Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Chapter 1, Problem 28P
To determine
Introduction: When related companies trade with each other, sales between them require special accounting treatment, because a business cannot recognize profit through business activities with itself. When an investor company sells inventory to its investee company, the investment company can defer profit on such inventory until it is sold to an unrelated party.
The
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Harper, Inc., acquires 40 percent of the outstanding voting stock of Kinman Company on January 1, 2020, for $242,500 in cash. The book value of Kinman's net assets on that date was $425,000, although one of the company's buildings, with a $62,800 carrying amount, was actually worth $119,050. This building had a 10-year remaining life. Kinman owned a royalty agreement with a 20-year remaining life that was undervalued by $125,000.
Kinman sold inventory with an original cost of $37,800 to Harper during 2020 at a price of $54,000. Harper still held $23,550 (transfer price) of this amount in inventory as of December 31, 2020. These goods are to be sold to outside parties during 2021.
Kinman reported a $44,200 net loss and a $23,100 other comprehensive loss for 2020. The company still manages to declare and pay a $16,000 cash dividend during the year.
During 2021, Kinman reported a $58,600 net income and declared and paid a cash dividend of $18,000. It made additional inventory sales…
Harper, Inc., acquires 40 percent of the outstanding voting stock of Kinman Company on January 1, 2020, for $347,200 in cash. The book value of Kinman's net assets on that date was $680,000, although one of the company's buildings, with a $64,800 carrying amount, was actually worth $117,800. This building had a 10-year remaining life. Kinman owned a royalty agreement with a 20-year remaining life that was undervalued by $135,000.
Kinman sold inventory with an original cost of $77,700 to Harper during 2020 at a price of $111,000. Harper still held $24,900 (transfer price) of this amount in inventory as of December 31, 2020. These goods are to be sold to outside parties during 2021.
Kinman reported a $45,600 net loss and a $24,200 other comprehensive loss for 2020. The company still manages to declare and pay a $13,000 cash dividend during the year.
During 2021, Kinman reported a $49,600 net income and declared and paid a cash dividend of $15,000. It made additional inventory sales…
Harper, Incorporated, acquires 40 percent of the outstanding voting stock of Kinman Company on January 1, 2023, for $277,700 in cash. The book value of Kinman's net assets on that date was $540,000, although one of the company's buildings, with a $68,800 carrying amount, was actually worth $118,550. This building had a 10-year remaining life. Kinman owned a royalty agreement with a 20-year remaining life that was undervalued by $104,500.
Kinman sold inventory with an original cost of $35,700 to Harper during 2023 at a price of $51,000. Harper still held $26,250 (transfer price) of this amount in inventory as of December 31, 2023. These goods are to be sold to outside parties during 2024.
Kinman reported a $57,800 net loss and a $25,500 other comprehensive loss for 2023. The company still manages to declare and pay a $13,000 cash dividend during the year.
During 2024, Kinman reported a $50,600 net income and declared and paid a cash dividend of $15,000. It made additional inventory…
Chapter 1 Solutions
Advanced Accounting
Ch. 1 - What advantages does a company achieve when it...Ch. 1 - A company acquires a rather large investment in...Ch. 1 - What accounting treatments are appropriate for...Ch. 1 - Prob. 4QCh. 1 - Why does the equity method record dividends from...Ch. 1 - Prob. 6QCh. 1 - Smith. Inc., has maintained an ownership interest...Ch. 1 - Prob. 8QCh. 1 - Because of the acquisition of additional investee...Ch. 1 - Prob. 10Q
Ch. 1 - Prob. 11QCh. 1 - Prob. 12QCh. 1 - In a stock acquisition accounted for by the equity...Ch. 1 - Prob. 14QCh. 1 - What is the difference between downstream and...Ch. 1 - Prob. 16QCh. 1 - Prob. 17QCh. 1 - What is the fair-value option for reporting equity...Ch. 1 - When an investor uses the equity method to account...Ch. 1 - Prob. 2PCh. 1 - Prob. 3PCh. 1 - Under fair-value accounting for an equity...Ch. 1 - When an equity method investment account is...Ch. 1 - Prob. 6PCh. 1 - Prob. 7PCh. 1 - Prob. 8PCh. 1 - Evan Company reports net income of $140,000 each...Ch. 1 - Prob. 10PCh. 1 - Prob. 11PCh. 1 - Prob. 12PCh. 1 - Prob. 13PCh. 1 - Prob. 14PCh. 1 - Prob. 15PCh. 1 - Prob. 16PCh. 1 - Prob. 17PCh. 1 - Prob. 18PCh. 1 - Prob. 19PCh. 1 - Prob. 20PCh. 1 - Prob. 21PCh. 1 - Prob. 23PCh. 1 - Matthew, Inc., owns 30 percent of the outstanding...Ch. 1 - Prob. 26PCh. 1 - Prob. 28PCh. 1 - Prob. 29PCh. 1 - Prob. 30PCh. 1 - Prob. 31P
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