On January 1, 2020, Allan Company bought a 15 percent interest in Sysinger Company. The acquisition price of$220,500 reflected an assessment that all of Sysinger's accounts were fairly valued within the company'saccounting records. During 2020, Sysinger reported net income of $119,300 and declared cash dividends of$35,500. Allan possessed the ability to significantly influence Sysinger's operations and, therefore, accounted forthis investment using the equity method.On January 1, 2021, Allan acquired an additional 80 percent interest in Sysinger and provided the following fair-value assessments of Sysinger's ownership components:Consideration transferred by Allan for 80% interestFair value of Allan's 15% previous ownershipNoncontrolling interest's 5% fair value$ 1,444,800270,90090,300Total acquisition-date fair value for Sysinger Company$ 1,806,000Also, as of January 1, 2021, Allan assessed a $430,000 value to an unrecorded customer contract recentlynegotiated by Sysinger. The customer contract is anticipated to have a remaining life of four years. Sysinger's otherassets and liabilities were judged to have fair values equal to their book values. Allan elects to continue applyingthe equity method to this investment for internal reporting purposes. At December 31, 2021, the following financial information is available for consolidation:AllanSysingerCompanyCompany$(1,000,900) $ (411,000)660,900(52,155)RevenuesOperating expensesEquity earnings of Sysinger248,600Gain on revaluation of Investmentin Sysinger to fair value(37,830)Net income$429,985$162,400Retained earnings, January 1(962,800)(649,600)(162,400)$(429,985)139,800$(1,252,985) $ (768,900)Net incomeDividends declared43,100Retained earnings, December 31287,3001,726,910858,000883,000Current assets584, 200Investment in Sysinger (equity method)Property, plant, and equipmentPatented technology628,000394,300Customer contract$ 1,606,500$ (138,600)(531,000)(168,000)(768,900)Total assets$ 3,755,210$(1,350, 225)(934,000)(218,LiabilitiesCommon stockAdditional paid-in capitalRetained earnings, December 31(1,252,985)Total liabilities and equities$(3,755,210) $(1,606,500)a. How should Allan allocate Sysinger's total acquisition-date fair value (January 1, 2021) to the assets acquired andliabilities assumed for consolidation purposes?b. Calculate the following as they would appear in Allan's pre-consolidation 2021 statements.• Equity in earnings of Sysinger• Gain on revaluation of Investment in Sysinger to fair value• Investment in Sysingerc. Prepare a worksheet to consolidate the financial statements of these two companies as of December 31, 2021.At year-end, there were no intra-entity receivables or payables.

Consolidated financial statements are a set of financial statements prepared for a group company…

On January 1, 2020, Allan Company bought a 15 percent interest in Sysinger Company. The acquisition price of $220,500 reflected an assessment that all of Sysinger's accounts were fairly valued within the company's accounting records. During 2020, Sysinger reported net income of $119,300 and declared cash dividends of $35,500. Allan possessed the ability to significantly influence Sysinger's operations and, therefore, accounted for this investment using the equity method. On January 1, 2021, Allan acquired an additional 80 percent interest in Sysinger and provided the following fair- value assessments of Sysinger's ownership components: Consideration transferred by Allan for 80% interest Fair value of Allan's 15% previous ownership Noncontrolling interest's 5% fair value $ 1,444,800 270,900 90,300 Total acquisition-date fair value for Sysinger Company $ 1,806,000 Also, as of January 1, 2021, Allan assessed a $430,000 value to an unrecorded customer contract recently negotiated by Sysinger. The customer contract is anticipated to have a remaining life of four years. Sysinger's other assets and liabilities were judged to have fair values equal to their book values. Allan elects to continue applying the equity method to this investment for internal reporting purposes.

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q