On January 1, 2015, Pomegranate Company acquired 80% of the voting stock of Starfruit Company for $47.100.000 in cash. The fair value of the noncontrolling interest in Starfruit at the date of acquisition was $6.900.000. Starfruit's book value was $12.000.000 at the date of acquisition. Starfruit's assets and liabilities were reported on its books at values approximating fair value, except its plant and equipment (10-year life, straight-line) was overvalued by $13.000.000. Starfruit Company had previously unreported intangible assets, with a market value of $16.000.000 and 5-year life, straight- line, which were capitalized following GAAP. Additional information: Pomegranate uses the complete equity method to account for its investment in Starfruit on its own books. Goodwill recognized in this acquisition was impaired by a total of $1,000,000 in 2015 and 2016, and by $250,000 in 2017. It is now December 31, 2017, the accounting year-end. Here is Starfruit Company's trial balance at December 31, 2017: Current assets Plant & equipment, net Intangibles Liabilities Capital stock Retained earnings, January 1 Acumulated other comprehensive income. January 1 Dividends Sales revenue Cost of goods sold Operating expenses Other comprehensive income Dr (Cr) $13,000,000 89,000,000 1,000,000 (86,000,000) (500.000) (14.000.000 (250,000) 300.000 (11,000,000) 5.500.000 3,000,000 (50,000) 50 On the 2017 consolidation working paper, eliminating entry (R) reduces the Investment in Starfruit by Os 3.600.000 O$64,800,000 O$33.560.000 O$81,000,000
On January 1, 2015, Pomegranate Company acquired 80% of the voting stock of Starfruit Company for $47.100.000 in cash. The fair value of the noncontrolling interest in Starfruit at the date of acquisition was $6.900.000. Starfruit's book value was $12.000.000 at the date of acquisition. Starfruit's assets and liabilities were reported on its books at values approximating fair value, except its plant and equipment (10-year life, straight-line) was overvalued by $13.000.000. Starfruit Company had previously unreported intangible assets, with a market value of $16.000.000 and 5-year life, straight- line, which were capitalized following GAAP. Additional information: Pomegranate uses the complete equity method to account for its investment in Starfruit on its own books. Goodwill recognized in this acquisition was impaired by a total of $1,000,000 in 2015 and 2016, and by $250,000 in 2017. It is now December 31, 2017, the accounting year-end. Here is Starfruit Company's trial balance at December 31, 2017: Current assets Plant & equipment, net Intangibles Liabilities Capital stock Retained earnings, January 1 Acumulated other comprehensive income. January 1 Dividends Sales revenue Cost of goods sold Operating expenses Other comprehensive income Dr (Cr) $13,000,000 89,000,000 1,000,000 (86,000,000) (500.000) (14.000.000 (250,000) 300.000 (11,000,000) 5.500.000 3,000,000 (50,000) 50 On the 2017 consolidation working paper, eliminating entry (R) reduces the Investment in Starfruit by Os 3.600.000 O$64,800,000 O$33.560.000 O$81,000,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![On January 1, 2015, Pomegranate Company acquired 80% of the voting stock of Starfruit Company for $47,100,000 in cash. The fair value of the noncontrolling interest in Starfruit at the date of acquisition was $6,900,000. Starfruit's book value was $12,000,000 at the date of acquisition. Starfruit's
assets and liabilities were reported on its books at values approximating fair value, except its plant and equipment (10-year life, straight-line) was overvalued by $13,000,000. Starfruit Company had previously unreported intangible assets, with a market value of $16,000,000 and 5-year life, straight-
line, which were capitalized following GAAP.
Additional information:
Pomegranate uses the complete equity method to account for its investment in Starfruit on its own books. Goodwill recognized in this acquisition was impaired by a total of $1,000,000 in 2015 and 2016, and by $250,000 in 2017. It is now December 31, 2017, the accounting year-end.Here is Starfruit
Company's trial balance at December 31, 2017:
Current assets
Plant & equipment, net
Intangibles
Liabilities
Capital stock
Retained earnings, January 1
Acumulated other comprehensive income, January 1
Dividends
Sales revenue
Cost of goods sold
Operating expenses
Other comprehensive income
Dr (Cr)
$13,000,000
89,000,000
1,000,000
(86,000,000)
(500,000)
(14,000,000)
(250,000)
300,000
(11,000,000)
5,500,000
3,000,000
(50,000)
$0
On the 2017 consolidation working paper, eliminating entry (R) reduces the Investment in Starfruit by
Os 3,600,000
O$64,800,000
O$33,560,000
O$81,000,000
1](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F221cc151-cc80-4014-8543-de0dc30d4c8c%2Fb6582094-7e94-4cf1-8561-541a747c05f8%2Fojj1nki_processed.png&w=3840&q=75)
Transcribed Image Text:On January 1, 2015, Pomegranate Company acquired 80% of the voting stock of Starfruit Company for $47,100,000 in cash. The fair value of the noncontrolling interest in Starfruit at the date of acquisition was $6,900,000. Starfruit's book value was $12,000,000 at the date of acquisition. Starfruit's
assets and liabilities were reported on its books at values approximating fair value, except its plant and equipment (10-year life, straight-line) was overvalued by $13,000,000. Starfruit Company had previously unreported intangible assets, with a market value of $16,000,000 and 5-year life, straight-
line, which were capitalized following GAAP.
Additional information:
Pomegranate uses the complete equity method to account for its investment in Starfruit on its own books. Goodwill recognized in this acquisition was impaired by a total of $1,000,000 in 2015 and 2016, and by $250,000 in 2017. It is now December 31, 2017, the accounting year-end.Here is Starfruit
Company's trial balance at December 31, 2017:
Current assets
Plant & equipment, net
Intangibles
Liabilities
Capital stock
Retained earnings, January 1
Acumulated other comprehensive income, January 1
Dividends
Sales revenue
Cost of goods sold
Operating expenses
Other comprehensive income
Dr (Cr)
$13,000,000
89,000,000
1,000,000
(86,000,000)
(500,000)
(14,000,000)
(250,000)
300,000
(11,000,000)
5,500,000
3,000,000
(50,000)
$0
On the 2017 consolidation working paper, eliminating entry (R) reduces the Investment in Starfruit by
Os 3,600,000
O$64,800,000
O$33,560,000
O$81,000,000
1
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