On 3 January 20X4, Windsor Company purchased 10% of the shares of Brampton for $608,000 cash. Windsor will use the equity method. On this date, Brampton has $1,980,000 of assets, $1,584,000 of liabilities, and $396,000 of equity. Book values reflect fair values except for $895,000 of equipment, which has a five-year life and a fair value of $1,118,750. In 20X4, Brampton pays $35,400 of total dividends and reports earnings of $118,000. Required: 1. Calculate goodwill on acquisition, and the annual extra depreciation on investee equipment at fair value. 2. Prepare 20X4 journal entries for Windsor Company. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) 3. At the end of 20X4, what is the balance in the investment account?

On 3 January 20X4, Windsor Company purchased 10% of the shares of Brampton for $608,000 cash. Windsor will use the equity method. On this date, Brampton has $1,980,000 of assets, $1,584,000 of liabilities, and $396,000 of equity. Book values reflect fair values except for $895,000 of equipment, which has a five-year life and a fair value of $1,118,750. In 20X4, Brampton pays $35,400 of total dividends and reports earnings of $118,000. Required: 1. Calculate goodwill on acquisition, and the annual extra depreciation on investee equipment at fair value. 2. Prepare 20X4 journal entries for Windsor Company. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) 3. At the end of 20X4, what is the balance in the investment account?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: Required Prepare the [E] and [A] consolidation entries on the date of the acquisition:

A: Consolidation refers to the process of combining financial statements of multiple entities into a…

Q: On March 31, 2024, Wolfson Corporation acquired all of the outstanding common stock of Barney…

A: ANSWER THE PURCHASE PRICE PAID BY THE COMPANY FOR ACQUISITION OF ANOTHER COMPANY IS MORE THAN THE…

Q: On January 1, 2023, Holland Corporation paid $7 per share to a group of Zeeland Corporation…

A: Consolidation is an activity in which financial statements of a parent and its subsidiary should be…

Q: On 3 January 20X4, Windsor Company purchased 20% of the shares of Brampton for $640,000 cash.…

A: Answer:- Journal entry meaning:- Journal entry serves as a record of a company's all financial…

Q: Corporation used debentures with a par value of $644,000 to acquire 100 percent of Sord- On that…

A: Cash and Recievables $ 48,000Inventory $ 1,82,000Land $ 92,000Plant and…

Q: Sage Inc. bought 40% of Adams Corporation’s outstanding common stock on January 2, 20X1, for…

A: Acquisition by a company is the taking over of another company’s share so that investment can be…

Q: What is the balance of the Investment in Schedule account on Planner's balance sheet at December 31,…

A: Under the equity method of recording the investment is that;First of all the percentage of…

Q: On January 1, 2XX1, Bargain Inc. acquired 100% of Wind Corporation for $9,750,000 cash. On that…

A: Consolidation is an activity in which financial statements of a parent and its subsidiary should be…

Q: On January 1, Hockey Unlimited Inc. purchased 2, 500 of the 10, 000 outstanding common shares of…

A: Depreciable assets are tangible assets with a limited useful life that decrease in value over time.…

Q: On 1/1/21 Playtel Corporation acquired all of the stock of Sydney Corporation for $800,000 cash. The…

A: 1. Particulars Amount Book value of net assets $800,000 Common stock 60000 Paid in…

Q: Peel Corporation purchased 60 percent of Split Products Company's shares on December 31, 20X7, for…

A: In the context of the given question, we are required to compute the balance of the investment…

Q: On January 1, 2022, Pride Corporation purchased 90 percent of the outstanding voting shares of Star,…

A: Consolidated net income:Net income is a business's income after taxes, deductions, and other…

Q: On January 1, Year 1, RAK, Inc. acquired a 25% interest in Tech Corp. for $375,000. At the date of…

A: A business becomes a shareholder or equity investor in another business when it buys shares or…

Q: Required: a1. Compute the amount of goodwill recognized in Holland's acquisition of Zeeland. a2.…

A: PartciularsAmountRemaining LifeAmortizationConsideration transferred by…

Q: On January 1, 2023, Holland Corporation paid $7 per share to a group of Zeeland Corporation…

A: Requirement a1:Consideration Given (7*60,000)420,000Fair Value of Non-Controlling Interest…

Q: of Zeeland's outstanding voting stock, representing a 60 percent ownership interest. The remaining…

