Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Herbert, Inc., acquired all of Rambis Company's outstanding stock on January 1, 2020, for $589,000 in cash. Annual excess
amortization of $16,700 results from this transaction. On the date of the takeover, Herbert reported retained earnings of $473,000, and
Rambis reported a $240,000 balance. Herbert reported internal net income of $46,500 in 2020 and $58,500 in 2021 and declared
$10,000 in dividends each year. Rambis reported net income of $27,400 in 2020 and $39,400 in 2021 and declared $5,000 in
dividends each year.
a. Assume that Herbert's internal net income figures above do not include any income from the subsidiary.
• If the parent uses the equity method, what is the amount reported as consolidated retained earnings on December 31, 2021?
• What would be the amount of consolidated retained earnings on December 31, 2021, if the parent had applied either the initial
value or partial equity method for internal accounting purposes?
b. Under each of the following situations, what is…
Herbert, Inc., acquired all of Rambis Company’s outstanding stock on January 1, 2020, for $649,000 in cash. Annual excess amortization of $19,800 results from this transaction. On the date of the takeover, Herbert reported retained earnings of $410,000, and Rambis reported a $226,000 balance. Herbert reported internal net income of $42,500 in 2020 and $55,400 in 2021 and declared $10,000 in dividends each year. Rambis reported net income of $28,500 in 2020 and $41,400 in 2021 and declared $5,000 in dividends each year.
a. Assume that Herbert’s internal net income figures above do not include any income from the subsidiary.
If the parent uses the equity method, what is the amount reported as consolidated retained earnings on December 31, 2021?
What would be the amount of consolidated retained earnings on December 31, 2021, if the parent had applied either the initial value or partial equity method for internal accounting purposes?
b. Under each of the following situations, what is…
Herbert, Inc., acquired all of Rambis Company's outstanding stock on January 1, 2020, for $622,000 in cash. Annual excess
amortization of $11,300 results from this transaction. On the date of the takeover, Herbert reported retained earnings of $465,000, an
Rambis reported a $211,000 balance. Herbert reported internal net income of $43,500 in 2020 and $56,900 in 2021 and declared
$10,000 in dividends each year. Rambis reported net income of $22,100 in 2020 and $35,500 in 2021 and declared $5,000 in
dividends each year.
a. Assume that Herbert's internal net income figures above do not include any income from the subsidiary.
• If the parent uses the equity method, what is the amount reported as consolidated retained earnings on December 31, 2021?
• What would be the amount of consolidated retained earnings on December 31, 2021, if the parent had applied either the initial
value or partial equity method for internal accounting purposes?
b. Under each of the following situations, what is…
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- Herbert, Inc., acquired all of Rambis Company’s outstanding stock on January 1, 2020, for $652,000 in cash. Annual excess amortization of $13,700 results from this transaction. On the date of the takeover, Herbert reported retained earnings of $498,000, and Rambis reported a $232,000 balance. Herbert reported internal net income of $44,750 in 2020 and $58,350 in 2021 and declared $10,000 in dividends each year. Rambis reported net income of $23,300 in 2020 and $36,900 in 2021 and declared $5,000 in dividends each year. a. Assume that Herbert’s internal net income figures above do not include any income from the subsidiary. If the parent uses the equity method, what is the amount reported as consolidated retained earnings on December 31, 2021? What would be the amount of consolidated retained earnings on December 31, 2021, if the parent had applied either the initial value or partial equity method for internal accounting purposes? Equity method, initial value method and partial…arrow_forwardHerbert, Inc., acquired all of Rambis Company's outstanding stock on January 1, 2020, for $599,000 in cash. Annual excessamortization of $17,000 results from this transaction. On the date of the takeover, Herbert reported retained earnings of $486,000, andRambis reported a $220,000 balance. Herbert reported internal net income of $41,000 in 2020 and $55,600 in 2021 and declared$10,000 in dividends each year. Rambis reported net income of $27,500 in 2020 and $42,100 in 2021 and declared $5,000 individends each year.a. Assume that Herbert's internal net income figures above do not include any income from the subsidiary.• If the parent uses the equity method, what is the amount reported as consolidated retained earnings on December 31, 2021?. What would be the amount of consolidated retained earnings on December 31, 2021, if the parent had applied either the initialvalue or partial equity method for internal accounting purposes?b. Under each of the following situations, what is the…arrow_forwardHerbert, Inc., acquired all of Rambis Company’s outstanding stock on January 1, 2017, for $574,000 in cash. Annual excess amortization of $12,000 results from this transaction. On the date of the takeover, Herbert reported retained earnings of $400,000, and Rambis reported a $200,000 balance. Herbert reported internal net income of $40,000 in 2017 and $50,000 in 2018 and declared $10,000 in dividends each year. Rambis reported net income of $20,000 in 2017 and $30,000 in 2018 and declared $5,000 in dividends each year.arrow_forward
