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 Revenues $ (300,000) (200,000) Cost of goods sold 140,000 80,000 Expenses 20,000 10,000 Net income $ (140,000) (110,000) Retained earnings, 1/1 $ (300,000) (150,000) Net income (140,000) (110,000) Dividends declared –0– –0– Retained earnings, 12/31 $ (440,000) (260,000) Cash and receivables $ 210,000 $ 90,000 Inventory 150,000 110,000 Investment in Suarez 260,000 –0– Equipment (net) 440,000 300,000 Total assets 1,060,000 $ 500,000 Liabilities $ (420,000) (140,000) Common stock (200,000) (100,000) Retained earnings, 12/31 (440,000) (260,000) Total liabilities and equities (1,060,000) (500,000) 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. What is the total for consolidated expenses? I have the answer but I'm trying to see how you calculated the book value of net asset here. Can you explain why the Book Value of net assets here is 250,000.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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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
Revenues	$ (300,000)	(200,000)
Cost of goods sold	140,000	80,000
Expenses	20,000	10,000
Net income	$ (140,000)	(110,000)
Retained earnings, 1/1	$ (300,000)	(150,000)
Net income	(140,000)	(110,000)
Dividends declared	–0–	–0–
Retained earnings, 12/31	$ (440,000)	(260,000)
Cash and receivables	$ 210,000	$ 90,000
Inventory	150,000	110,000
Investment in Suarez	260,000	–0–
Equipment (net)	440,000	300,000
Total assets	1,060,000	$ 500,000
Liabilities	$ (420,000)	(140,000)
Common stock	(200,000)	(100,000)
Retained earnings, 12/31	(440,000)	(260,000)
Total liabilities and equities	(1,060,000)	(500,000)

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.

What is the total for consolidated expenses? I have the answer but I'm trying to see how you calculated the book value of net asset here. Can you explain why the Book Value of net assets here is 250,000.

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