On March 31, 2020, United Corporation acquired for $750,000 cash all the outstanding common stock of National Company when National's balance sheet showed net assets of $500,000. Out-of-pocket costs of the business combination may be disregarded. The current fair values of assets and liabilities

On March 31, 2020, United Corporation acquired for $750,000 cash all the outstanding common stock of National Company when National's balance sheet showed net assets of $500,000. Out-of-pocket costs of the business combination may be disregarded. The current fair values of assets and liabilities

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

Pitino acquired 90 percent of Brey's outstanding shares on January 1, 2019, in exchange for $351,000 in cash. The subsidiary's stockholders' equity accounts totaled $335,000, and the noncontrolling interest had a fair value of $39,000 on that day. However, a building (with a ten-year remaining life) in Brey's accounting records was undervalued by $15,000. Pitino assigned the rest of the excess fair value over book value to Brey's patented technology (four-year remaining life). Brey reported net income from its own operations of $65,000 in 2019 and $81,000 in 2020. Brey declared dividends of $19,500 in 2019 and $23,500 in 2020. Brey sells inventory to Pitino as follows: Year Cost to Brey Transfer Price to Pitino Inventory Remaining at Year-End (at transfer price) 2019 $ 70,000 $ 120,000 $ 26,000 2020 77,000 140,000 38,000 2021 99,000 165,000 40,000 At December 31, 2021, Pitino owes Brey $17,000 for inventory acquired during the…
On January 1, 2020, the Pacita Corporation purchased equity securities to be held for trading purposes for P2,000,000. The company also paid commission, taxes and other transaction costs amounting to P50,000. The securities had fair values at December 31, 2020 and 2021, respectively: P1,750,000 and P2,100,000. No securities were sold during 2021. What amount of unrealized gain or loss should be reported in the 2021 profit or loss section of the statement of comprehensive income? P200,000 loss P250,000 loss P350,000 gain P100,000 gain а. b. с. d.
On January 1, 2021, Alamar Corporation acquired a 42 percent interest in Burks, Inc., for $185,000. On that date, Burks’s balance sheet disclosed net assets with both a fair and book value of $337,000. During 2021, Burks reported net income of $84,000 and declared and paid cash dividends of $24,000. Alamar sold inventory costing $29,000 to Burks during 2021 for $41,000. Burks used all of this merchandise in its operations during 2021. Prepare all of Alamar’s 2021 journal entries to apply the equity method to this investment. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
On January 1, 2020, Pail Corporation acquired 75 percent of Sand Company's common stock for $525,000 cash. The fair value of the noncontrolling interest at that date was determined to be $175,000. At the date of the business combination, the book values of Sand's net assets and liabilities approximated fair value except for depreciable plant assets, which were OVERvalued by $4000 and Inventory, which was UNDERvalued by $9000 The remaining useful life of the plant assets was set at 10 years. For the year ended December 31, 2020, Pail reported Cost of Goods Sold of $14000 on its general ledger. Sand reported Cost of Goods Sold of $16000 on its general ledger. What amount of COST OF GOODS SOLD should be reported on the 12/31/20 consolidated Income Statement?
On January 3, 2019, Persoff Corporation acquired all of the outstanding voting stock of Sea Cliff, Inc., in exchange for $6,815,000 in cash. Persoff elected to exercise control over Sea Cliff as a wholly owned subsidiary with an independent accounting system. Both companies have December 31 fiscal year-ends. At the acquisition date, Sea Cliff’s stockholders’ equity was $2,527,500 including retained earnings of $1,727,500. Persoff pursued the acquisition, in part, to utilize Sea Cliff’s technology and computer software. These items had fair values that differed from their values on Sea Cliff’s books as follows: Asset Book Value Fair Value RemainingUseful Life Patented technology $ 152,500 $ 2,427,500 7 years Computer software $ 67,500 $ 1,867,500 12 years Sea Cliff’s remaining identifiable assets and liabilities had acquisition-date book values that closely approximated fair values. Since acquisition, no assets have been impaired. During the next three years, Sea Cliff…