- Require A. B. & C.arrow_forwardVaughn Inc. acquired all of the outstanding common stock of Roberts Co. on January 1, 2020, for $276,000. Annual amortization of $21,000 resulted from this acquisition. Vaughn reported net income of $80,000 in 2020 and $60,000 in 2021 and paid $24,000 in dividends each year. Roberts reported net income of $50,000 in 2020 and $57,000 in 2021 and paid $12,000 in dividends each year. What is the Investment in Roberts Co. balance on Vaughn's books as of December 31, 2021, if the equity method has been applied?arrow_forwardVaughn Incorporated acquired all of the outstanding common stock of Roberts Company on January 1, 2023, for $276,000. Annual amortization of $21,000 resulted from this acquisition. Vaughn reported net income of $80,000 in 2023 and $60,000 in 2024 and paid $24,000 in dividends each year. Roberts reported net income of $50,000 in 2023 and $57,000 in 2024 and paid $12,000 in dividends each year. What is the Investment in Roberts Company balance on Vaughn's books as of December 31, 2024, if the partial equity method has been applied? Multiple Choice $317,000 is Incorrect $326,000 $359,000 $368,000 $383,000 please answer do not image.arrow_forward
- On May 31, 2021, Armstrong LTD paid $3,500,000 to acquire all of the common stock of Hall Corporation, which became a division of Armstrong. Hall reported the following balance sheet at the time of the acquisition: Current assets $ 900,000 Noncurrent assets 2,700,000 Total assets $3,600,000 Current liabilities $ 600,000 Long-term liabilities 500,000 Stockholders’ equity 2,500,000 Total liabilities and stockholders’ equity $3,600,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Hall was $3,100,000. At December 31, 2021, Hall reports the following balance sheet information: Current assets $800,000 Noncurrent assets (including goodwill recognized in purchase) 2,400,000 Current liabilities (700,000) Long-term liabilities (500,000) Net assets $2,000,000 It is…arrow_forwardOn May 31, 2021, Oriole Company paid $3,675,000 to acquire all of the common stock of Pharoah Corporation, which became a division of Oriole. Pharoah reported the following balance sheet at the time of the acquisition: Current assets $ 945,000 Current liabilities $ 630,000 Noncurrent assets 2,835,000 Long-term liabilities 525,000 Stockholder's equity 2,625,000 Total assets $3,780,000 Total liabilities and stockholder's equity $3,780,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Pharoah was $3,255,000. At December 31, 2021, Pharoah reports the following balance sheet information: Current assets $ 840,000 Noncurrent assets (including goodwill recognized in purchase) 2,520,000 Current liabilities (735,000 ) Long-term liabilities (525,000 ) Net assets $2,100,000 It is determined that the fair value of the Pharoah division is $2,310,000.…arrow_forwardOn May 31, 2021, Ivanhoe Company paid $3,640,000 to acquire all of the common stock of Oriole Corporation, which became a division of Ivanhoe. Oriole reported the following balance sheet at the time of the acquisition: Current assets $ 936,000 Current liabilities $ 624,000 Noncurrent assets 2,808,000 Long-term liabilities 520,000 Stockholder's equity 2,600,000 Total assets $3,744,000 Total liabilities and stockholder's equity $3,744,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Oriole was $3,224,000. At December 31, 2021, Oriole reports the following balance sheet information: Current assets $ 832,000 Noncurrent assets (including goodwill recognized in purchase) 2,496,000 Current liabilities (728,000 ) Long-term liabilities (520,000 ) Net assets $2,080,000 It is determined that the fair value of the Oriole division is $2,288,000. 1).…arrow_forward
- On April 1, 2024, BigBen Company acquired 35% of the shares of LittleTick, Incorporated BigBen paid $140,000 for the investment, which is $52,000 more than 35% of the book value of LittleTick's identifiable net assets. BigBen attributed $12,400 of the $52,000 difference to inventory that will be sold in the remainder of 2024, and the rest to goodwill. LittleTick recognized a total of $17,000 of net income for 2024, and paid total dividends for the year of $10,800; these dividends were issued quarterly. BigBen's investment in LittleTick will affect BigBen's 2024 net income by: Note: Round your answer to nearest whole dollar amount. Multiple Choice earnings of $2,901. a loss of $7,938. earnings of $4,463. earnings of $1,562.arrow_forwardOn May 31, 2020, Roddick Company paid $3,400,000 to acquire all of the ordinary shares of Bolt Corporation, which became a division of Roddick. Bolt reported the following statement of financial position at the time of the acquisition: Equity $2,500,000 Non-current assets $2,700,000 Non-current liabilities 500,000 Current assets 900,000 Current liabilities 600,000 Total assets $3,600,000 Total equity and liabilities $3,600,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Bolt was $2,800,000. On December 31, 2020, Bolt reports the following statement of financial position information: Current assets $ 800,000 Non-current assets (including goodwill recognized in purchase) 2,400,000 Current liabilities (700,000) Non-current liabilities (500,000) Net assets $2,000,000 It is determined that the recoverable amount value of the Bolt…arrow_forwardNascent, Inc., acquires 60 percent of Sea-Breeze Corporation for $414,000 cash on January 1, 2015. The remaining 40 percent of the Sea-Breeze shares traded near a total value of $276,000 both before and after the acquisition date. On January 1, 2015, Sea-Breeze had the following assets and liabilities:The companies’ financial statements for the year ending December 31, 2018, follow:Answer the following questions:a. How can the accountant determine that the parent has applied the initial value method?b. What is the annual excess amortization initially recognized in connection with this acquisition?c. If the parent had applied the equity method, what investment income would the parent have recorded in 2018?d. What amount should the parent report as retained earnings in its January 1, 2018, consolidated balance sheet?e. What is consolidated net income for 2018 and what amounts are attributable to the controlling and noncontrolling interests?f. Within consolidated statements at January 1,…arrow_forward
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