Perry acquired 80% of Salt on 1/1/2021 for $720,000 when Salt's equity consisted of$300,000 in capital stock and $200,000 in retained earnings. Salt's inventory wasunderstated by $50,000 Equipment with a 10-year life, was understated by $100,000,and building, with a 25-year life, was understated by $100,000. Any excess is goodwill.20212022Perry$Salt$Perry$Salt$Separate IncomeDividens1.150.000815.0001.450.000765.000600.000300.000650.000320.000REQUIRED1. Calculate the goodwill that should be reported in the consolidated balance sheet onDecember 31, 20222. Calculate income from Salt. for 2021 and 20223. Calculate the balance of the Investment in Salt account at December 31, 2021 and 20224. Calculate Noncontrolling interest share from Salt. for 2021 and 20225. Calculate the noncontrolling interest balance on December 31, 2021, and 2022

Requirement 1: Goodwill What is goodwill? Goodwill refers to the amount that Perry paid for Salt,…

Answered: Perry acquired 80% of Salt on 1/1/2021…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter12: Intangibles

Section: Chapter Questions

Problem 18E

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JLB Enterprises acquired 15% of REB Corporation on January 1, 2018, for $63,000 when the book value of REB's net assets was $360,000. During 2018, REB reported net income of $90,000 and paid dividends of $30,000. On January 1, 2019, JLB for $120,000. purchased an additional 25% of REB Any excess of cost over book value was attributable to goodwill (No amortization). On that same date, JLB changed to the equity method. During 2019, REB reported net income of $120,000 and paid dividends of $45,000. a. What investment income did JLB record from REB in 2018? b. What investment income did JLB record from REB in 2019? C. What journal entry was made on Jan 1 2019 as switch equity method? d. What was the balance in Equity Investment at December 31, 2019? (Hint: use the amount paid for 25% of REB from JLB to calculate the implied fair value of the original 15% of the investment)
On March 31, 2021, JISOO Company purchased 32,000 shares of the 40,000 outstanding shares of ROSECompany at a price of P1,200,000 with an excess of P30,000 over the book value of ROSE Company’snet assets. P13,000 of the excess is attributed to an undervalued equipment with a remaining usefullife of 10 years from the date of acquisition and the rest of the amount is attributed to goodwill. Forthe year 2021, JISOO Company reported a net income of P750,000 and paid dividends of P180,000.While ROSE Company reported a net income of P240,000 which was evenly earned during the yearand paid dividends to JISOO Company amounting to P39,000. Goodwill was not impaired in 2021.The retained earnings of JISOO Company at the end of 2021 per books is P1,025,000. JISOO Companyuses the cost method to account for its investment in ROSE Company. Non-controlling interest ismeasured at fair market value. Requirement:Compute for the non-controlling interest in net assets on December 31, 2021.
On January 1, 2020, Adamson, Inc. acquired the outstanding voting common stock of Skyview Corp. for $600,000. Of this payment, $85,000 was allocated to undervalued equipment (with a five-year life). Any remaining excess was attributable to goodwill.During 2020, Adamson bought inventory for $44,000 and sold it to Skyview for $98,500. 60% of these goods were still in the company's possession on December 31. The financial statements of the two companies as of December 31, 2020 are presented below. Adamson Skyview Sales revenue $ 750,000 $440,000 Cost of goods sold (414,975 ) (69,000 ) Gross profit 335,025 371,000 Operating expenses (65,000 ) (75,000 ) Income (loss) from subsidiary 246,300 0 Net Income $ 516,325 $296,000 Retained Earnings, 1/1/20 $ 670,000 $258,000 Net income 516,325 296,000…
On January 1, 2019, Field Company acquired 40% of North Company by purchasing 10,000 shares for $180,000 and obtained significant influence. On the date of acquisition, Field calculated that its share of the excess of the fair value over the book value of North’s depreciable assets was $15,000 and that the purchased goodwill was $12,000. At the end of 2019, North reported net income of $45,000 and paid dividends of $0.60 per share. Field depreciates its depreciable assets over a 12-year remaining life. Required: 1. Prepare all the journal entries of Field to record the preceding information for 2019. 2. Next Level What is the conceptual justification for the use of the equity method? {Chart of Accounts} {General Journal} The conceptual justification for the use of the equity method is: a. It recognizes that fair value is not an appropriate valuation method for the investment because the investor could influence the amount of income it recognizes. b. It recognizes…
