On January 1, 2015, Pam Corporation made a significant acquisition, purchasing 75 percent of Sam Corporation's outstanding voting stock for a total of $4,200,000. Sam Corporation's stockholders' equity at that time was made up of the following components (all values in thousands): Capital stock with a par value of $10: $2,000 Additional paid-in capital: $1200 Retained earnings as of December 31, 2014: $1500 Total stockholders' equity: $4700 The surplus fair value of the net assets obtained from this acquisition was allocated as follows: 10 percent to underappreciated inventory (which was subsequently sold in 2015), 40 percent to underappreciated plant assets with a remaining useful life of eight years, and the remaining 50 percent to goodwill. Fast forward to December 31, 2019, and the comparative trial balances for both Pam Corporation and Sam Corporation as follows: Pam Other assets net $5,845 Sam $4500 Investment in Sam-75% 3,640 - Expenses (including cost of sales) 5,285 800 Dividends 600 300 $15370 $5600 Capital stock, $10 par $4,000 $2,000 Additional paid-in capital 850 1200 Retained earnings 2,670 1500 Sales 7380 900 Income from Sam 470 $15370 $5600

On January 1, 2015, Pam Corporation made a significant acquisition, purchasing 75 percent of Sam Corporation's outstanding voting stock for a total of $4,200,000. Sam Corporation's stockholders' equity at that time was made up of the following components (all values in thousands): Capital stock with a par value of $10: $2,000 Additional paid-in capital: $1200 Retained earnings as of December 31, 2014: $1500 Total stockholders' equity: $4700 The surplus fair value of the net assets obtained from this acquisition was allocated as follows: 10 percent to underappreciated inventory (which was subsequently sold in 2015), 40 percent to underappreciated plant assets with a remaining useful life of eight years, and the remaining 50 percent to goodwill. Fast forward to December 31, 2019, and the comparative trial balances for both Pam Corporation and Sam Corporation as follows: Pam Other assets net $5,845 Sam $4500 Investment in Sam-75% 3,640 - Expenses (including cost of sales) 5,285 800 Dividends 600 300 $15370 $5600 Capital stock, $10 par $4,000 $2,000 Additional paid-in capital 850 1200 Retained earnings 2,670 1500 Sales 7380 900 Income from Sam 470 $15370 $5600

Financial Accounting

14th Edition

ISBN:9781305088436

Author:Carl Warren, Jim Reeve, Jonathan Duchac

Publisher:Carl Warren, Jim Reeve, Jonathan Duchac

Chapter15: Investments And Fair Value Accounting

Section: Chapter Questions

Problem 28E

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On January 1, 2015, Pam Corporation made a significant acquisition, purchasing 75 percent of SamCorporation's outstanding voting stock for a total of $4,200,000. Sam Corporation's stockholders'equity at that time was made up of the following components (all values in thousands):Capital stock with a par value of $10: $2,000Additional paid-in capital: $1200Retained earnings as of December 31, 2014: $1500Total stockholders' equity: $4700The surplus fair value of the net assets obtained from this acquisition was allocated as follows: 10percent to underappreciated inventory (which was subsequently sold in 2015), 40 percent tounderappreciated plant assets with a remaining useful life of eight years, and the remaining 50 percentto goodwill.Fast forward to December 31, 2019, and the comparative trial balances for both Pam Corporation andSam Corporation as follows: Pam SamOther assets—net $5,845 $4500Investment in Sam—75% 3,640 —Expenses (including cost of sales) 5,285 800Dividends 600 300…
On January 1, 2015 ,Pub Corporation made a significant acquisition, purchasing 75 percent of SubCorporation's outstanding voting stock for a total of $4,200,000. Sub Corporation's stockholders'equity at that time was made up of the following components (all values in thousands):Capital stock with a par value of $10: $2,000Additional paid-in capital: $1200Retained earnings as of December 31, 2014: $1500Total stockholders' equity: $4700The surplus fair value of the net assets obtained from this acquisition was allocated as follows: 10percent to underappreciated inventory (which was subsequently sold in 2015), 40 percent tounderappreciated plant assets with a remaining useful life of eight years, and the remaining 50 percentto goodwill.Fast forward to December 31, 2019, and we have the comparative trial balances for both PubCorporation and Sub Corporation.…
On January 1, 2015 ,Pub Corporation made a significant acquisition, purchasing 75 percent of Sub Corporation's outstanding voting stock for a total of $4,200,000. Sub Corporation's stockholders'equity at that time was made up of the following components (all values in thousands):Capital stock with a par value of $10: $2,000Additional paid-in capital: $1200Retained earnings as of December 31, 2014: $1500Total stockholders' equity: $4700The surplus fair value of the net assets obtained from this acquisition was allocated as follows: 10percent to underappreciated inventory (which was subsequently sold in 2015), 40 percent tounderappreciated plant assets with a remaining useful life of eight years, and the remaining 50 percentto goodwill.Fast forward to December 31, 2019, and we have the comparative trial balances for both PubCorporation and Sub Corporation.…
On December 31, 2016, Akron, Inc. purchased 5 Percent of Zip’s Company's common shares on the open market in exchange for $16,000. On December 31, 2017, Akron, Inc., acquires an additional 25 percent of Zip Company's outstanding common stock for $95,000. During the next two years, the following information is available for Zip Company: Income Dividends Declared Common StockFair Value (12/31) 2016 $320,000 2017 $75,000 $7,000 380,000 2018 88,000 15,000 480,000 At December 31, 2017, Zip reports a net book value of $290,000. Akron attributed any excess of its 30 percent share of Zip's fair over book value to its share of Zip's franchise agreements. The franchise agreements had a remaining life of 10 years at December 31, 2017. Assume Akron applies the equity method to its Investment in Zip account: What amount of equity income should Akron report for 2018? On Akron's December 31, 2018, balance sheet, what amount is reported for the Investment in Zip…
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