On January 1, 2020, Mcllroy, Inc., acquired a 60 percent interest in the common stock of Stinson, Inc., for $420,000.Stinson's book value on that date consisted of common stock of $100,000 and retained earnings of $248,300. Also, theacquisition-date fair value of the 40 percent noncontrolling interest was $280,000. The subsidiary held patents (with a10-year remaining life) that were undervalued within the company's accounting records by $87,100 and an unrecordedcustomer list (15-year remaining life) assessed at a $63,000 fair value. Any remaining excess acquisition-date fair valuewas assigned to goodwill. Since acquisition, Mcllroy has applied the equity method to its Investment in Stinson accountand no goodwill impairment has occurred. At year-end, there are no intra-entity payables or receivables.Intra-entity inventory sales between the two companies have been made as follows:Ending Balance(at transferprice)$57,50037,600Cost toYear McIlroy2020 $138,0002021 112,800The individual financial statements for these two companies as of December 31, 2021, and the year then ended follow:Stinson,Inc.$(399,000)243,40082,8000SalesCost of goods soldTransferPriceto Stinson$172,500150,400Operating expensesEquity in earnings in Stinson,Net incomeRetained earnings, 1/1/21Net incomeDividends declaredRetained earnings,12/31/21Cash and receivablesInventoryInvestment in StinsonBuildings (net)Equipment (net)Patents (net)Total assetsLiabilitiesMcIlroy,Inc.$ (760,000)499,500202,710(38,034)(95,824)$ (829,700)(95,824)51,300$ (874,224)$297, 100279, 100Common stockRetained earnings, 12/31/21Total liabilities andequities(Note: Parentheses indicate a credit balance.)448,688370,000264,0000$ 1,658,888$ (484,664)(300,000)(874,224)$(1,658,888)$ (72,800)$(286,100)(72,800)21,300$(337,600)$ 153,700133,9000208,50092,10026,800$ 615,000$(177,400)(100,000)(337,600)$ (615,000)a. Show how Mcllroy determined the $448,688 Investment in Stinson account balance. Assume that Mcllroy defers 100percent of downstream intra-entity profits against its share of Stinson's income.

On January 1, 2020, Mcllroy, Inc., acquired a 60 percent interest in the common stock of Stinson, Inc., for $420,000. Stinson's book value on that date consisted of common stock of $100,000 and retained earnings of $248,300. Also, the acquisition-date fair value of the 40 percent noncontrolling interest was $280,000. The subsidiary held patents (with a 10-year remaining life) that were undervalued within the company's accounting records by $87,100 and an unrecorded customer list (15-year remaining life) assessed at a $63,000 fair value. Any remaining excess acquisition-date fair value was assigned to goodwill. Since acquisition, Mcllroy has applied the equity method to its Investment in Stinson account and no goodwill impairment has occurred. At year-end, there are no intra-entity payables or receivables.

On January 1, 2020, Mcllroy, Inc., acquired a 60 percent interest in the common stock of Stinson, Inc., for $420,000. Stinson's book value on that date consisted of common stock of $100,000 and retained earnings of $248,300. Also, the acquisition-date fair value of the 40 percent noncontrolling interest was $280,000. The subsidiary held patents (with a 10-year remaining life) that were undervalued within the company's accounting records by $87,100 and an unrecorded customer list (15-year remaining life) assessed at a $63,000 fair value. Any remaining excess acquisition-date fair value was assigned to goodwill. Since acquisition, Mcllroy has applied the equity method to its Investment in Stinson account and no goodwill impairment has occurred. At year-end, there are no intra-entity payables or receivables.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Parson Company acquired an 80 percent interest in Syber Company on January 1, 2020. Any portion of Syber's business fair value in excess of its corresponding book value was assigned to trademarks. This intangible asset has subsequently undergone annual amortization based on a 15-year life. Over the past two years, regular intra-entity inventory sales transpired between the two companies. No payment has yet been made on the latest transfer. All dividends are paid in the same period as declared. The individual financial statements for the two companies as well as consolidated totals for 2021 follow (credit balances indicated by parentheses): ParsonCompany SyberCompany ConsolidatedTotals Sales $ (744,000 ) $ (654,000 ) $ (1,223,000 ) Cost of goods sold 450,000 412,000 691,000 Operating expenses 104,000 107,000 213,300 Income of Syber (102,960 ) 0 0 Separate company net income $ (292,960 ) $ (135,000 )…
