On Jan. 1, 2022, you acquire Co. M for $ 31,200,000 when Co. M's book value was $ 6,040,000. M's book value equals fair value except: Assets: Inventory is understated by $ 380,000; Equipment (2.5 yr remaining life) is understated by $ 12,700,000; Patents (10 y remaining life) are understated by $ 4,540,000; a Brand Name (indefinite life) is understated by $ 1.780,000; Lease agreements (2 yr remaining life) are understated by $ 623,000. Any remaining difference between M's fair value and the fair value of identifiable net assets is attributed to goodwill. During 2022, M reports net income of $ 3,780,000 and pays dividends of $ 402,000. During 2023, M reports net income of $ 3,680,000 and pays dividends of $ 267,000. You use the equity method to internally account for your investment in M and the acquisition method for consolidation. Below are selected balances for You and Co. M as of Dec. 31, 2023 (2 yrs after acquisition). Required 1: Determine the consolidation balances for these selected accounts at Dec. 31, 2023. Co. M Consolidated Balances DR (CR) Equipment, net Patents Brand names Lease agreements Goodwill Cost of goods sold Depreciation amortization expense You 160,000,000 2,400,000 0 0 0 450,000,000 90,000,000 62,000,000 600,000 0 0 0 68,000,000 38,500,000 Required 2: Provide the internal balances for each of the following. The Investment in Co. M account balance at Dec. 31, 2023, is The Equity in Co. M Income account balance at Dec. 31, 2023, is -

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Transcribed Image Text:On Jan. 1, 2022, you acquire Co. M for $ 31,200,000 when Co. M's book value was $ 6,040,000. M's book value equals fair value except: Assets: Inventory is understated by $ 380,000; Equipment (2.5 yr remaining life) is understated by $ 12,700,000; Patents (10 y remaining life) are understated by $ 4,540,000; a Brand Name (indefinite life) is understated by $ 1.780,000; Lease agreements (2 yr remaining life) are understated by $ 623,000. Any remaining difference between M's fair value and the fair value of identifiable net assets is attributed to goodwill. During 2022, M reports net income of $ 3,780,000 and pays dividends of $ 402,000. During 2023, M reports net income of $ 3,680,000 and pays dividends of $ 267,000. You use the equity method to internally account for your investment in M and the acquisition method for consolidation. Below are selected balances for You and Co. M as of Dec. 31, 2023 (2 yrs after acquisition). Required 1: Determine the consolidation balances for these selected accounts at Dec. 31, 2023. Co. M Consolidated Balances DR (CR) Equipment, net Patents Brand names Lease agreements Goodwill Cost of goods sold Depreciation amortization expense You 160,000,000 2,400,000 0 0 0 450,000,000 90,000,000 62,000,000 600,000 0 0 0 68,000,000 38,500,000 Required 2: Provide the internal balances for each of the following. The Investment in Co. M account balance at Dec. 31, 2023, is The Equity in Co. M Income account balance at Dec. 31, 2023, is -

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