Net Income Dividends Declared Inventory Purchases from Corgan 2017 2018 $35,000 45,000 $150,000 $100,000
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On January 1, 2017, Corgan Company acquired 80 percent of the outstanding voting stock of Smashing, Inc., for a total of $980,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $700,000,
During the next two years, Smashing reported the following:
Corgan sells inventory to Smashing using a 60 percent markup on cost. At the end of 2017 and 2018, 40 percent of the current year purchases remain in Smashing’s inventory.
a. Compute the equity method balance in Corgan’s Investment in Smashing, Inc., account as of December 31, 2018.
b. Prepare the worksheet adjustments for the December 31, 2018, consolidation of Corgan and Smashing.
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- On January 1, 2017, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing, Inc., for a total of $1,120,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $830,000, retained earnings of $380,000, and a noncontrolling interest fair value of $480,000. Corgan attributed the excess of fair value over Smashing's book value to various covenants with a 20-year remaining life. Corgan uses the equity method to account for its investment in Smashing. During the next two years, Smashing reported the following: Net Income 2017 S 2018 Inventory Purchases Dividends Declared from 280,000 260,000 Corgan $ 48,000 58,000 $ 230,000 250,000 Corgan sells inventory to Smashing using a 60 percent markup on cost. At the end of 2017 and 2018, 30 percent of the current year purchases remain in Smashing's inventory. 1. Compute the equity method balance in Corgan's Investment in Smashing, Inc., account as of December 31, 2018. 2. Prepare the…On January 1, 2020, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing, Inc., for a total of $1,050,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $810,000, retained earnings of $360,000, and a noncontrolling interest fair value of $450,000. Corgan attributed the excess of fair value over Smashing's book value to various covenants with a 20-year remaining life. Corgan uses the equity method to account for its investment in Smashing. During the next two years, Smashing reported the following: Net Income Dividends Declared Inventory Purchases from Corgan 2020 $ 260,000 $ 46,000 $ 210,000 2021 240,000 56,000 230,000 Corgan sells inventory to Smashing using a 60 percent markup on cost. At the end of 2020 and 2021, 40 percent of the current year purchases remain in Smashing's inventory. Compute the equity method balance in Corgan's Investment in Smashing, Inc., account as of…On July 1, 2021, Truman Company acquired a 70 percent interest in Atlanta Company in exchange for consideration of $792,400 in cash and equity securities. The remaining 30 percent of Atlanta’s shares traded closely near an average price that totaled $339,600 both before and after Truman’s acquisition. In reviewing its acquisition, Truman assigned a $125,500 fair value to a patent recently developed by Atlanta, even though it was not recorded within the financial records of the subsidiary. This patent is anticipated to have a remaining life of five years. The following financial information is available for these two companies for 2021. In addition, the subsidiary’s income was earned uniformly throughout the year. The subsidiary declared dividends quarterly. Truman Atlanta Revenues $ (768,485 ) $ (536,000 ) Operating expenses 418,000 378,000 Income of subsidiary (46,515 ) 0 Net income $ (397,000 ) $ (158,000 ) Retained earnings, 1/1/21 $…
- On January 1, 2017, Harrison, Inc., acquired 90 percent of Starr Company in exchange for$1,125,000 fair-value consideration. The total fair value of Starr Company was assessed at $1,200,000. Harrison computed annual excess fair-value amortization of $8,000 based on the difference between Starr’s total fair value and its underlying book value. The subsidiary reported net income of $70,000 in 2017 and $90,000 in 2018 with dividend declarations of $30,000 each year. Apart from its investment in Starr, Harrison had net income of $220,000 in 2017 and $260,000 in 2018. What is the balance of the non controlling interest in Starr at December 31, 2018?Plaza, Inc., acquires 80 percent of the outstanding common stock of Stanford Corporation on January 1, 2018, in exchange for $1,079,300 cash. At the acquisition date, Stanford’s total fair value, including