A: Goodwill Calculation and Allocation for Holland's Acquisition of Zeelanda1. Compute the Amount of…

Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

Question

On 3 January 20X4, Windsor Company purchased 10% of the shares of Brampton for $608,000 cash. Windsor will use the equity method. On this date, Brampton has $1,980,000 of assets,
$1,584,000 of liabilities, and $396,000 of equity. Book values reflect fair values except for $895,000 of equipment, which has a five-year life and a fair value of $1,118,750. In 20X4, Brampton pays
$35,400 of total dividends and reports earnings of $118,000.
Required:
1. Calculate goodwill on acquisition, and the annual extra depreciation on investee equipment at fair value.
2. Prepare 20X4 journal entries for Windsor Company. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
3. At the end of 20X4, what is the balance in the investment account?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Journal entry meaning

VIEW

Step 2: Computation of goodwill and annual extra depreciation

VIEW

Step 3: Journal entries

VIEW

Step 4: Computation of balance in investment account

VIEW

Solution

VIEW

Step by step

Solved in 5 steps

SEE SOLUTION Check out a sample Q&A here

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.

Similar questions

Manji
On January 1, 2022, Palmcroft Company acquired 100 percent of the outstanding voting shares of Salt River, Incorporated, for $776,000 cash. At January 1, 2022, Salt River’s net assets had a total carrying amount of $543,200. Equipment (eight-year remaining life) was undervalued on Salt River’s financial records by $126,000. Any remaining excess fair over book value was attributed to a database developed by Salt River (four-year remaining life), but not recorded on its books. Palmcroft applies the equity method to account for its investment in Salt River. Each year since the acquisition, Salt River has declared a $46,000 dividend. Salt River recorded net income of $111,000 in 2022 and $125,600 in 2023. Selected account balances from the two companies’ individual records were as follows: Items Palmcroft Salt River 2024 Revenues $ 554,000 $ 349,400 2024 Expenses 362,000 251,000 2024 Income from Salt River 55,950 - Retained earnings, 12/31/24 298,150 231,300 On its…
Gaw Company purchased 15% of the common stock of Trace Corporation for $150,000 on 1/1/X1. At the time, Trace's equity included $500,000 of capital stock and $500,000 retained earnings. Gaw selected the fair-value method to account for this investment. On 12/31/X1, Trace's stock had a $1,200,000 total market value. Trace reported net income of $200,000 for year X1 and paid dividends of $60,000 on October 1, X1. How much income should Gaw recognize from its Trace investment in year X1?
On January 1, 2024, Alamar Corporation acquired a 40 percent interest in Burks, Incorporated, for $210,000. On that date, Burks's balance sheet disclosed net assets with both a fair and book value of $360,000. During 2024, Burks reported net income of $80,000 and declared and paid cash dividends of $25,000. Alamar sold inventory costing $30,000 to Burks during 2024 for $40,000. Burks used all of this merchandise in its operations during 2024. Required: Prepare all of Alamar's 2024 journal entries to apply the equity method to this investment. Record the acquisition of a 40 percent interest in Burks. Record the accrual of 40 percent of the reported earnings of the investee. Record the investee dividend declaration Record the collection of dividend from investee. Record the income on intra-entity sale.
On January 1, 2020, Holland Corporation paid $9 per share to a group of Zeeland Corporation shareholders to acquire 60,000 shares of Zeeland’s outstanding voting stock, representing a 60 percent ownership interest. The remaining 40,000 shares of Zeeland continued to trade in the market close to its recent average of $8.00 per share both before and after the acquisition by Holland. Zeeland’s acquisition date balance sheet follows: Current assets $ 14,300 Liabilities $ 216,500 Property and equipment (net) 328,300 Common stock 100,000 Patents 193,900 Retained earnings 220,000 $ 536,500 $ 536,500 On January 1, 2020, Holland assessed the carrying amount of Zeeland’s equipment (5-year remaining life) to be undervalued by $58,000. Holland also determined that Zeeland possessed unrecorded patents (10-year remaining life) worth $300,600. Zeeland’s acquisition-date fair values for its current assets and liabilities were equal to…
