P. acquired 40% of the equity securities of A Co. on Jan 1, 20X1 for $1,100,000 to exert significant influence over the company. P. also paid $100,000 of professional fees for the acquisition. All the identifiable assets and liabilities of A. Co. at the time of acquisition were recorded at fair value at $2,000,000 except for the following: Carrying value Fair value PP&E Inventory $1,500,000 200,000 $2,000,000 150,000 The PP&E has a remaining 5-years of useful life. A. Co. depreciates the PP&E using the straight-line method. 60% of the inventory held by the A. Co. at the time of the acquisition by P. with the fair value adjustment was sold during the year. During the year, A. Co. reported a net income of $300,000, and declared cash dividend in total of $100,000 to its shareholders in the year. Required: Determine the following: 1) The implied goodwill included in the investment paid; 2) The ending balance of the investment account in the associate A. on Dec 31, 20X1.

P. acquired 40% of the equity securities of A Co. on Jan 1, 20X1 for $1,100,000 to exert significant influence over the company. P. also paid $100,000 of professional fees for the acquisition. All the identifiable assets and liabilities of A. Co. at the time of acquisition were recorded at fair value at $2,000,000 except for the following: Carrying value Fair value PP&E Inventory $1,500,000 200,000 $2,000,000 150,000 The PP&E has a remaining 5-years of useful life. A. Co. depreciates the PP&E using the straight-line method. 60% of the inventory held by the A. Co. at the time of the acquisition by P. with the fair value adjustment was sold during the year. During the year, A. Co. reported a net income of $300,000, and declared cash dividend in total of $100,000 to its shareholders in the year. Required: Determine the following: 1) The implied goodwill included in the investment paid; 2) The ending balance of the investment account in the associate A. on Dec 31, 20X1.

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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