On January 4, 2021, Jonathan Company purchased 75% interest in Monica Corporation for P300,000. Monica’s recorded assets and liabilities as of acquisition are P400,000 and P120,000, respectively. Net asset of Monica is fairly valued except for inventory which is over-valued by P20,000 and machinery (5-year useful life) which is under-valued by P40,000. NCI is measured at fair value. For the year 2021, Jonathan reported net income of P150,000 and paid dividend of P80,000 while Monica reported net income of P40,000 and paid dividend of P20,000. The parent elects the “equity method” in accounting for its investment in subsidiary. The working paper elimination entry for 2021 will include: a. Debit to dividend income, P15,000. b. Credit share in profit of the subsidiary, P30,000. c. Debit goodwill, P100,000 d. Credit depreciation expense, P8,000
On January 1, 2019, Field Company acquired 40% of North Company by purchasing 8,000 shares for $144,000 and obtained significant influence. On the date of acquisition, Field calculated that its share of the excess of the fair value over the book value of North’s depreciable assets was $15,000 and that the purchased goodwill was $12,000. At the end of 2019, North reported net income of $50,000 and paid dividends of $0.80 per share. Field depreciates its depreciable assets over a 12-year remaining life. Required: 1. Prepare all the journal entries of Field to record the preceding information for 2019. 2. Next Level What is the conceptual justification for the use of the equity method?
26. On January 1, 2022, Campbell Corp. purchases 100% of Manning Inc. for $9.6 million. At the time of acquisition, the fair market value of Manning's tangible net assets (excluding goodwill) is $7.9 million. Campbell ascribes the excess of $1,700,000 to goodwill. During the year the fair value of Manning declines to $8.0 million and the fair value of Manning's tangible net assets is estimated at $6.8 million as of December 31, 2022. a. Determine if the goodwill has become impaired and, if so, the amount of the impairment. b. What impact does the impairment of goodwill have on Campbell Corp's financial statements?
On January 3, 2021, Matteson Corporation acquired 40 percent of the outstanding common stock of O’Toole Company for $1,377,000. This acquisition gave Matteson the ability to exercise significant influence over the investee. The book value of the acquired shares was $909,000. Any excess cost over the underlying book value was assigned to a copyright that was undervalued on its balance sheet. This copyright has a remaining useful life of 10 years. For the year ended December 31, 2021, O’Toole reported net income of $261,000 and declared cash dividends of $50,000. On December 31, 2021, what should Matteson report as its investment in O’Toole under the equity method
On January 1, 2021 Major acquired 60% of Minor for a cash payment of $600,000. At date of acquisition, the fair value of Minor's net assets were $300,000. Assuming there is no control premium, how much Goodwill is recorded in the consolidated financial statements $420,000 $300,000 $700,000 $60,000
Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2022. 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: Net income Dividends 2022 $ 100,000 40,000 2023 $ 120,000 50,000 2024 $ 130,000 60,000 Assume the equity method is applied. Compute the noncontrolling interest in the net income of Demers at December 31, 2024. Multiple Choice $20,400 $24,600 $26,000
Gino Company acquired 30% of ABC Corporations share for P8,000,000 on July 1, 2020. ABCCorporation’s identifiable net assets on the date of acquisition are P20,000,000. Gino believes thatthe investee has known goodwill and the fair value of the corporation's net assets is the same as itscarrying amount except for the following: a. Equipment is undervalued by P2,000,000.b. Inventory’s fair value is P2,000,000 greater than its carrying amount. The equipment has a remaining life of 4 years and depreciated using the straight-line method. At theend of 2020, all inventories at the acquisition date are entirely sold.On November 30, ABC Corporation pays a P2,000,000 dividend to its shareholders. During the year,ABC Corporation reported a net income of P5,000,000, 40% of these were earned in the first half ofthe year. The fair value of ABC Corporation's shares held by Gino at the end of 2020 is P8,250,000.Requirements:1. Prepare the necessary journal entries to record the above transactions.2.…
Gino Company acquired 30% of ABC Corporations share for P8,000,000 on July 1, 2020. ABCCorporation’s identifiable net assets on the date of acquisition are P20,000,000. Gino believes thatthe investee has known goodwill and the fair value of the corporation's net assets is the same as itscarrying amount except for the following: a. Equipment is undervalued by P2,000,000.b. Inventory’s fair value is P2,000,000 greater than its carrying amount. The equipment has a remaining life of 4 years and depreciated using the straight-line method. At theend of 2020, all inventories at the acquisition date are entirely sold.On November 30, ABC Corporation pays a P2,000,000 dividend to its shareholders. During the year,ABC Corporation reported a net income of P5,000,000, 40% of these were earned in the first half ofthe year. The fair value of ABC Corporation's shares held by Gino at the end of 2020 is P8,250,000.Requirements: 1. Suppose that on November 30, 2020, ABC Corporation revalued its Land that…

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