the noncontrolling interest, was assessed at $1,349,125. Also at the acquisition date, Stanford's book value was $565,100. Several individual items on Stanford’s financial records had fair values that differed from their book values as follows: Book Value Fair Value Tradenames (indefinite life) $ 292,900 $ 439,200 Property and equipment (net, 8-year remaining life) 241,600 260,000 Patent ( 14-year remaining life) 140,400 182,400 For internal reporting purposes, Plaza, Inc., employs the equity method to account for this investment. The following account balances are for the year ending December 31, 2018, for both companies. Plaza Stanford Revenues $ (938,600) $ (719,900) Cost of Good sold 518,900 322,400 Depreciation Expense 219,900 30,200 Amortization…The Holtz Corporation acquired 80 percent of the 100,000 outstanding voting shares of Devine, Inc., for $6.45 per share on January 1, 2020. The remaining 20 percent of Devine’s shares also traded actively at $6.45 per share before and after Holtz’s acquisition. An appraisal made on that date determined that all book values appropriately reflected the fair values of Devine’s underlying accounts except that a building with a 5-year future life was undervalued by $65,500 and a fully amortized trademark with an estimated 10-year remaining life had a $85,000 fair value. At the acquisition date, Devine reported common stock of $100,000 and a retained earnings balance of $224,500. Following are the separate financial statements for the year ending December 31, 2021: HoltzCorporation Devine,Inc. Sales $ (747,000 ) $ (432,750 ) Cost of goods sold 207,000 135,000 Operating expenses 338,000 126,750 Dividend income (16,000 ) 0 Net income $…
- On January 1, 2017, Palka, Inc., acquired 70 percent of the outstanding shares of Sellinger Company for $1,666,000 in cash. The price paid was proportionate to Sellinger’s total fair value, although at the acquisition date, Sellinger had a total book value of $2,070,000. All assets acquired and liabilities assumed had fair values equal to book values except for a patent (six-year remaining life) that was undervalued on Sellinger’s accounting records by $300,000. On January 1, 2018, Palka acquired an additional 25 percent common stock equity interest in Sellinger Company for $656,250 in cash. On its internal records, Palka uses the equity method to account for its shares of Sellinger. During the two years following the acquisition, Sellinger reported the following net income and dividends: 2017 2018 $525,000 $701,000 Net…Ocean, Inc. acquired 15% of River Co. on January 1, 2022 for $94,500 and appropriately accounted for the investment using the fair-value method. On January 1, 2023, Ocean purchased an additional 20% of River for $180,000, achieving the ability to exert significant influence over River. On that date, the fair value of River's common stock was $900,000 in total. River's January 1, 2023, book value equaled $680,000, although land was undervalued by $40,000. Any additional excess cost over fair value was attributable to an undervalued patent with a 6-year remaining life. During 2023, River reported net income of $168,000 and paid dividends of $40,000. Based on the above information, use the prospective approach to account for the change to the equity method and determine the following numbers. (a) The amount of annual excess amortization for 2023. Answer: (b) The amount of equity income that Ocean should report for 2023. Answer: (c) Compute the balance of Investment in River account at the…Peterson Corporation acquired 70 percent of the outstanding voting stock of Summer Company on January 1, 2020, for $395,500 in cash and other consideration. At the acquisition date, Peterson assessed Summer's identifiable assets and liabilities at a collective net fair value of $565,000, and the fair value of the 30 percent noncontrolling interest was $169,500. No excess fair value over book value amortization accompanied the acquisition. Summer sells inventory to Peterson at a markup equal to 60 percent of cost Intra-entity transfers were $54,000 in 2020 and $84,000 in 2021. Of this inventory, $25,000 of the 2020 transfers were retained and then sold by Peterson in 2021, whereas $39,000 of the 2021 transfers were held until 2022. Summer reports net income of $74,000 for year 2021 The amount of net income attributable to noncontrolling interest on 2021 consolidated financial statement would be O $19,680 O S22.200 O S20 625 O S23,775