On 3 January 20X4, Windsor Company purchased 20% of the shares of Brampton for $640,000 cash. Windsor will use the equity method. On this date, Brampton has $1, 810, 000 of assets, $1, 448,000 of liabilities, and $362, 000 of equity. Book values reflect fair values except for $810, 000 of equipment, which has a five-year life and a fair value of $1,012, 500. In 20X4, Brampton pays $24, 600 of total dividends and reports earnings of $82, 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.) Record the investment made in Brampton Corp. Record the Investment revenue. Record the receipts of cash dividends paid by Brampton. 3. At the end of 20X4, what is the balance in the investment account?

On 3 January 20X4, Windsor Company purchased 20% of the shares of Brampton for $640,000 cash. Windsor will use the equity method. On this date, Brampton has $1, 810, 000 of assets, $1, 448,000 of liabilities, and $362, 000 of equity. Book values reflect fair values except for $810, 000 of equipment, which has a five-year life and a fair value of $1,012, 500. In 20X4, Brampton pays $24, 600 of total dividends and reports earnings of $82, 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.) Record the investment made in Brampton Corp. Record the Investment revenue. Record the receipts of cash dividends paid by Brampton. 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

Similar questions

On January 1, Year 1, RAK, Inc. acquired a 25% interest in Tech Corp. for $375,000. At the date of acquisition, the net assets had a fair value in excess of shareholders' equity of $200,000. The fair value in excess of book value is the result of equipment with a remaining useful life of four years. For the year ended December 31, Year 1. Tech hadnet income of $60,000 and RAK received a dividend of $10,000 from Tech. At December 31, Year 1, Tech had shareholders' equity of $820,000. What amount would RAK show as investment in Tech Corp. at the end of Year 1? $380,000 $375.000 $367,500 $357,500
On January 1, 2021, ABC purchased 90% of the outstanding shares of PQR by paying P740,000. On that date, PQR had P300,000 capital stock and P500,000 of retained earnings. An undervalued asset attributable to building amounting to P60,000 with a remaining life of 10 years. All other assets and liabilities of PQR had book value approximated their fair market value. On January 1, 2022, ABC’s common stock and retained earnings amounted to P1,000,000 and P850,000 respectively, while PQR’s retained earnings is P600,000. The 2022 net income and dividends were as follows: ABC Net Income P340,000 and Dividend of P100,000; PQR net income P150,000 and Dividends P50,000. On April 1, 2022, ABC sold machinery with a book value of P30,000 to PQR for P60,000. The machinery is expected to have a remaining useful life of five years from the date of the sale. On December 1, 2022, PQR company sold equipment with a book value at P72,000 to ABC for P60,000. The equipment is expected to last for ten years…
On January 1, 2023, Holland Corporation paid $7 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 $5.00 per share both before and after the acquisition by Holland. Zeeland's acquisition date balance sheet follows: Current assets Property and equipment (net) Patents $ 15,000 Liabilities 209,000 Common stock 203,808 Retained earnings $427,000 $ 227,000 100,000 100,000 $ 427,000 On January 1, 2023, Holland assessed the carrying amount of Zeeland's equipment (5-year remaining life) to be undervalued by $65,000. Holland also determined that Zeeland possessed unrecorded patents (10-year remaining life) worth $226,600. Zeeland's acquisition-date fair values for its current assets and liabilities were equal to their carrying amounts. Any remaining excess of Zeeland's…
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 attributable to building amounting to P75,000 with a remaining life of 25 years. All other assets and liabilities of S Company had 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 Dividends P Company P340,000 P100,000 S Company P150,000 P50,000 On April 1, 20x1, S Company sold equipment with book value of P30,000 to P…
On January 1, 2023, Holland Corporation paid $7 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 $5.00 per share both before and after the acquisition by Holland. Zeeland's acquisition date balance sheet follows: Current assets Property and equipment (net) Patents $14,700 Liabilities 288,708 Common stock 199,100 Retained earnings $422,500 $222,500 100,000 100,000 $ 422,500 On January 1, 2023, Holland assessed the carrying amount of Zeeland's equipment (5-year remaining life) to be undervalued by $62,000. Holland also determined that Zeeland possessed unrecorded patents (10-year remaining life) worth $226,900. Zeeland's acquisition-date fair values for its current assets and liabilities were equal to their carrying amounts. Any remaining excess of Zeeland's…
