Timber, Inc. acquires 10% of Lake Co. on January 1, 2023 for $124,000 and appropriately accounted for the investment using the fair - value method. On January 1, 2024, Timber purchased an additional 25% of Lake for$390,000, achieving the ability to exert significant influence over Lake. On that date (i.e., Jan. 1, 2024), the fair value of Lake's common stock was $1,560,000 in total. Lake's January 1, 2024, book value equaled $1,280,000, although a land was undervalued by $ 70,000. Any additional excess cost over fair value was attributable to an undervalued patent with a 5-year remaining life. During 2024, Lake reported net income of $380,000 and paid dividends of $60,000Based on the above information, use the prospective approach to account for the change to the equity method and determine the following numbers.1. The amount of annual excess amortization for 20242. Excess allocated to land?3. excess allocated To patent?4. The amount of equity income that Timber should report for20245. the balance of Investment in Lake account at the end of 2024.

To address the change in accounting for Timber, Inc.'s investment in Lake Co. from the fair-value…

Answered: Timber, Inc. acquires 10% of Lake Co.…

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

On January 1, 2022, Aronsen Company acquired 90 percent of Sledel Company's outstanding shares. Sledel had a net book value on that date of $450,000: common stock ($12 par value) of $240,000 and retained earnings of $210,000. Aronsen paid $691,200 for this Investment. The acquisition-date fair value of the 10 percent noncontrolling Interest was $76,800. The excess fair value over book value associated with the acquisition was used to increase land by $222,000 and to recognize copyrights (12-year remaining life) at $96,000. Subsequent to the acquisition, Aronsen applied the Initial value method to its Investment account. In the 2022-2023 period, the subsidiary's retained earnings Increased by $230,000. During 2024, Siedel earned Income of $94,000 while declaring $34,000 in dividends. Also, at the beginning of 2024, Siedel Issued 4,000 new shares of common stock for $52 per share to finance the expansion of its corporate facilities. Aronsen purchased none of these additional shares and…
On December 31, Pacifica, Inc., acquired 100 percent of the voting stock of Seguros Company. Pacifica will maintain Seguros as a wholly owned subsidiary with its own legal and accounting identity. The consideration transferred to the owner of Seguros included 56,570 newly issued Pacifica common shares ($20 market value, $5 par value) and an agreement to pay an additional $130,000 cash if Seguros meets certain project completion goals by December 31 of the following year. Pacifica estimates a 50 percent probability that Seguros will be successful in meeting these goals and uses a 4 percent discount rate to represent the time value of money. Immediately prior to the acquisition, the following data for both firms were available: Seguros Seguros Book Fair Pacifica Values Values $(1,270,000) 889,000 (381,000) Revenues Expenses Net income $ Retained earnings, 1/1 $(1,048,000) (381,000) 139,000 Net income Dividends declared Retained earnings, 12/31 $(1,290,000) $ 121,000 146,000 457,000 $…
Victoria Corp acquired 80 per cent of the share capital of Whitehorse Corp on 1 July 2019. As at the date of acquisition, Whitehorse’s retained earnings was $40,000. On this date, the fair value of the 20% non-controlling interest in Whitehorse was $25,000. Ignore the tax rate. The statements of the financial position of Victoria Corp and Whitehorse Corp as at 30 June 2020 are as follows: Victoria Corp ($) Whitehorse Corp ($) Current assets 320,000 168,000 Non-current assets: Property, plant and equipment 190,000 36,000 Investment (in Whitehorse) 100,000 - 290,000 36,000 610,000 204,000 Current liabilities 270,000 94,000 Shareholders’ equity: Share capital…
Placid Lake Corporation acquired 80 percent of the outstanding voting stock of Scenic, Inc., on January 1, 2020, when Scenic had a net book value of $630,000. Any excess fair value was assigned to intangible assets and amortized at a rate of $6,000 per year. Placid Lake's 2021 net income before consideration of its relationship with Scenic (and before adjustments for intra-entity sales) was $530,000. Scenic reported net income of $340,000. Placid Lake declared $160,000 in dividends during this period; Scenic paid $63,000. At the end of 2021, selected figures from the two companies' balance sheets were as follows: Placid Lake Scenic Inventory $ 370,000 $ 113,000 Land 830,000 430,000 Equipment (net) 630,000 530,000 During 2020, intra-entity sales of $190,000 (original cost of $88,000) were made. Only 20 percent of this inventory was still held within the consolidated entity at the end of 2020. In 2021, $320,000 in intra-entity sales were made…
On Jan, 1 2024, NCDA Incorporated purchased 6,000 shares of the outstanding common stock of MT Corporation at acost of $140,000. MT had 30,000 shares of outstanding common stock. The total bok value and total fair value of MT' individual net asets on Jan 1, 2024, are $600,000 and $650,000, respectively. Asume that fair market value increments (i.e., the difference between the fair and book value of Brothers' assets) are depreciated using straight-line over years). The total fair value of hte 30,000 shares of MT's common stock on December 31, 2024, si $760,000. Both companies have a January through December fiscal year. The folowing data pertains ot Mountain Corporation during 2024: Dividends declared and paid, January 1 - December 31: $ 12,000 Netincome, January 1 - December 31: $18,000 1) Assume NCDA wil have significant influence over the financial and operating policies of MT, compute the goodwill (if any) on the acquisition. 2) Prepare the necesary entries of NCDA for 2024 under…
On January 1, 2019, Aronsen Company acquired 90 percent of Sledel Company's outstanding shares. Sledel had a net book value on that date of $504,300: common stock ($10 par value) of $207,500 and retained earnings of $296,800. Aronsen paid $600,300 for this Investment. The acquisition-date fair value of the 10 percent noncontrolling Interest was $66,700. The excess fair value over book value associated with the acquisition was used to increase land by $82,220 and to recognize copyrights (16-year remaining life) at $80,480. Subsequent to the acquisition, Aronsen applied the Initial value method to its Investment account In the 2019-2020 period, the subsidiary's retained earnings Increased by $100,600. During 2021, Siedel earned Income of $81,500 while declaring $20,300 in dividends. Also, at the beginning of 2021, Siedel Issued 4,150 new shares of common stock for $38 per share to finance the expansion of its corporate facilities. Aronsen purchased none of these additional shares and…
On January 1, 2022, Aspen Company acquired 80 percent of Birch Company's voting stock for $452,000. Birch reported a $505,000 book value, and the fair value of the noncontrolling interest was $113,000 on that date. Then, on January 1, 2023, Birch acquired 80 percent of Cedar Company for $112,000 when Cedar had a $104,000 book value and the 20 percent noncontrolling interest was valued at $28,000. In each acquisition, the subsidiary's excess acquisition-date fair over book value was assigned to a trade name with a 30-year remaining life. These companies report the following financial information. Investment income figures are not included. Items Sales: Aspen Company Birch Company Cedar Company Expenses: Aspen Company 2022 $ 517,500 294,500 Not available 2023 2024 $ 715,000 368,000 247,100 $ 935,000 594,600 223,400 $ 557,500 510,000 181,000 $ 55,000 18,000 6,000 Birch Company Cedar Company Dividends declared: $ 477,500 241,000 Not available $ 495,000 305,000 236,000 Aspen Company Birch…

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