On January 4 2011, Bailey corp purchased 40% of the voting common stock.. Accounting On January 4, 2011, Bailey Corp. purchased 40% of the voting common stock of EmeryCo., paying $3,000,000. Bailey properly accounts for this investment using the equitymethod. At the time of the investment, Emery's total stockholders' equity was$5,000,000. Bailey gathered the following information about Emery's assets andliabilities whose book values and fair values differed:BVFVBuilding (20-year life) $1,000,000 $1,800,000Equipment (5-year life) $1,500,000 $2,000,000Franchise (10-year life) $0$700,000Any excess of cost over fair value was attributed to goodwill, which has not beenimpaired. Emery Co. reported a net income of $400,000 for 2011 and paid dividendsof $200,000 during that year.a. What is the amount of the excess of the purchase price over book value?b. How much goodwill is associated with this investment?

Step 1:- Define GoodwillAn intangible asset such as goodwill arises when a company acquires an asset…

Answered: On January 4, 2011, Bailey Corp.…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On January 2, 2021, Marzelle Corp. purchased 30% of the voting common stock of Hoffman Co., paying $3,000,000. Marzelle decided to use the equity method to account for this investment. At the time of the investment, Hoffman's total stockholders’ equity was $8,000,000. Marzelle gathered the following information about Hoffman's assets and liabilities: Book Value Fair Value Buildings (10-year life) $ 400,000 $ 600,000 Equipment (5-year life) 1,200,000 1,400,000 Franchises (8-year life) $ 0 $ 480,000 For all other assets and liabilities, book value and fair value were equal. Any excess of cost over fair value was attributed to goodwill, which has not been impaired. For 2021, what is the total amount of excess amortization for Marzelle’s 30% investment in Hoffman? Group of answer choices 1-$20,000. 2-$120,000. 3-$60,000. 4-$36,000. 5-$40,000.
On January 2, 2022, Promenade Company purchased 25% of Twilight Company'S ordinary shares: no goodwill resulted from the purchase. Promenade appropriately carries this investment at equity and the balance in Twilight's investment account was 3,800,000 at December 31, 2022. Twilight reported net income of 2, 400, 000 for the year and paid dividends amounting to 960,000 during 2022. How much did Promenade pay for it's investment?
Blue Spruce Corporation purchased 300 common shares of Burke Inc. for $22,830 and accounted for them using FV-OCI. During the year, Burke paid a cash dividend of $3.45 per share. At year end, Burke shares had a fair value of $72.50 per share. (a) Prepare Blue Spruce's journal entry to record the purchase of the investment. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List debit entry before credit entry.) Account Titles and Explanation Debit Credit
On January 3, 2021, Madison Corp. purchased 30% of the voting common stock of Huntsville Co., paying $3,000,000. Madison decided to use the equity method to account for this investment. At the time of the investment, Huntsville's total stockholders' equity was $8,000,000. Madison gathered the following information about Huntsville's assets and liabilities: Buildings (18-year life) Equipment (5-year life) Franchises (8-year life) Book Value Fair Value $ 400,000 $ 680,000 1,200,000 1,400,000 $ 8 $ 480,000 For all other assets and liabilities, book value and fair value were equal. Any excess of cost over fair value was attributed to goodwill, which has not been impaired. For 2021, what is the total amount of excess amortization for Madison's 30% investment in Huntsville? Multiple Choice $36,000. $20,000. $40,000. $120,000. $60,000.
On January 2, 2022, Promenade Company purchased 25% of Twilight Company's ordinary shares; no goodwill resulted from the purchase. Promenade appropriately carries this investment at equity and the balance in Twilight's investment account was P3,800,000 at December 31, 2022. Twilight reported net income of P2,400,000 for the year and paid dividends amounting to P960,000 during 2022. How much did Promenade pay for its investment in Twilight?
On January 1, 2011, Goodwill Corporation purchased 25% of the outstanding voting shares of Short Supplies common stock for $210,000 cash. On that date, Short's book value and fair value were both $840,000. The equity method is deemed appropriate for this investment. Short's net income reported on December 31, 2011, was $80,000. During 2011, Short also paid cash dividends in the amount of $24,000. Required: Compute the amount that would be reported for the investment on Goodwill Corporation's financial statements at December 31, 2011.
Pharoah Company purchased 200 of the 1000 outstanding shares of Sheridan Company's common stock for $520000 on January 2, 2025. In 2025, Sheridan declared dividends of $60000 and reported earnings of $320000. If Pharoah uses the fair value method of accounting for its investment in Sheridan, the balance in Equity Investments (Sheridan) on December 31, 2025 should be O $572000. O $508000. O $584000. O $520000.
Runner Corporation, which reports under IFRS, has the following investments at December 31, 2024: 2. 3. 4. Trading investments: common shares of National Bank, cost $36,500, fair value $43,400. Investment in an associate (40% ownership): common shares of Sword Corp., cost $218,200, fair value cannot be determined because the shares do not trade publicly. Runner purchased the investment on January 1, 2024. For the year ended December 31, 2024, Sword Corp. reported net income of $46,600 and declared and paid dividends of $15,800. Equity investment: common shares of Epee Inc. (19% ownership) purchased on July 1, 2024, cost $423,300, fair value at December 31, 2024, $545,200. Management intends to purchase more shares of Epee in two years. Epee earned $39,900 for the year ended December 31, 2024, and declared and paid dividends of $1,800, which Runner received at the end of each quarter in 2024. Bond investment to be held to maturity: bonds of Ghoti Ltd., purchased at a cost equal to its…
The Crump Companies, Inc., has ownership interests in several public companies. At the beginning of 2018, thecompany’s ownership interest in the common stock of Silken Properties increased to the point that it becameappropriate to begin using the equity method of accounting for the investment. The balance in the investmentaccount was $31 million at the time of the change. Accountants working with company records determined thatthe balance would have been $48 million if the account had been adjusted to reflect the equity method.Required:1. Prepare the journal entry to record the change in accounting principle. (Ignore income taxes.)2. Briefly describe other steps Crump should take to report the change.3. Suppose Crump is changing from the equity method rather than to the equity method. How would youranswers to requirements 1 and 2 differ?
Ramirez Company has a held-for-collection investment in the 6%, 20-year bonds of Soto Company. The investment was originally purchased for $1,200,000 in 2016. Early in 2017, Ramirez recorded an impairment of $300,000 on the Soto investment, due to Soto’s financial distress. In 2018, Soto returned to profitability and the Soto investment was no longer impaired. What entry does Ramirez make in 2018 under (a) GAAP and (b) IFRS?
Please show the proper solution in a good accounting form.
Jon company owns two financial investments in the shares of listed companies. With the following details: Investment 1 - Acquired on september 1, 2020 at a cost of $50,000 with a fair value of $60,000 at year end for the purpose of trading. Investment 2 - Acquired on august 1, 2020 at a cost of $25,000 to hold indefinitely. Its fair value at year end is $20,000. What are the amounts to appear in the statement of Comprehensive Income for the year ended september 30, 2020?

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