On January 02, 2021, Parent Corporation purchased 80% of SUBSIDIARY Company’s ordinary shares for P648,000. P30,000 of the excess (aggregate of consideration and NCI over the book value of net assets) is attributable to goodwill and the balance to an equipment with an economic life of ten years. Non-controlling interest is measured at its fair value on date of acquisition. On the date of acquisition, stockholders’ equity of the two companies were as follows: PARENT Corporation SUBSIDIARY Company Ordinary shares P1,050,000 P240,000 Retained earnings 1,560,000 P420,000 On December 31, 2021, SUBSIDIARY Company reported net income of P105,000 and paid dividends of P36,000 to Parent. Parent reported earnings from its own operations of P285,000 and paid dividends of P183,000. Goodwill had been impaired and should be reported at P20,000 on December 31, 2021. What is the non-controlling interest in profit of SUBSIDIARY Company on December 31, 2021? What is…
Victoria Corp acquired 80 per cent of the share capital of Whitehorse Corp on 1 July 2019. As at the date of acquisition, Whitehorse’s retained earnings was $40,000. On this date, the fair value of the 20% non-controlling interest in Whitehorse was $25,000. Ignore the tax rate. The statements of the financial position of Victoria Corp and Whitehorse Corp as at 30 June 2020 are as follows: Victoria Corp ($) Whitehorse Corp ($) Current assets 320,000 168,000 Non-current assets: Property, plant and equipment 190,000 36,000 Investment (in Whitehorse) 100,000 - 290,000 36,000 610,000 204,000 Current liabilities 270,000 94,000 Shareholders’ equity: Share capital…
On July 1, 2021, Truman Company acquired a 70 percent interest in Atlanta Company in exchange for consideration of $835,275 in cash and equity securities. The remaining 30 percent of Atlanta's shares traded closely near an average price that totaled $357,975 both before and after Truman's acquisition. In reviewing its acquisition, Truman assigned a $140,000 fair value to a patent recently developed by Atlanta, even though it was not recorded within the financial records of the subsidiary. This patent is anticipated to have a remaining life of five years. The following financial information is available for these two companies for 2021. In addition, the subsidiary's income was earned uniformly throughout the year. The subsidiary declared dividends quarterly.
On January 1, 2021, Ackerman Company acquires 80% of Seidel Company for $2,054,400 in cash consideration. The remaining 20 percent noncontrolling interest shares had an acquisition-date estimated fair value of $513,600. Seidel's acquisition-date total book value was $2,040,000. The fair value of Seidel's recorded assets and liabilities equaled their carrying amounts. However, Seidel had two unrecorded assets- a trademark with an indefinite life and estimated fair value of $294,000 and several customer relationships estimated to be worth $216,000 with four-year remaining lives. Any remaining acquisition-date fair value in the Seidel acquisition was considered goodwill. During 2021, Seidel reported $206,400 net income and declared and paid dividends totaling $60,000. Also in 2021, Ackerman reported $420,000 net income, but neither declared nor paid dividends. a. What amount should Ackerman assign to the 20 percent noncontrolling interest of Seidel at the acquisition date? b. How much of…
On January 1, 2023, Pulaski, Incorporated, acquired a 60 percent interest in the common stock of Sheridan, Incorporated, for $384,600. Sheridan's book value on that date consisted of common stock of $100,000 and retained earnings of $227,300. Also, the acquisition-date fair value of the 40 percent noncontrolling interest was $256,400. The subsidiary held patents (with a 10-year remaining life) that were undervalued within the company's accounting records by $78,400 and also had unpatented technology (15-year estimated remaining life) undervalued by $54,300. Any remaining excess acquisition-date fair value was assigned to an indefinite-lived trade name. Since acquisition, Pulaski has applied the equity method to its Investment in Sheridan account. At year-end, there are no intra-entity payables or receivables. Intra-entity inventory sales between the two companies have been made as follows: Year Cost to Pulaski Transfer Price to Sheridan Ending Balance (at transfer price) 2023 $…
