Patty Corporation acquired 100 percent of Oliver Company's outstanding common stockon January 1, 20X1 for $639,000 in cash. Oliver reported net assets with a carryingamount of $374,000 at that time. Some of Oliver's assets either were unrecorded (havingbeen internally developed) or had fair values that differed from book values as follows:BookFairValuesValuesTrademarks (indefinite life) $ 101,500 $249,500Customer relationships (5-0 91,200year remaining life)Equipment (10-yearremaining life)364,000 323,800Any goodwill is considered to have an indefinite life with no impairment charges duringthe year. Assume Patty applies the equity method to account for its investment in Oliver.In year 2021, Oliver reported net income of $350,600 and declared dividend of $98,000.The amount of Equity in Oliver Earnings reported on Patty's financial record beforeconsolidation would be:336,380328,340252,600350,600

Oliver Company was purchased by Patty Corporation through a business combination. Oliver had assets…

Answered: Patty Corporation acquired 100 percent…

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter20: Corporations: Distributions In Complete Liquidation And An Overview Of Reorganizations

Section: Chapter Questions

Problem 35P

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Patrick Corporation acquired 100 percent of O’Brien Company’s outstanding common stock on January 1 for $700,400 in cash. O’Brien reported net assets with a carrying amount of $440,000 at that time. Some of O’Brien’s assets either were unrecorded (having been internally developed) or had fair values that differed from book values as follows: BookValues FairValues Trademarks (indefinite life) $ 94,500 $ 238,500 Customer relationships (5-year remaining life) 0 75,000 Equipment (10-year remaining life) 352,000 310,300 Any goodwill is considered to have an indefinite life with no impairment charges during the year. The following are financial statements at the end of the first year for these two companies prepared from their separately maintained accounting systems. O’Brien declared and paid dividends in the same period. Credit balances are indicated by parentheses. Patrick O'Brien Revenues $ (1,725,000 ) $ (676,000 ) Cost of goods sold…
On January 1, 20X1, XYZ, Inc. purchased 70% of Set Corporation for $469,000. On that date the book value of the net assets of Set totaled $500,000. Based on the appraisal done at the time of the purchase, all assets and liabilities had book values equal to their fair values except as follows: Book Value Fair Value Inventory $100,000 $120,000 Land 75,000 85,000 Equipment (useful life 4 years) 125,000 165,000 The remaining excess of cost over book value was allocated to a patent with a 10-year useful life. During 20X1 XYZ reported net income of $200,000 and Set had net income of $100,000. What income from subsidiary did Promo include in its net income if Promo uses the simple equity method? a. $70,000 b. $42,000 c. $38,000 d. $110,000
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