On January 1 of the current year, Barger Company buys 150,000 shares of Booker, Incorporated’s common stock for $1,200,000, the book value of the shares. This purchase gave Barger 25% ownership in Booker and the ability to significantly influence operating and financing decisions. At the time of the acquisition, Booker had a total book value of $4,800,000. During the current year, Booker reported net income of $700,000 and paid a $0.85 per share dividend.
On January 1, year 1, ABC Company purchased 80% of the stock of XYZ for P4,000,000 cash. Prior to the acquisition, XYZ had 100,000 shares of stock outstanding. On the date of acquisition, XYZ's stock had fair value of P52 per share. During the year, XYZ reported P280,000 in net income and paid dividends of P50,000. What is the balance in the noncontrolling interest account on ABC's balance sheet on December 31, year 1?
On January 1, 20x0, P Company purchased 80 percent of the outstanding shares of S Company by paying P650,000.On that date, S Company P300,000 capital stock and P500,000 retained earnings. An undervalued asset attributableto building amounting to P75,000 with a remaining life of 25 years. All other assets and liabilities of S Companyhad book value approximated their fair market value.On January 1, 20x1 P’s common stock and retained earnings amounted to P1,000,000 and P800,000, respectively,while S Company’s retained earnings is P600,000.The 20x1 net income and dividends using cost (or initial value) method that was as follows;Net Income DividendsP Company P340,000 P100,000S Company P150,000 P50,000On April 1, 20x1, S Company sold equipment with book value of P30,000 to P Company for 60,000. The gain onthe sale is included in the net income of S Company indicated above. The equipment is expected to have to have aremaining useful life of five years from the date of sale.On September 30,…
On January 2, Year 1 Parent Company paid $1,200,000 for 100% of the voting common stock of Sub Corp. At the time of the investment, Sub Corp had net assets with a book value of $800,000 and fair value of $1,000,000. The fair value increase is attributable to the building and will be amortized over 10 years. During year 1, Sub earned net income of $100,000 and paid dividends of $20,000. Any excess cost over fair value is attributable to goodwill with an indefinite life. What is the amount of goodwill from Parent's investment in Sub? O $200,000 O $400,000 O $1,200,000 O $20,000 QUESTION 2 What is the balance in Parent's investment account at December 31, Year 1? O $1,260,000 O $1,200,000 O $1,340,000 O $1,280,000
Riverbed Inc acquired 108,000 common shares, which is 25% of the outstanding common shares, of Tahiti Ltd. on January 1, 2023 for $637,200. At the time of purchase, Tahiti Ltd's depreciable assets were undervalued by $35,840. The depreciable assets had a remaining useful life of 5 years with no salvage value. Tahiti Ltd. declared and paid a cash dividend of $0.35 per share on July 31, 2023. Tahiti Ltd. reported $1.3 million as net income on December 31, 2023 for the year ending on this date. Assume that Riverbed Inc. is in a position to exercise significant influence over Tahiti Ltd, and that Riverbed follows IFRS. Prepare all the journal entries for 2023 in the books of Riverbed Inc. relating to above transactions. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit…
On March 31, 2024, Wolfson Corporation acquired all of the outstanding common stock of Barney Corporation for $18,500,000 in cash. The book values and fair values of Barney’s assets and liabilities were as follows: Book Value Fair Value Current assets $ 7,500,000 $ 9,000,000 Property, plant, and equipment 12,500,000 15,500,000 Other assets 1,150,000 1,650,000 Current liabilities 5,500,000 5,500,000 Long-term liabilities 7,500,000 7,000,000 Required: Calculate the amount paid for goodwill.
On 1/1/19, Major Company purchased 10% of Minor Company's common stock for $100,000. Minor's book value of equity at that date consisted of $200,000 common stock and $450,000 retained earnings. On 1/1/19, the difference between the fair value and book value of equity of Minor's stock is attributable to land for $100,000 and the remaining difference is attributable to equipment. The equipment has a 10 year remaining life at 1/1/19. During 2019, Minor reported income of $150,000 and paid dividends of $50,000. The fair value of Major’s investment in Minor stock on 12/31/19 is $125,000. Assuming that Major is investing in Minor because it has excess cash and thinks Minor stock price prospects are good, answer the following questions (use the $XXX,XXX) format. The investment will be sold within a month after year-end. Round to the nearest dollar. The total asset amount related to the Investment in Minor on Major’s 12/31/2019 balance sheet is ________ The Minor investment increased…