On January 1, 2023, Pulaski, Incorporated, acquired a 60 percent interest in the common stock of Sheridan, Incorporated, for $420,000. Sheridan's book value on that date consisted of common stock of $100,000 and retained earnings of $248,300. Also, the acquisition-date fair value of the 40 percent noncontrolling interest was $280,000. The subsidiary held patents (with a 10-year remaining life) that were undervalued within the company's accounting records by $87,100 and also had unpatented technology (15- year estimated remaining life) undervalued by $63,000. Any remaining excess acquisition-date fair value was assigned to an indefinite- lived trade name. Since acquisition, Pulaski has applied the equity method to its Investment in Sheridan account. At year-end, there are no intra-entity payables or receivables. Intra-entity inventory sales between the two companies have been made as follows: Year 2023 2024 Cost to Pulaski Transfer Price to Sheridan Ending Balance (at transfer price) $…
On July 1, 2021, Truman Company acquired a 70 percent interest in Atlanta Company in exchange for consideration of $792,400 in cash and equity securities. The remaining 30 percent of Atlanta’s shares traded closely near an average price that totaled $339,600 both before and after Truman’s acquisition. In reviewing its acquisition, Truman assigned a $125,500 fair value to a patent recently developed by Atlanta, even though it was not recorded within the financial records of the subsidiary. This patent is anticipated to have a remaining life of five years. The following financial information is available for these two companies for 2021. In addition, the subsidiary’s income was earned uniformly throughout the year. The subsidiary declared dividends quarterly. Truman Atlanta Revenues $ (768,485 ) $ (536,000 ) Operating expenses 418,000 378,000 Income of subsidiary (46,515 ) 0 Net income $ (397,000 ) $ (158,000 ) Retained earnings, 1/1/21 $…
On January 1, 2017, Palka, Inc., acquired 70 percent of the outstanding shares of Sellinger Company for $1,666,000 in cash. The price paid was proportionate to Sellinger’s total fair value, although at the acquisition date, Sellinger had a total book value of $2,070,000. All assets acquired and liabilities assumed had fair values equal to book values except for a patent (six-year remaining life) that was undervalued on Sellinger’s accounting records by $300,000. On January 1, 2018, Palka acquired an additional 25 percent common stock equity interest in Sellinger Company for $656,250 in cash. On its internal records, Palka uses the equity method to account for its shares of Sellinger. During the two years following the acquisition, Sellinger reported the following net income and dividends: 2017 2018 $525,000 $701,000 Net…
On January 1, 2019, Aronsen Company acquired 90 percent of Sledel Company's outstanding shares. Sledel had a net book value on that date of $504,300: common stock ($10 par value) of $207,500 and retained earnings of $296,800. Aronsen paid $600,300 for this Investment. The acquisition-date fair value of the 10 percent noncontrolling Interest was $66,700. The excess fair value over book value associated with the acquisition was used to increase land by $82,220 and to recognize copyrights (16-year remaining life) at $80,480. Subsequent to the acquisition, Aronsen applied the Initial value method to its Investment account In the 2019-2020 period, the subsidiary's retained earnings Increased by $100,600. During 2021, Siedel earned Income of $81,500 while declaring $20,300 in dividends. Also, at the beginning of 2021, Siedel Issued 4,150 new shares of common stock for $38 per share to finance the expansion of its corporate facilities. Aronsen purchased none of these additional shares and…
On January 1, 2020, QuickPort Company acquired 90 percent of the outstanding voting stock of NetSpeed, Inc., for $1,125,000 in cash and stock options. At the acquisition date, NetSpeed had common stock of $1,170,000 and Retained Earnings of $58,500. The acquisition-date fair value of the 10 percent noncontrolling interest was $125,000. QuickPort attributed the $21,500 excess of NetSpeed's fair value over book value to a database with a five-year remaining life. During the next two years, NetSpeed reported the following: Net Income Dividends Declared 2020 $ 30,100 $ 4,300 2021 43,000 4,300 On July 1, 2020, QuickPort sold communication equipment to NetSpeed for $27,500. The equipment originally cost $30,500 and had accumulated depreciation of $5,400 and an estimated remaining life of three years at the date of the intra-entity transfer. Compute the equity method balance in QuickPort's Investment in NetSpeed, Inc., account as of December 31, 2021.…