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 attributable to building amounting to P75,000 with a remaining life of 25 years. All other assets and liabilities of S Company had 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 Dividends P Company P340,000 P100,000 S Company P150,000 P50,000 On April 1, 20x1, S Company sold equipment with book value of P30,000 to P…
On January 1, 2011, Pat Corporation paid $400,000 for purchase of Sad Corporation, when Sad'sstockholders" equity consisted of $300,000 capital stock and $200,000 retained earnings. Book valueswere equal to fair values of Sad's assets and liabilities, except for a building and land. The buildinghad a book value of $80,000, a fair value of $120,000, and a remaining useful life of eight years. Theland had a book value of $50,000 and a fair value of $150.000. Required : Calculate goodwill at the date of purchase of Sad Corporation
On January 1, 2017, Bright Company acquired 80% of Animo Company's common stock for 280,000 cash. At that date, Animo reported common stock outstanding of 200,000 and retained earnings of 100,000 and the fair Animo's assets and liabilities were equal, except for other intangible assets, which has a fair value 50,000 greater than book value and an 8- year remaining life. Animo reported the following data for 2017 and 2018. Year Net Income Comprehensive Income 30,000 45,000 Dividends Paid 2017 2018 25,000 35,000 5,000 10,000 Bright reported separate net income from own operations of 100,000 and paid dividends of 30,000 for both years. Based on the preceding information, what is the amount of comprehensive attributable to the controlling interest in 2018?
On 1 April 20X7 Root acquired 116 million of Branch's 145 million ordinary shares for an immediate cash payment of $210 million and issued at par one 10% $100 loan note for every 200 shares acquired. At the date of acquisition Branch owned a recently built property that was carried at its depreciated construction cost of $62 million. The fair value of this property at the date of acquisition was $82 million and it had an estimated remaining life of 20 years. Branch also had an internally-developed brand which was valued at the acquisition date at $25 million with a remaining life of 10 years. The inventory of Branch at 31 March 20X9 includes goods supplied by Root for a sale price of $56 million. Root adds a mark-up of 40% on cost to all sales. What is the amount of the unrealised profit arising from intragroup trading?
At the beginning of the current year, Boyet Company bought 40% of Aubrey Company’s outstanding ordinary shares for P3,500,000. The company also paid P700,000 to a business broker who helped find a suitable business and negotiated the purchase. The carrying amount of Aubrey Company’s net assets at the purchase date totaled P9,000,000. The difference was attributed to plant which had a carrying amount of P1,100,000 and a fair value of P2,000,000 and to inventory which had a carrying amount of P250,000 and a fair value of P350,000. The plant has 18-year life. All inventory was sold during the current year. During the current year, the investee reported net income of P1,200,000 and paid a P200,000 cash dividend. Of the amount paid for the investment, how much is attributable to goodwill? How much is the amortization of purchase differential during the current year? What amount should be reported as investment income for the current year? What is the carrying amount of the investment in…
At the beginning of the current year, Big Company purchased 25% of the outstanding ordinary shares of Small company paying P5,000,000. On this date, the carrying amount of the net assets of Small equaled to P16,000,000. The difference was attributed to an excess of fair value over carrying amount of an equipment amounting to P3,000,000. The equipment has a remaining useful life of five years. In addition, Small's inventory had a carrying amount of P3,400,000 but was determined to have a fair value of P4.400,000. 75% of the inventory was sold during the year. At the end of the current year, Small company, reported net income of P1,600,000 and paid cash dividends of P1,000,000. What is the carrying amount of the investment at the end of the year?
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…