On January 1, Jarel acquired 80 percent of the outstanding voting stock of Suarez for $260,000 cash consideration. The remaining 20 percent of Suarez had an acquisition date fair value of $65,000. On January 1, Suarez possessed equipment (five-year remaining life) that was undervalued on its books by $25,000. Suarez also had developed several secret formulas that Jarel assessed at $50,000. These formulas, although not recorded on Suarez’s financial records, were estimated to have a 20-year future life.As of December 31, the financial statements appeared as follows: Jarel Suarez Revenue $(300000) $(200000) Cost of goods sold 140000 80000 Expenses 20000 10000 Net income $(140000) $(110000) Retained earnings,1/1 $(300000) $(150000) Net income (140000) (110000) Dividend declared -0- -0- Retained earnings 12/31 $(440000) $(260000) Cash and receivables $210000 $90000 Inventory 150000 110000 Investment in Suarez 260000 -0- Equipments (net) 440000 300000 Total assets $1060000 $500000 Liabilities $(420000) (140000) Common stock (200000) (100000) Retained earnings 12/31 (440000) (260000) Total liabilities and equities $(1060000) $(500000 Included in the above statements, Jarel sold inventory costing $80,000 to Suarez for $100,000. Of these goods, Suarez still owns 60 percent on December 31.Choose the correct. What is the consolidated total for equipment (net) at December 31?a. $735,000.b. $740,000.c. $760,000.d. $765,000.
On January 1, Jarel acquired 80 percent of the outstanding voting stock of Suarez for $260,000 cash consideration. The remaining 20 percent of Suarez had an acquisition date fair value of $65,000. On January 1, Suarez possessed equipment (five-year remaining life) that was undervalued on its books by $25,000. Suarez also had developed several secret formulas that Jarel assessed at $50,000. These formulas, although not recorded on Suarez’s financial records, were estimated to have a 20-year future life.As of December 31, the financial statements appeared as follows: Jarel Suarez Revenue $(300000) $(200000) Cost of goods sold 140000 80000 Expenses 20000 10000 Net income $(140000) $(110000) Retained earnings,1/1 $(300000) $(150000) Net income (140000) (110000) Dividend declared -0- -0- Retained earnings 12/31 $(440000) $(260000) Cash and receivables $210000 $90000 Inventory 150000 110000 Investment in Suarez 260000 -0- Equipments (net) 440000 300000 Total assets $1060000 $500000 Liabilities $(420000) (140000) Common stock (200000) (100000) Retained earnings 12/31 (440000) (260000) Total liabilities and equities $(1060000) $(500000 Included in the above statements, Jarel sold inventory costing $80,000 to Suarez for $100,000. Of these goods, Suarez still owns 60 percent on December 31.Choose the correct. What is the consolidated total for equipment (net) at December 31?a. $735,000.b. $740,000.c. $760,000.d. $765,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, Jarel acquired 80 percent of the outstanding voting stock of Suarez for $260,000 cash
consideration. The remaining 20 percent of Suarez had an acquisition date fair value of $65,000. On
January 1, Suarez possessed equipment (five-year remaining life) that was undervalued on its books by
$25,000. Suarez also had developed several secret formulas that Jarel assessed at $50,000. These formulas, although not recorded on Suarez’s financial records, were estimated to have a 20-year future life.
As of December 31, the financial statements appeared as follows:
| Jarel | Suarez | |
| Revenue | $(300000) | $(200000) |
| Cost of goods sold | 140000 | 80000 |
| Expenses | 20000 | 10000 |
| Net income | $(140000) | $(110000) |
| $(300000) | $(150000) | |
| Net income | (140000) | (110000) |
| Dividend declared | -0- | -0- |
| Retained earnings 12/31 | $(440000) | $(260000) |
| Cash and receivables | $210000 | $90000 |
| Inventory | 150000 | 110000 |
| Investment in Suarez | 260000 | -0- |
| Equipments (net) | 440000 | 300000 |
| Total assets | $1060000 | $500000 |
| Liabilities | $(420000) | (140000) |
| Common stock | (200000) | (100000) |
| Retained earnings 12/31 | (440000) | (260000) |
| Total liabilities and equities | $(1060000) | $(500000 |
Included in the above statements, Jarel sold inventory costing $80,000 to Suarez for $100,000. Of these goods, Suarez still owns 60 percent on December 31.Choose the correct. What is the consolidated total for equipment (net) at December 31?
a. $735,000.
b. $740,000.
c. $760,000.
d. $765,000.
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