Parent Corporation acquired an 80% interest in Sub Corporation for $380,000 on January 1, 20X4 when Sub's stockholders' equity consisted of $200,000 capital stock and $75,000 retained earnings. The excess cost over book value acquired was allocated to inventory that was overvalued by $50,000 and sold in 20X4, to equipment that was undervalued by $100,000 and to goodwill. The undervalued equipment had an 8-year remaining useful life. Parent regularly sells inventory to Sub at 125% of cost. Intercompany sales were $200,000 in 20X5 and $100,000 in 20X6. Sub's inventory included $35,000 of this merchandise at 12/31/20X5 and $20,000 of this merchandise at 12/31/20X6. On October 1, 20X4 Sub sold Parent a building for $110,000. Sub had originally paid $150,000 for the building and had accumulated depreciation as of the date of sale of $90,000. Parent is depreciating the building at a rate of $22,000 per 12-month period. During 20X4 Sub sold land for which it had paid $50,000 to Parent for $65,000. Parent resold the land to outsiders during 20X6 for $75,000. 1. Find GW 2. Unrealized building gain for 20x4, 1/1/x6 and 12/31/x6 3. Find building depreciation Adj for 20x4, 20x5, and 20x
Parent Corporation acquired an 80% interest in Sub Corporation for $380,000 on January 1, 20X4 when Sub's stockholders' equity consisted of $200,000 capital stock and $75,000 retained earnings. The excess cost over book value acquired was allocated to inventory that was overvalued by $50,000 and sold in 20X4, to equipment that was undervalued by $100,000 and to goodwill. The undervalued equipment had an 8-year remaining useful life. Parent regularly sells inventory to Sub at 125% of cost. Intercompany sales were $200,000 in 20X5 and $100,000 in 20X6. Sub's inventory included $35,000 of this merchandise at 12/31/20X5 and $20,000 of this merchandise at 12/31/20X6. On October 1, 20X4 Sub sold Parent a building for $110,000. Sub had originally paid $150,000 for the building and had accumulated depreciation as of the date of sale of $90,000. Parent is depreciating the building at a rate of $22,000 per 12-month period. During 20X4 Sub sold land for which it had paid $50,000 to Parent for $65,000. Parent resold the land to outsiders during 20X6 for $75,000. 1. Find GW 2. Unrealized building gain for 20x4, 1/1/x6 and 12/31/x6 3. Find building depreciation Adj for 20x4, 20x5, and 20x
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Parent Corporation acquired an 80% interest in Sub Corporation for $380,000 on January 1, 20X4 when Sub's stockholders' equity consisted of $200,000 capital stock and $75,000 retained earnings . The excess cost over book value acquired was allocated to inventory that was overvalued by $50,000 and sold in 20X4, to equipment that was undervalued by $100,000 and to goodwill . The undervalued equipment had an 8-year remaining useful life.
Parent regularly sells inventory to Sub at 125% of cost. Intercompany sales were $200,000 in 20X5 and $100,000 in 20X6. Sub's inventory included $35,000 of this merchandise at 12/31/20X5 and $20,000 of this merchandise at 12/31/20X6.
On October 1, 20X4 Sub sold Parent a building for $110,000. Sub had originally paid $150,000 for the building and had accumulated depreciation as of the date of sale of $90,000. Parent is depreciating the building at a rate of $22,000 per 12-month period.
During 20X4 Sub sold land for which it had paid $50,000 to Parent for $65,000. Parent resold the land to outsiders during 20X6 for $75,000.
1. Find GW
2. Unrealized building gain for 20x4, 1/1/x6 and 12/31/x6
3. Find building depreciation Adj for 20x4, 20x5, and 20x6
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