Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2019. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervaluec by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any exces consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2019. Demers reported
common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued
by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess
consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an
annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:
2019
2020
2021
$100,000 $120,000
$130,000
Net
income
Dividends 40,000 50,000
60,000
Assume the initial value method is applied.
Compute Pell's Investment in Demers at December 31, 2020.
Multiple Choice
< Prev
7 of 10
54
F2
#3
E
80
F3
$
4
MAY
29
F4
R
do 5
%
F5
T
6
Next >
N
P
MacBook Air
F6
Y
&
7
AA
F7
U
W
* 00
8
DII
F8
9
F9
0
Transcribed Image Text:Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2019. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired. Demers earns income and pays dividends as follows: 2019 2020 2021 $100,000 $120,000 $130,000 Net income Dividends 40,000 50,000 60,000 Assume the initial value method is applied. Compute Pell's Investment in Demers at December 31, 2020. Multiple Choice < Prev 7 of 10 54 F2 #3 E 80 F3 $ 4 MAY 29 F4 R do 5 % F5 T 6 Next > N P MacBook Air F6 Y & 7 AA F7 U W * 00 8 DII F8 9 F9 0
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