Putt Corporation acquired 70 percent of Slice Company's voting common stock on January 1, 20X3, for $158,900. Slice reportedcommon stock outstanding of $100,000 and retained earnings of $85,000. The fair value of the noncontrolling interest was $68,100 atthe date of acquisition. Buildings and equipment held by Slice had a fair value $25,000 higher than book value. The remainder of thedifferential was assigned to a copyright held by Slice. Buildings and equipment had a 10-year remaining life and the copyright had a 5-year life at the date of acquisition.Trial balances for Putt and Slice on December 31, 20X5, are as follows:Putt CorporationSlice CompanyDebitCreditDebitCreditCash$15,850$ 58,000Accounts Receivable65,00070,000Interest & Other Receivables30,00010,000Inventory150,000180,000Land80,00060,000Buildings & Equipment315,000240,000Bond Discount15,000Investment in Slice Company157,630Cost of Goods Sold375,000110,000Depreciation Expense25,00010,000Interest Expense24,00033,000Other Expense28,00030,00017,0005,000Dividends DeclaredAccumulated$ 60,000Depreciation-Buildings and EquipmentAccounts PayableOther PayablesBonds Payable$120,00061,00028,00030,00020,000250,000300,000Common Stock150,000100,000Additional Paid-in CapitalRetained Earnings30,000100,000190,400165,240Sales450,000Other Income28,250Gain on Sale of EquipmentIncome from Slice Company9,60010,990Total$1,295,480$1,295,480$808,000$808,000Putt sold land it had purchased for $21,000 to Slice on September 20, 20X4, for $32,000. Slice plans to use the land for future plantexpansion. On January 1, 20X5, Slice sold equipment to Putt for $91,600. Slice purchased the equipment on January 1, 20X3, for$100,000 and depreciated it on a 10-year basis, including an estimated residual value of $10,000. The residual value and estimatedeconomic life of the equipment remained unchanged as a result of the transfer, and both companies use straight-line depreciation.Assume Putt uses the fully adjusted equity method. Required:a. Compute the amount of income assigned to the noncontrolling interest in the consolidated income statement for 20X5.Income to noncontrolling interest$ 4,710b. Prepare a reconciliation between the balance in the Investment in Slice Company account reported by Putt at December 31, 20X5,and the underlying book value of net assets reported by Slice at that date. (Enter the proportion of stock held as a fraction (i.e., 0.75),not in percent.)Underlying book value of Slice Company stock:Common stock outstanding$100,000Retained earnings, January 1, 20X5100,000Net income for 20X530,000Dividends paid in 20X55,000Net book value$225,000Portion of ownership held by Putt0.70Net book value of ownership held by Putt$157,500Unamortized differential:Buildings and equipment12,250Соpyright4,760Gain on sale of land11,000Deferred gross profit on sale of equipmentRealized deferred gainInvestment in Slice Company163,510

a) Following are the calculations of income assigned to the non - controlling interest in the…

mon stock outstanding of $100,000 and retained earnings of $85,000. The fair value of the noncontrolling date of acquisition. Buildings and equipment held by Slice had a fair value $25,000 higher than book value rential was assigned to a copyright held by Slice. Buildings and equipment had a 10-year remaining life and life at the date of acquisition. balances for Putt and Slice on December 31, 20X5, are as follows: Putt Corporation Credit Slice Company Debit Debit Cre sh counts Receivable terest & Other Receivables ventory nd ildings & Equipment nd Discount vestment in Slice Company st of Goods Sold 15,850 $ 58,000 65,000 70,000 30,000 10,000 150,000 180,000 80,000 60,000 315,000 240,000 15,000 157,630 375,000 25,000 110,000 preciation Expense terest Expense her Expense 10,000 24,000 33,000 28,000 17,000 vidends Declared 30,000 5,000 cumulated $ 120,000 $ 60 preciation-Buildings and Equipment counts Payable her Payables nds Payable mmon Stock ditional Paid-in Capital tained Earnings 61,000 28 30,000 20 250,000 300 150,000 100 30,000 165,240 100 les 450,000 190 her Income in on Sale of Equipment 28,250 come from Slice Company 10,990 tal $1,295,480 $1,295,480 $808,000 $808 sold land it had purchased for $21,000 to Slice on September 20, 20X4, for $32,000. Slice plans to use the

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q