On January 1, 2013, Ruark Corporation acquired a 40 percent interest in Batson, Inc., for$210,000. On that date, Batson's balance sheet disclosed net assets with both a fair andbook value of $360,000. During 2013, Batson reported net income of $80,000 and paidcash dividends of $25,000. Ruark sold inventory costing $30,000 to Batson during 2013for $40,000. Batson used all of this merchandise in its operations during 2013. Prepareall of Ruark's 2013 journal entries to apply the equity method to this investment.General JournalDebitTo record acquisition.Investment in Batson, Inc.CashTo recognize income earned.Investment in Batson, Inc.Equity in Investee IncomeTo record collection of dividend.CashInvestment in Batson, Inc.Credit

The equity method is a type of accounting used to record an investment in a company where the…

Answered: On January 1, 2013, Ruark Corporation…

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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Acker Company bought 100% of Howell Company on 1/1/X1 for $1,440,000 and began applying the equity method. The book value of Howell's equity on that date was $1,440,000. In year X1, Howell reported net income of $100,000 and paid $40,000 in dividends. During year X1, Howell sold 1,000 units of inventory to Acker for $20,000 that had cost $10,000. On 12/31/X1, 400 of the units remained in Acker's inventory. How much investment income should Acker report in year X1
On January 1, 2021, Alamar Corporation acquired a 36 percent interest in Burks, Inc., for $198,000. On that date, Burks’s balance sheet disclosed net assets with both a fair and book value of $353,000. During 2021, Burks reported net income of $84,000 and declared and paid cash dividends of $24,000. Alamar sold inventory costing $27,000 to Burks during 2021 for $35,000. Burks used all of this merchandise in its operations during 2021. Prepare all of Alamar’s 2021 journal entries to apply the equity method to this investment 1. Record the acquisition of a 36 percent interest in Burks
On January 1, 2018, Powers Company acquired 80% of the ordinary share of Scullery Company for $195,000. On this date Scullery had total owners' equity of $200,000 (ordinary share, premium ordinary and retained earnings of $10,000, $90,000, and $100,000 respectively). In that date inventory undervalued $6,250 and equipment undervalued $12,500. The equipment has a remaining life of five years and straight-line depreciation is used. The following transaction occurred during 2018 and 2019: 1) On December 31, 2018, Powers sold equipment to Scullery at a gain of $10,000. During 2019, the equipment was used by Scullery. Depreciation is being computed using the straight-line method, a five-year life, and no salvage value. 2) during 2018scullery sold merchandise inventory 120,000 to powers with gross profit 25% which sold all except 20,000 3) On July 1, 2018 Scullery sold land $100,000 to Powers including 10,000 gain. 4) 1/1/2019 Scullery sold a truck to Powers for 70,000 and book value 50,000…
e of cents Price Company purchased 90% of the outstanding common stock of Score Company on January 1, 2016, for $450,000. At that time, Score Company had stockholders' equity consisting of common stock, $200,000; other com $160,000; and retained earnings, $90,000. On December 31, 2020, trial balances for Price Company and Score Company were as follows: Price $ 109,000 $ Cash Accounts Receivable Note Receivable Inventory Investment in Score Company Plant and Equipment Land Score 78,000 94,000 -0- 166,000 75,000 309,000 158,000 450,000 -0- 940,000 420,000 160,000 70,000 70,000 50,000 822,000 242,000 250,500 124,000 Dividends Declared Cost of Goods Sold Operating Expenses Total Debits Accounts Payable Notes Payable Common Stock $3,351,500 $1,236,000 $ 132,000 $ 46,000 300,000 120,000 500,000 200,000 260,000 160,000 Other Contributed Capital Retained Earnings, 1/1 Sales Dividend and Interest Income Total Credits 687,000 1,420,000 52,500 $3.351,500 $1,236,000 210,000 500,000 -0- Price…
On July 1, 2013, Tremen Corporation acquired 40% of the shares of Delany Company. Tremen paid $3,000,000 for the investment, and that amount is exactly equal to 40% of the fair value of identifiable net assets on Delany's balance sheet. Delany recognized net income of $1,000,000 for 2013, and paid $150,000 quarterly dividends to its shareholders. After all closing entries are made, Tremen's "Investment in Delany Company" account would have a balance of: A. $3,200,000. B. $3,160,000. C. $3,000,000.| D. $3,080,000. Mars Inc. has a defined benefit pension plan. On December 31 (the end of the fiscal year), the company received the PB0 report from the actuary. The following information was included in the report: ending PBO, $110,000; benefits paid to retirees, $10,000; interest cost, $7,200. The discount rate applied by the actuary was 8%. What was the beginning PBO? A. $90,000. B. $100,000. C. $107,200. D. $112,000. A company reports pretax accounting income of $10 million, but because of…
On May 31, 2018, Armstrong Company paid $3,500,000 to acquire all of the common stock of Hall Corporation, which became a division of Armstrong. Hall reported the following balance sheet at the time of the acquisition: Current assets $ 900,000 Current liabilities $ 600,000 Noncurrent assets 2,700,000 Long-term liabilities 500,000 Stockholders' equity 2,500,000 Total liabilities and Total assets $3,600,000 stockholders' equity $3,600,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Hall was $3,100,000. At December 31, 2018, Hall reports the following balance sheet information: Current assets $ 800,000 Noncurrent assets (including goodwill recognized in purchase) 2,600,000 Current liabilities (700,000) Long-term liabilities (500,000) Net assets $2,200,000 It is determined that the fair value of the Hall division is $2,300,000. Instructions (a) Compute the amount of goodwill recognized, if any, on May 31, 2018. (b) Determine the…

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