P company paid $3,600,000 in cash, to acquire 90%of S company on January 1, 2014. The total stockholder's equity of S company at that time was $5,000,000. Below are the assets and liabilities of S company book value that differ with the fair value on 1/1.2014: - inventory (sold in the current year) was overvalued by $200,000. - lands was overvalued by $500,000. -equipment remaining life of 4 years was undervalued by $400,000 - building (remaining life of 5 years) was overvalued by $750,000. - notes receivable (due in 4 years) was undervalued by $200,000. S company declared a dividend of $150,000, for March and June 2014 each. S company net income for the year was $1,000,000. Required: 1- calculate Goodwill that should be reported in the consolidated balance sheet. 2- calculate income from S company for 2014. * M

P company paid $3,600,000 in cash, to acquire 90%of S company on January 1, 2014. The total stockholder's equity of S company at that time was $5,000,000. Below are the assets and liabilities of S company book value that differ with the fair value on 1/1.2014: - inventory (sold in the current year) was overvalued by $200,000. - lands was overvalued by $500,000. -equipment remaining life of 4 years was undervalued by $400,000 - building (remaining life of 5 years) was overvalued by $750,000. - notes receivable (due in 4 years) was undervalued by $200,000. S company declared a dividend of $150,000, for March and June 2014 each. S company net income for the year was $1,000,000. Required: 1- calculate Goodwill that should be reported in the consolidated balance sheet. 2- calculate income from S company for 2014. * M

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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Sutton Company purchased 10% of the outstanding stock of Roberts Company on January 1, 2012. Roberts reported net income of $155,000 and declared dividends of $40,000 during 2012. How would these events be reported by Sutton using the cost method?
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Eastern Management Ltd acquired all the assets and liabilities of King Ltd on 30 June 2017. The carrying amount and estimated fair value of assets and liabilities of King Ltd to be taken over are as follows: Carrying amount Fair value Accounts Receivable $760,000 $720,000 Inventory $1,300,000 $1,440,000 Property, plants and equipment $1,680,000 $1,560,000 Accounts payables $680,000 $680,000 Provision for employees benefits $170,000 $220,000 In addition to these assets and liabilities, due diligence identified the existence of brand names that were valued by an expert at $500,000. The due diligence process also uncovered contingent liabilities that were reliably measured at $150,000. The price paid was $4.8 million and costs of $100,000 were incurred in the purchase. Required: Calculate the amount of goodwill that would be recorded in the books of Eastern Management Ltd following the acquisition of King Ltd. Show all workings. How…
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On January 1, 2015 P company acquired 80% interest in S Company for P2,000,000 cash. The stockholders' equity of S at the time of acquisition is P 1,875,000. On January 1, 2015, NCI is measured at its implied fair value. The excess of cost over book value of interest acquired is allocated to the following assets: Inventories: 100,000 (sold in 2013) Building: 200,000 (5-year remaining life) During 2015, S company reported total comprehensive income of 500,000 and paid dividends of P 100,000. How much goodwill (gain on bargain purchase) is reported in the consolidated statement of financial position on January 1, 2015? A. 325,000 B. 200,000 C. (325,000) D. (375,000)
On January 1, 2018, Powers Company acquired 80% of the ordinary share of Scullery Company for $195,000. On this date Scullery had total owners' equity of $200,000 (ordinary share, premium ordinary and retained earnings of $10,000, $90,000, and $100,000 respectively). In that date inventory undervalued $6,250 and equipment undervalued $12,500. The equipment has a remaining life of five years and straight-line depreciation is used. The following transaction occurred during 2018 and 2019: 1) On December 31, 2018, Powers sold equipment to Scullery at a gain of $10,000. During 2019, the equipment was used by Scullery. Depreciation is being computed using the straight-line method, a five-year life, and no salvage value. 2) during 2018scullery sold merchandise inventory 120,000 to powers with gross profit 25% which sold all except 20,000 3) On July 1, 2018 Scullery sold land $100,000 to Powers including 10,000 gain. 4) 1/1/2019 Scullery sold a truck to Powers for 70,000 and book value 50,000…
3) On January 1, 2013, Pendal Corporation purchased 25% of the outstanding common stock of Sedda Corporation for $100,000 cash. Book value and fair value of Sedda's assets and liabilities at the time of acquisition are shown below. Assets Book Fair Values $40,000 Values $40,000 Cash Accounts receivable 100,000 90,000 50,000 210,000 $390,000 Inventories 40,000 Equipment 180,000 $360,000 Liabilities & Equities Accounts payable Note payable Capital stock Retained earnings $110,000 $110,000 50,000 40,000 100,000 100,000 $360,000 $150,000 Required: Prepare an allocation schedule for Pendal's investment in Sedda.