Nascent, Inc., acquires 60 percent of Sea-Breeze Corporation for $414,000 cash c Sea-Breeze shares traded near a total value of $276,000 both before and after the had the following assets and liabilities: Curront accoto Book Value Ś 150.000 Fair Value $ 150 000
Nascent, Inc., acquires 60 percent of Sea-Breeze Corporation for $414,000 cash c Sea-Breeze shares traded near a total value of $276,000 both before and after the had the following assets and liabilities: Curront accoto Book Value Ś 150.000 Fair Value $ 150 000
Chapter10: Cost Recovery On Property: Depreciation, Depletion, And Amortization
Section: Chapter Questions
Problem 62P
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Subject:
![Nascent, Inc., acquires 60 percent of Sea-Breeze Corporation for $414,000 cash on January 1, 2018. 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, 2018, Sea-Breeze
had the following assets and liabilities:
Current assets
Land
Buildings (net) (6-year remaining life)
Equipment (net) (4-year remaining life)
Patent (10-year remaining life)
Liabilities
Revenues
Operating expenses
Investment income
Net income
Retained earnings, 1/1/21
Net income
Dividends declared
Retained earnings, 12/31/21
The companies' financial statements for the year ending December 31, 2021, follow:
Current assets
Land
Buildings (net)
Equipment (net)
Investment in Sea-Breeze
Total assets
Liabilities
Common stock
Retained earnings, 12/31/21
Total liabilities and equities
$
Annual excess amortization
f.
g.
$
$
$
$
Book Value
$ 150,000
200,000
300,000
300,000
(400,000)
330,000
220,000
700,000
400,000
414,000
$ 2,064,000
$
b.
c. Investment income
d. Parent's portion of consolidated retained earnings
e. Consolidated net Income.
Nascent
Sea-Breeze
(600,000) $ (300,000)
210,000
410,000
(42,000)
(232,000)
(500,000)
(724,000)
(840,000)
$(2,064,000)
Net income attributable to noncontrolling interest
Net income attributable to Nascent, Inc.
0
(90,000)
(300,000)
(700,000)
(232,000)
(90,000)
70,000
92,000
(840,000) $ (320,000)
$
Fair Value
$ 150,000
200,000
360,000
280,000
100,000
(400,000)
$
Subsidiary's building balance included in consolidated buildings
Consolidated balance
0
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 2021?
d. What amount should the parent report as retained earnings in its January 1, 2021, consolidated balance sheet?
e. What is consolidated net income for 2021, 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, 2021?
100,000
200,000
200,000
500,000
0
$ 1,000,000
$ (200,000)
(480,000)
(320,000)
$(1,000,000)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc7fe5a73-45e4-4166-8ba1-50e355550dfc%2F286bc866-f567-42d0-9c35-6eafdbf0c0f6%2F8uigs9d_processed.png&w=3840&q=75)
Transcribed Image Text:Nascent, Inc., acquires 60 percent of Sea-Breeze Corporation for $414,000 cash on January 1, 2018. 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, 2018, Sea-Breeze
had the following assets and liabilities:
Current assets
Land
Buildings (net) (6-year remaining life)
Equipment (net) (4-year remaining life)
Patent (10-year remaining life)
Liabilities
Revenues
Operating expenses
Investment income
Net income
Retained earnings, 1/1/21
Net income
Dividends declared
Retained earnings, 12/31/21
The companies' financial statements for the year ending December 31, 2021, follow:
Current assets
Land
Buildings (net)
Equipment (net)
Investment in Sea-Breeze
Total assets
Liabilities
Common stock
Retained earnings, 12/31/21
Total liabilities and equities
$
Annual excess amortization
f.
g.
$
$
$
$
Book Value
$ 150,000
200,000
300,000
300,000
(400,000)
330,000
220,000
700,000
400,000
414,000
$ 2,064,000
$
b.
c. Investment income
d. Parent's portion of consolidated retained earnings
e. Consolidated net Income.
Nascent
Sea-Breeze
(600,000) $ (300,000)
210,000
410,000
(42,000)
(232,000)
(500,000)
(724,000)
(840,000)
$(2,064,000)
Net income attributable to noncontrolling interest
Net income attributable to Nascent, Inc.
0
(90,000)
(300,000)
(700,000)
(232,000)
(90,000)
70,000
92,000
(840,000) $ (320,000)
$
Fair Value
$ 150,000
200,000
360,000
280,000
100,000
(400,000)
$
Subsidiary's building balance included in consolidated buildings
Consolidated balance
0
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 2021?
d. What amount should the parent report as retained earnings in its January 1, 2021, consolidated balance sheet?
e. What is consolidated net income for 2021, 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, 2021?
100,000
200,000
200,000
500,000
0
$ 1,000,000
$ (200,000)
(480,000)
(320,000)
$(1,000,000)
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