Please show me the correct way to solve this financial accounting problem with accurate methods. Several years ago, a parent company acquired all of the outstandingcommon stock of its subsidiary for a purchase price of $320,000. On theacquisition date, this purchase price was $75,000 more than thesubsidiary's book value of Stockholders' Equity. The AAP was entirelyattributable to Goodwill. On the date of acquisition, the parentcompany's management believed that the goodwill had a 10-year usefullife.Since the date of acquisition, the subsidiary has reported a cumulative netincome of $260,000 and paid $105,000 in dividends to its parentcompany.Compute the balance of the Equity Investment account on the parent'sbalance sheet, assuming that the Goodwill asset has not declined in valuesince the date of acquisition.

Concept of Equity Investment Account:The Equity Investment account represents the parent company's…

Answered: Several years ago, a parent company…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Can you please give me correct answer the accounting question?
I need help with this general accounting question using the proper accounting approach.
At the beginning of the year SassyCat acquired 30% of the outstanding common stock of LazyMouse for $1,200,000. The book value of the net assets of LazyMouse at the time of the acquisition was $4,500,000. Any excess cost over the underlying book value was assigned to a patent that was undervalued on LazyMouse's balance sheet. The patent has a remaining useful life of 5 years. For the year, LazyMouse reported net income of $300,000 and paid cash dividends of $90,000. Question 1 At the end of the year the balance of the LazyMouse investment on the books of SassyCat should be ? (enter whole dollars without dollar signs)
General Accounting
One company acquired another in a transaction in which $100,000 of the acquisition price is assigned to goodwill. Several years later, a worksheet is being produced to consolidate these two companies. How is the reported value of the goodwill determined at this date?
Please provide the correct answer to this general accounting problem using valid calculations.
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.
The owners of Rainier Company are planning to sell the business to new interests. The cumulative net earnings for the past five years amounted to P16,500,000 including expropriation loss of P1,500,000. Goodwill is measured by capitalizing excess earnings at 25% with normal earnings at 20%. The fair value of the net assets of the entity at current year-end was P10,000,000. What is the acquisition cost of the entity? A. 16,400,000 B. 14,000,000 C. 14,400,000 D. 15,200,000
On September 1, 20Y8, Vernon Corporation acquired Barlow Enterprises for a cash payment of $2,300,000. At the time of acquisition, Barlow's balance sheet showed assets of $1,800,000, liabilities of $600,000, and owner's equity of $1,200,000. A recent appraisal indicated that the fair value of Barlow's assets is estimated to be $2,100,000. How much goodwill was generated due to this acquisition? What is the net dollar value impact this transaction had on assets? What is the net dollar value impact this transaction had on liabilities? What is the net dollar value impact this transaction had on equity?
On January 1, 2025, John Paul Jones Corp. purchased 30% of Sky Tech Inc. for $45 million. This acquisition gave John Paul Jones significant influence over Sky Tech. At the date of acquisition, the book value of Sky Tech's net assets was $75 million and their fair value was $90 million. The difference was attributed to the fair value of equipment exceeding book value, and the remaining useful life of this equipment was 5 years. For 2025, Sky Tech reported a net income of $75 million and declared and paid $20 million in dividends. Relative to its investment in Sky Tech, the amount of investment income reported by John Paul Jones Corp. on it’s year end December 31, 2025 income statement is: $6 million. $16.5 million. $22.5 million. $21.6 million. The total amount that John Paul Jones Corp. would report for its investment in Sky Tech Inc. on itsDecember 31, 2025 balance sheet is: $67.5 million. $61.5 million. $60.6 million. $66.6 million. Assume John Paul cannot exercise significant…
On June 28, Lexicon Corporation acquired 100% of the common stock of Gulf & Eastern. The purchase price allocation included the following items: $5.2 million, patent; $4.2 million, developed technology; $3.2 million, indefinite-life trademark; $6.2 million, goodwill. Lexicon’s policy is to amortize intangible assets using the straight-line method, no residual value, and a five-year useful life. What is the total amount of expenses (ignoring taxes) that would appear in Lexicon’s income statement for the year ended December 31 related to these items?
Meck Company is considering the acquisition of another entity. The following data relate to the acquiree: Shareholders' equity 5,000,000 Earnings for prior three years 1,500,000 The acquiree has a valuable patent which is not recorded. If the entity is sold, the patent would be transferred to the buyer for P500,000. Other assets are properly appraised. The patent has a remaining life of 5 years. The earnings of the entity are expected to increase 10% more than the average earnings of the past three years before taking into consideration the amortization of the patent cost. Compute for the goodwill under the following methods: 1. Average future earnings are capitalized at 8% 2. goodwill is measured at the average excess earnings capitalized at 10% with normal rate at 8%. 3. Goodwill is measured at the present value of the average excess earnings discounted at 10% for four years with normal rate of 8%. The present value of an ordinary annuity of 1 for 4 years at 10% is 3.17.

SEE MORE QUESTIONS

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS