olac Company acquires 30% of the voting stock of Talgo Corporation on January 1, 2019 for $ 25,000,000. The book value of Talgo's stock at the time of purchase was $ 40,000,000. Book values approximated fair values except for a building that was overvalued by $ 10,000,000 (10 year life), equipment that was undervalued by $ 4,000,000 (4 year life) and previously unrecorded intangibles of $ 20,000,000 (indefinite life). It is now Decemer 31, 2021. Solac sells merchandise to Talgo at a markup of 25% on cost. Talgo sells merchandise to Solac at a markup of 20% on cost. are the inventory balances : Date Inventory held by Solac Inventory held by Talgo December 31, 2020 3,000,000 1,000,000 December 31, 2021 3,120,000 1,025,000 Talgo reports net income of $ 1,300,000 in 2019; $1,500,000 in 2020 and $ 1,600,000 in 2021. Talgo pays no dividends during this period. Required: a. Calculate equity in net income of Talgo, reported on Solac's 2021 income statement b. Calculate the balance in Investment in Talgo as of December 31, 2021
olac Company acquires 30% of the voting stock of Talgo Corporation on January 1, 2019 for $ 25,000,000. The book value of Talgo's stock at the time of purchase was $ 40,000,000. Book values approximated fair values except for a building that was overvalued by $ 10,000,000 (10 year life), equipment that was undervalued by $ 4,000,000 (4 year life) and previously unrecorded intangibles of $ 20,000,000 (indefinite life). It is now Decemer 31, 2021. Solac sells merchandise to Talgo at a markup of 25% on cost. Talgo sells merchandise to Solac at a markup of 20% on cost. are the inventory balances : Date Inventory held by Solac Inventory held by Talgo December 31, 2020 3,000,000 1,000,000 December 31, 2021 3,120,000 1,025,000 Talgo reports net income of $ 1,300,000 in 2019; $1,500,000 in 2020 and $ 1,600,000 in 2021. Talgo pays no dividends during this period. Required: a. Calculate equity in net income of Talgo, reported on Solac's 2021 income statement b. Calculate the balance in Investment in Talgo as of December 31, 2021
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
100%
Solac Company acquires 30% of the voting stock of Talgo Corporation on January 1, 2019 for $ 25,000,000. The book value of Talgo's stock at the time of purchase was $ 40,000,000. Book values approximated fair values except for a building that was overvalued by $ 10,000,000 (10 year life), equipment that was undervalued by $ 4,000,000 (4 year life) and previously unrecorded intangibles of $ 20,000,000 (indefinite life). It is now Decemer 31, 2021. Solac sells merchandise to Talgo at a markup of 25% on cost. Talgo sells merchandise to Solac at a markup of 20% on cost. are the inventory balances : Date Inventory held by Solac Inventory held by Talgo December 31, 2020 3,000,000 1,000,000 December 31, 2021 3,120,000 1,025,000 Talgo reports net income of $ 1,300,000 in 2019; $1,500,000 in 2020 and $ 1,600,000 in 2021. Talgo pays no dividends during this period. Required: a. Calculate equity in net income of Talgo, reported on Solac's 2021 income statement b. Calculate the balance in Investment in Talgo as of December 31, 2021
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education