Peterson Corporation acquired 70 percent of the outstanding voting stock of Summer Company on January 1, 2020, for $395,500 in cash and other consideration. Atthe acquisition date, Peterson assessed Summer's identifiable assets and liabilities at a collective net fair value of $565,000, and the fair value of the 30 percentnoncontrolling interest was $169,500. No excess fair value over book value amortization accompanied the acquisition.Summer sells inventory to Peterson at a markup equal to 60 percent of cost Intra-entity transfers were $54,000 in 2020 and $84,000 in 2021. Of this inventory, $25,000of the 2020 transfers were retained and then sold by Peterson in 2021, whereas $39,000 of the 2021 transfers were held until 2022.Summer reports net income of $74,000 for year 2021 The amount of net income attributable to noncontrolling interest on 2021 consolidated financial statement wouldbeO $19,680O S22.200O S20 625O S23,775

Since all intercompany sales are upstream, the effect on Summer's income must be reflected in the…

Answered: Peterson Corporation acquired 70…

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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On January 1, 2024, Brooks Corporation exchanged $1,194,000 fair-value consideration for all of the outstanding voting stock of Chandler, Incorporated. At the acquisition date, Chandler had a book value equal to $1,150,000. Chandler’s individual assets and liabilities had fair values equal to their respective book values except for the patented technology account, which was undervalued by $216,000 with an estimated remaining life of six years. The Chandler acquisition was Brooks’s only business combination for the year. In case expected synergies did not materialize, Brooks Corporation wished to prepare for a potential future spin-off of Chandler, Incorporated. Therefore, Brooks had Chandler maintain its separate incorporation and independent accounting information system as elements of continuing value. On December 31, 2024, each company submitted the following financial statements for consolidation. Dividends were declared and paid in the same period. Accounts Brooks Corporation…
On January 1, 2020, Pail Corporation acquired 75 percent of Sand Company's common stock for $525,000 cash. The fair value of the noncontrolling interest at that date was determined to be $175,000. At the date of the business combination, the book values of Sand's net assets and liabilities approximated fair value except for depreciable plant assets, which were OVERvalued by $4000 and Inventory, which was UNDERvalued by $9000 The remaining useful life of the plant assets was set at 10 years. For the year ended December 31, 2020, Pail reported Cost of Goods Sold of $14000 on its general ledger. Sand reported Cost of Goods Sold of $16000 on its general ledger. What amount of COST OF GOODS SOLD should be reported on the 12/31/20 consolidated Income Statement?
Parson Company acquired an 80 percent interest in Syber Company on January 1, 2020. Any portion of Syber's business fair value in excess of its corresponding book value was assigned to trademarks. This intangible asset has subsequently undergone annual amortization based on a 15-year life. Over the past two years, regular intra-entity inventory sales transpired between the two companies. No payment has yet been made on the latest transfer. All dividends are paid in the same period as declared. The individual financial statements for the two companies as well as consolidated totals for 2021 follow (credit balances indicated by parentheses): ParsonCompany SyberCompany ConsolidatedTotals Sales $ (744,000 ) $ (654,000 ) $ (1,223,000 ) Cost of goods sold 450,000 412,000 691,000 Operating expenses 104,000 107,000 213,300 Income of Syber (102,960 ) 0 0 Separate company net income $ (292,960 ) $ (135,000 )…
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Plaza, Incorporated, acquires 80 percent of the outstanding common stock of Stanford Corporation on January 1, 2024, in exchange for $941, 800 cash. At the acquisition date, Stanford's total fair value, including the noncontrolling interest, was assessed at $1,177,250. Also at the acquisition date, Stanford's book value was $546, 100. Several individual items on Stanford's financial records had fair values that differed from their book values as follows: Items Book Value Fair Value Trade names (indefinite life) $ 300, 900 $ 360, 900 Property and equipment (net, 8-year remaining life) 233, 600 262, 400 Patent (14-year remaining life) 120, 900 154, 500 For internal reporting purposes, Plaza, Incorporated, employs the equity method to account for this investment. The following account balances are for the year ending December 31, 2024, for both companies. Accounts Plaza Stanford Revenues $ (795, 100) $ (782,600) Cost of goods sold 439, 600 331, 000 Depreciation expense 186, 400 29, 200…
On January 1, 2019, Monica Company acquired 80 percent of Young Company's outstanding common stock for $744,000. The fair value of the noncontrolling interest at the acquisition date was $186,000. Young reported stockholders' equity accounts on that date as follows: Common stock-$10 par value Additional paid-in capital Retained earnings In establishing the acquisition value, Monica appraised Young's assets and ascertained that the accounting records undervalued a building (with a five-year remaining life) by $90,000. Any remaining excess acquisition-date fair value was allocated to a franchise agreement to be amortized over 10 years. $ 300,000 50,000 450,000 During the subsequent years, Young sold Monica inventory at a 20 percent gross profit rate. Monica consistently resold this merchandise in the year of acquisition or in the period immediately following. Transfers for the three years after this business combination was created amounted to the following: Year 2019 2020 2021 Transfer…
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The Holtz Corporation acquired 80 percent of the 100,000 outstanding voting shares of Devine, Inc., for $6.45 per share on January 1, 2020. The remaining 20 percent of Devine’s shares also traded actively at $6.45 per share before and after Holtz’s acquisition. An appraisal made on that date determined that all book values appropriately reflected the fair values of Devine’s underlying accounts except that a building with a 5-year future life was undervalued by $65,500 and a fully amortized trademark with an estimated 10-year remaining life had a $85,000 fair value. At the acquisition date, Devine reported common stock of $100,000 and a retained earnings balance of $224,500. Following are the separate financial statements for the year ending December 31, 2021: HoltzCorporation Devine,Inc. Sales $ (747,000 ) $ (432,750 ) Cost of goods sold 207,000 135,000 Operating expenses 338,000 126,750 Dividend income (16,000 ) 0 Net income $…

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