On Jan. 1, 2022, you acquire Co. M for $ 34,200,000 when Co. M's book value was $ 5,400,000. M's book value equals fair value except: Assets: Inventory is overstated by $ 316,000; Equipment ( 20 yr remaining life) is understated by $ 13,800,000; Patents ( 10 yr remaining life) are understated by $4,530,000; a Brand Name (indefinite life) is understated by $ 1,510,000; Lease agreements ( 4 yr remaining life) are understated by $ 617,000. Liabilities: Long-term debt ( 4 yr remaining life) is understated by $ 2,610,000. 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 $ 3,960,000 and pays dividends of $ 453,000. During 2023, M reports net income of $ 3,740,000 and pays dividends of $ 250,000. 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: Determine the consolidation balances for these selected accounts at Dec. 31, 2023. You Co. M Consolidated Balances DR (CR) 62,000,000 Equipment, net Patents Brand names Lease agreements Goodwill Long-term liabilities Cost of goods sold Depreciation and amortization expense 160,000,000 2,400,000 0 0 0 (95,000,000) 450,000,000 90,000,000 600,000 0 (44,600,000) 68,000,000 38,500,000
On Jan. 1, 2022, you acquire Co. M for $ 34,200,000 when Co. M's book value was $ 5,400,000. M's book value equals fair value except: Assets: Inventory is overstated by $ 316,000; Equipment ( 20 yr remaining life) is understated by $ 13,800,000; Patents ( 10 yr remaining life) are understated by $4,530,000; a Brand Name (indefinite life) is understated by $ 1,510,000; Lease agreements ( 4 yr remaining life) are understated by $ 617,000. Liabilities: Long-term debt ( 4 yr remaining life) is understated by $ 2,610,000. 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 $ 3,960,000 and pays dividends of $ 453,000. During 2023, M reports net income of $ 3,740,000 and pays dividends of $ 250,000. 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: Determine the consolidation balances for these selected accounts at Dec. 31, 2023. You Co. M Consolidated Balances DR (CR) 62,000,000 Equipment, net Patents Brand names Lease agreements Goodwill Long-term liabilities Cost of goods sold Depreciation and amortization expense 160,000,000 2,400,000 0 0 0 (95,000,000) 450,000,000 90,000,000 600,000 0 (44,600,000) 68,000,000 38,500,000
Chapter10: Cost Recovery On Property: Depreciation, Depletion, And Amortization
Section: Chapter Questions
Problem 62P
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Transcribed Image Text:On Jan. 1, 2022, you acquire Co. M for S 34,200,000 when Co. M's book value was $ 5,400,000.
M's book value equals fair value except:
Assets: Inventory is overstated by $ 316,000; Equipment (20 yr remaining life) is
understated by $ 13,800,000; Patents ( 10 yr remaining life) are understated by
$ 4,530,000; a Brand Name (indefinite life) is understated by $ 1,510,000;
Lease agreements ( 4 yr remaining life) are understated by S 617,000.
Liabilities: Long-term debt ( 4 yr remaining life) is understated by $ 2,610,000.
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 $ 3,960,000 and pays dividends of
$ 453,000. During 2023, M reports net income of $ 3,740,000 and pays dividends of $ 250,000.
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: Determine the consolidation balances for these selected accounts at Dec. 31, 2023.
You
Co. M
Consolidated Balances DR (CR)
Equipment, net
160,000,000
62,000,000
Patents
2,400,000
600,000
Brand names
Lease agreements
0.
Goodwill
Long-term liabilities
(95,000,000)
(44,600,000)
Cost of goods sold
450,000,000
68,000,000
Depreciation and
amortization expense
90,000,000
38,500,000
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