On January 1, 2021, Alamar Corporation acquired a 36 percent interest in Burks, Inc., for $198,000. On that date, Burks’s balance sheet disclosed net assets with both a fair and book value of $353,000. During 2021, Burks reported net income of $84,000 and declared and paid cash dividends of $24,000. Alamar sold inventory costing $27,000 to Burks during 2021 for $35,000. Burks used all of this merchandise in its operations during 2021. Prepare all of Alamar’s 2021 journal entries to apply the equity method to this investment 1. Record the acquisition of a 36 percent interest in Burks
On January 1, 2019, Pride Corporation purchased 90 percent of the outstanding voting shares of Star, Inc., for $657,000 cash. The acquisition-date fair value of the noncontrolling interest was $73,000. At January 1, 2019, Star's net assets had a total carrying amount of $512,000. Equipment (eight-year remaining life) was undervalued on Star's financial records by $49,600. Any remaining excess fair value over book value was attributed to a customer list developed by Star (four-year remaining life), but not recorded on its books. Star recorded net income of $43,400 in 2019 and $49,600 in 2020. Each year since the acquisition, Star has declared a $12,400 dividend. At January 1, 2021, Pride's retained earnings show a $155,000 balance. Selected account balances for the two companies from their separate operations were as follows: Pride 2021 Revenues $ 308,800 2021 Expenses 217,000 What is consolidated net income for 2021? Multiple Choice $147,600. O $119,900. $99,300. Star $ 176,700 120,900…
On January 1, 2020, Waterway Corporation purchased 40% of the common shares of Wildhorse Company for $192,000. During the year, Wildhorse earned net income of $81,000 and paid dividends of $20,250.Prepare the entries for Waterway to record the purchase and any additional entries related to this investment in Wildhorse Company in 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit (To record purchase of stock.) (To record receipt of dividends.) (To record revenue.)
Allerton Company acquires all of Deluxe Company’s assets and liabilities for cash on January 1, 2018, and subsequently formally dissolves Deluxe. At the acquisition date, the following book and fair values were available for the Deluxe Company accounts:Prepare Allerton’s entry to record its acquisition of Deluxe in its accounting records assuming the following cash exchange amounts:1. $145,000.2. $110,000.
Following are selected account balances from Peregrine Company and Sprano Corporation as of December 31, 2021: On January 1, 2021, Peregrine acquired all of Sprano’s outstanding stock for $680,000 fair value in cash and common stock. At the date of acquisition, copyrights (with a 6-year remaining life) were undervalued by $120,000 (i.e., market value was higher than book value). Peregrine applies the equity method to maintain the Investment in Sprano account. For the year ending December 31, 2021 determined the total Equity Income in Sprano reported in Peregrine’s book.
On May 28, 2018, Pesky Corporation acquired all of the outstanding common stock of Harman, Inc. for$420 million. The fair value of Harman’s identifiable tangible and intangible assets totaled $512 million, and thefair value of liabilities assumed by Pesky was $150 million.Pesky performed a goodwill impairment test at the end of its fiscal year ended December 31, 2018. Management has provided the following information:Fair value of Harman, Inc. $400 millionFair value of Harman’s net assets (excluding goodwill) 370 millionBook value of Harman’s net assets (including goodwill) 410 millionRequired:1. Determine the amount of goodwill that resulted from the Harman acquisition.2. Determine the amount of goodwill impairment loss that Pesky should recognize at the end of 2018, if any.3. If an impairment loss is required, prepare the journal entry to record the loss.
On May 31, 2021, Oriole Company paid $3,675,000 to acquire all of the common stock of Pharoah Corporation, which became a division of Oriole. Pharoah reported the following balance sheet at the time of the acquisition: Current assets $ 945,000 Current liabilities $ 630,000 Noncurrent assets 2,835,000 Long-term liabilities 525,000 Stockholder's equity 2,625,000 Total assets $3,780,000 Total liabilities and stockholder's equity $3,780,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Pharoah was $3,255,000. At December 31, 2021, Pharoah reports the following balance sheet information: Current assets $ 840,000 Noncurrent assets (including goodwill recognized in purchase) 2,520,000 Current liabilities (735,000 ) Long-term liabilities (525,000 ) Net assets $2,100,000 It is determined that the fair value of the Pharoah division is $2,310,000.…