear on Ford's financial statements under the equity method for the year ended December 31, 20X1. Be sure to show calculations. 2. Explain how your answer to requirement 1 would change if Ford determined that it actually controlled Allen and had to consolidate its investment. Determine specific income statement and balance sheet accounts and amounts where possible. Be sure to show calculations

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Ford Corporation paid $10,200,000 for a 47% interest in Allen Corporation on January 1, 20X1 when Allen had the following identifiable assets and liabilities: Book Value Fair Value: 3,000,000 $3,000,000 4,000,000 6,800,000 $7,000,000 $9,800,000 $2,000,000 $2,000,000 Current assets Fixed assets (net) Liabilities At the time of Ford's purchase, the fixed assets had a remaining life of 8 years. For the year ended December 31, 20X1, Allen reported sales of $9 million and expenses of $5 million and declared and paid dividends of $1 million. At December 31, 20X1, Allen reported the following balance sheet information: December 31, 20x1 Current assets Fixed assets (net) Liabilities $4,000,000 5,500,000 9,500,000 $1,500,000 Required: 1. Determine the income statement and balance sheet accounts and amounts as they would appear on Ford's financial statements under the equity method for the year ended December 31, 20X1. Be sure to show calculations. 2. Explain how your answer to requirement 1 would change if Ford determined that it actually controlled Allen and had to consolidate its investment Determine specific income statement and balance sheet accounts and amounts where possible. Be sure to show calculations.
Transcribed Image Text:Ford Corporation paid $10,200,000 for a 47% interest in Allen Corporation on January 1, 20X1 when Allen had the following identifiable assets and liabilities: Book Value Fair Value: 3,000,000 $3,000,000 4,000,000 6,800,000 $7,000,000 $9,800,000 $2,000,000 $2,000,000 Current assets Fixed assets (net) Liabilities At the time of Ford's purchase, the fixed assets had a remaining life of 8 years. For the year ended December 31, 20X1, Allen reported sales of $9 million and expenses of $5 million and declared and paid dividends of $1 million. At December 31, 20X1, Allen reported the following balance sheet information: December 31, 20x1 Current assets Fixed assets (net) Liabilities $4,000,000 5,500,000 9,500,000 $1,500,000 Required: 1. Determine the income statement and balance sheet accounts and amounts as they would appear on Ford's financial statements under the equity method for the year ended December 31, 20X1. Be sure to show calculations. 2. Explain how your answer to requirement 1 would change if Ford determined that it actually controlled Allen and had to consolidate its investment Determine specific income statement and balance sheet accounts and amounts where possible. Be sure to show calculations.
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