On January 1, 2019, Monica Company acquired 80 percent of Young Company's outstanding common stock for $808,000. The fair value of the noncontrolling interest at the acquisition date was $202,000. Young reported stockholders' equity accounts on that date as follows: Common stock-$10 par value Additional paid-in capital Retained earnings $ 200,000 40,000 530,000 In establishing the acquisition value, Monica appraised Young's assets and ascertained that the accounting records undervalued a building (with a five-year remaining life) by $50,000. Any remaining excess acquisition-date fair value was allocated to a franchise agreement to be amortized over 10 years.
On January 1, 2019, Monica Company acquired 80 percent of Young Company's outstanding common stock for $808,000. The fair value of the noncontrolling interest at the acquisition date was $202,000. Young reported stockholders' equity accounts on that date as follows: Common stock-$10 par value Additional paid-in capital Retained earnings $ 200,000 40,000 530,000 In establishing the acquisition value, Monica appraised Young's assets and ascertained that the accounting records undervalued a building (with a five-year remaining life) by $50,000. Any remaining excess acquisition-date fair value was allocated to a franchise agreement to be amortized over 10 years.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![On January 1, 2019, Monica Company acquired 80 percent of Young Company's outstanding common stock for $808,000. The fair
value of the noncontrolling interest at the acquisition date was $202,000. Young reported stockholders' equity accounts on that date
as follows:
Common stock-$10 par value
Additional paid-in capital
Retained earnings
$ 200,000
40,000
530,000
In establishing the acquisition value, Monica appraised Young's assets and ascertained that the accounting records undervalued a
building (with a five-year remaining life) by $50,000. Any remaining excess acquisition-date fair value was allocated to a franchise
agreement to be amortized over 10 years.
During the subsequent years, Young sold Monica inventory at a 40 percent gross profit rate. Monica consistently resold this
merchandise in the year of acquisition or in the period immediately following. Transfers for the three years after this business
combination was created amounted to the following:
Transfer
Price
Year
2019
$ 70,000
2020
2021
90,000
100,000
Inventory Remaining
at Year-End
(at transfer price)
$ 22,000
24,000
30,000
In addition, Monica sold Young several pieces of fully depreciated equipment on January 1, 2020, for $48,000. The equipment had
originally cost Monica $74,000. Young plans to depreciate these assets over a 6-year period.
In 2021, Young earns a net income of $260,000 and declares and pays $85,000 in cash dividends. These figures increase the
subsidiary's Retained Earnings to a $860,000 balance at the end of 2021.
Monica employs the equity method of accounting. Hence, it reports $190,880 investment income for 2021 with an Investment account
balance of $960,800. Prepare the worksheet entries required for the consolidation of Monica Company and Young Company. (If no
entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3caee8cc-7057-4fdd-9b03-86de594d883e%2F4599781a-acd3-48fc-883e-1bbfd6f22541%2Fnpqidpw_processed.png&w=3840&q=75)
Transcribed Image Text:On January 1, 2019, Monica Company acquired 80 percent of Young Company's outstanding common stock for $808,000. The fair
value of the noncontrolling interest at the acquisition date was $202,000. Young reported stockholders' equity accounts on that date
as follows:
Common stock-$10 par value
Additional paid-in capital
Retained earnings
$ 200,000
40,000
530,000
In establishing the acquisition value, Monica appraised Young's assets and ascertained that the accounting records undervalued a
building (with a five-year remaining life) by $50,000. Any remaining excess acquisition-date fair value was allocated to a franchise
agreement to be amortized over 10 years.
During the subsequent years, Young sold Monica inventory at a 40 percent gross profit rate. Monica consistently resold this
merchandise in the year of acquisition or in the period immediately following. Transfers for the three years after this business
combination was created amounted to the following:
Transfer
Price
Year
2019
$ 70,000
2020
2021
90,000
100,000
Inventory Remaining
at Year-End
(at transfer price)
$ 22,000
24,000
30,000
In addition, Monica sold Young several pieces of fully depreciated equipment on January 1, 2020, for $48,000. The equipment had
originally cost Monica $74,000. Young plans to depreciate these assets over a 6-year period.
In 2021, Young earns a net income of $260,000 and declares and pays $85,000 in cash dividends. These figures increase the
subsidiary's Retained Earnings to a $860,000 balance at the end of 2021.
Monica employs the equity method of accounting. Hence, it reports $190,880 investment income for 2021 with an Investment account
balance of $960,800. Prepare the worksheet entries required for the consolidation of Monica Company and Young Company. (If no
entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
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