**Investment and Acquisition Overview: Morey, Inc. and Amsterdam Corporation**On January 1, 2021, Morey, Inc. made a strategic investment by exchanging $167,900 for a 25 percent stake in Amsterdam Corporation. This investment was accounted for using the equity method, given that the book values of Amsterdam’s assets and liabilities closely matched their fair values at the outset.Subsequently, on June 30, 2021, Morey expanded its stake by acquiring an additional 70 percent for $602,000, increasing its total ownership to 95 percent. This acquisition price was aligned with Amsterdam’s total fair value. Any excess fair value was designated as goodwill.**Amsterdam’s Financial Data as of December 31, 2021:**- **Revenues**: $(381,000)- **Expenses**: 221,000- **Retained earnings, January 1**: (212,400)- **Dividends declared, October 1**: 20,000- **Common stock**: (500,000)Amsterdam’s financial activities, particularly revenues and expenses, were evenly spread over the year without any changes in stock.**Required Calculations:**1. **Acquisition-Date Fair Value**: Calculate for inclusion in Morey's June 30 consolidated financial statements.2. **Revaluation Gain/Loss**: Determine for Morey's initial 25 percent investment as of June 30.3. **Goodwill Recognition**: Calculate the goodwill amount for inclusion on Morey’s December 31 consolidated balance sheet, assuming no impairments.4. **Noncontrolling Interest**: Calculate the amounts for June 30 and December 31 consolidated balance sheets.**Calculated Values:**| Calculation | Amount ||--------------------------------------------------|-------------|| a. Acquisition-date fair value | $860,000 || b. Revaluation gain | $27,100 || c. Goodwill | $67,600 || d. Noncontrolling interest on June 30 | || Noncontrolling interest on December 31 | |This analysis outlines essential financial considerations for acquisitions, emphasizing key accounting practices for investments and valuation.

In the event that one company buys another, financial information is recorded and reported using the…

On January 1, 2021, Morey, Inc., exchanged $167,900 for 25 percent of Amsterdam Corporation. Morey appropriately applied the equity method to this investment. At January 1, the book values of Amsterdam's assets and liabilities approximated their fair values. On June 30, 2021, Morey paid $602,000 for an additional 70 percent of Amsterdam, thus increasing its overall ownership to 95 percent. The price paid for the 70 percent acquisition was proportionate to Amsterdam's total fair value. At June 30, the carrying amounts of Amsterdam's assets and liabilities approximated their fair values. Any remaining excess fair value was attributed to goodwill. Amsterdam reports the following amounts at December 31, 2021 (credit balances shown in parentheses): Revenues Expenses Retained earnings, January 1 Dividends declared, October 1 Common stock Amsterdam's revenue and expenses were distributed evenly throughout the year, and no changes in Amsterdam's stock have occurred. a. Using the acquisition method, calculate the acquisition-date fair value of Amsterdam to be included in Morey's June 30 consolidated financial statements. b. Using the acquisition method, calculate the revaluation gain (or loss) reported by Morey for its 25 percent investment in Amsterdam on June 30. c. Using the acquisition method, calculate the amount of goodwill recognized by Morey on its December 31 consolidated balance sheet (assume no impairments have been recognized). d. Using the acquisition method, calculate the noncontrolling interest amount reported by Morey on its June 30 and December 31 consolidated balance sheet. a. b. C. d. $(381,000) 221,000 (212,400) 20,000 (500,000) Acquisition-date fair value Revaluation gain Goodwill Noncontrolling interest on June 30 Noncontrolling interest on December 31 $ 860,000 $ 27,100 $ 67,600

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q