Advanced Financial Accounting
Advanced Financial Accounting
11th Edition
ISBN: 9780078025877
Author: Theodore E. Christensen, David M Cottrell, Cassy JH Budd Advanced Financial Accounting
Publisher: McGraw-Hill Education
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Chapter 3, Problem 3.24P

Parent Company and Consolidated Balances

Exacto Company reported the following net income and dividends for the years indicated:

Chapter 3, Problem 3.24P, Parent Company and Consolidated Balances Exacto Company reported the following net income and

True Corporation acquired 75 percent of Exacto’s common stock on January 1, 20X5. On that date, the fair value of Exacto’s net assets was equal to the book value. True uses the equity method in accounting for its ownership in Exacto and reported a balance of $259,800 in its investment account on December 31, 20X7.

Required

  1. What amount did True pay when it purchased Exacto’s shares?
  2. What was the fair value of Exacto’s net assets on January 1, 20X5?
  3. What amount was assigned to the NCI shareholders on January 1, 20X5?
  4. What amount will be assigned to the NCI shareholders in the consolidated balance sheet prepared at December 31, 20X7?

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The comparative balance sheets and an income statement for Raceway Corporation follow. Balance Sheets As of December 31   Year 2 Year 1 Assets     Cash $ 6,300 $ 48,400 Accounts receivable 10,200 7,260 Inventory 45,200 56,000 Prepaid rent 700 2,140 Equipment 140,000 144,000 Accumulated depreciation (73,400) (118,000) Land 116,000 50,000 Total assets $ 245,000 $ 189,800 Liabilities     Accounts payable (inventory) $ 37,200 $ 40,000 Salaries payable 12,200 10,600 Stockholders’ equity     Common stock, $50 par value 150,000 120,000 Retained earnings 45,600 19,200 Total liabilities and stockholders’ equity $ 245,000 $ 189,800 Income Statement For the Year Ended December 31, Year 2 Sales $ 480,000 Cost of goods sold (264,000) Gross profit 216,000 Operating expenses   Depreciation expense (11,400) Rent expense (7,000) Salaries expense (95,200) Other operating expenses (76,000) Net income $ 26,400 Other Information Purchased…
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