Chapter 3, Problem 9P

Boulder, Inc., obtained 90 percent of Rock Corporation on January 1, 2019. Annual amortization of $25,000 is applicable on the allocations of Rock's acquisition-date business fair value. On January 1, 2020, Rock acquired 75 percent of Stone Company's voting stock. Excess business fair-value amortization on this second acquisition amounted to $11,800 per year. For 2021, each of the three companies reported the following information accumulated by its separate accounting system. Separate operating income figures do not include any investment or dividend income.     Separate Operating Income Dividends Declared Boulder $360,900 $120,000 Rock 124,900 21,000 Stone 188,000 41,000     Required: What is consolidated net income for 2021? How is 2021 consolidated net income distributed to the controlling and noncontrolling interests? Amount a. Consolidated net income for 2021                              b. Controlling interest in consolidated net income…

Mighty Company purchased a 60 percent interest in Lowly Company on January 1, 2020, for $459,900 in cash. Lowly's book value at that date was reported as $637,500, and the fair value of the noncontrolling interest was assessed at $306,600. Any excess acquisition-date fair value over Lowly's book value is assigned to trademarks to be amortized over 20 years. Subsequently, on January 1, 2021, Lowly acquired a 20 percent interest in Mighty. The price of $380,000 was equivalent to 20 percent of Mighty's book and fair value.   Neither company has paid dividends since these acquisitions occurred. On January 1, 2021, Lowly's book value was $899,500, a figure that rises to $961,750 (common stock of $300,000 and retained earnings of $661,750) by year-end. Mighty's book value was $1.90 million at the beginning of 2021 and $2.00 million (common stock of $1 million and retained earnings of $1,000,000) at December 31, 2021. No intra-entity transactions have occurred, and no additional stock has…

Boulder, Inc., obtained 90 percent of Rock Corporation on January 1, 2019. Annual amortization of $26,000 is applicable on the allocations of Rock's acquisition-date business fair value. On January 1, 2020, Rock acquired 75 percent of Stone Company's voting stock. Excess business fair-value amortization on this second acquisition amounted to $13,000 per year. For 2021, each of the three companies reported the following information accumulated by its separate accounting system. Separate operating Income figures do not include any Investment or dividend Income. Boulder Rock Stone Separate Operating Income $397,500 a. b. 137,500 200,000 Dividends Declared Required: a. What is consolidated net Income for 2021? b. How is 2021 consolidated net income distributed to the controlling and noncontrolling Interests? $123,000 27,000 47,000 Answer is not complete. Consolidated net income for 2021 Controlling interest in consolidated net income Noncontrolling interest in consolidated net income…

In 2020, Gain Inc. purchased all of the assets of Cookie’sbusiness. As part of this purchase, Gain Inc. purchased thefollowing intangible assets:• $ 270,000 for a 5-year agreement in which Cookie cannotcompete with Gain.• $ 720,000 for Goodwill. Gain plans to be in business for30 years.How much will Gain Inc. deduct as amortization in 2020 if theycommence business on 4/15/20?a. $58,500b. $49,500c. $46,750d. $40,500e. $31,500

On September 1, 2019, Simon Corporation acquired Jumbo Enterprises for a cash payment of OMR 970,520.  At the time of purchase, Simon Corporation’s balance sheet showed assets of OMR 520,000, liabilities of OMR 100,000, and owner’s equity of OMR 420,000.  The fair value of Jumbo’s assets is estimated to be OMR 620,000.  Compute the amount of goodwill acquired by Simon Corporation.

On January 1, 2019, Uncle Company purchased 80 percent of Nephew Company's capital stock for $614,400 in cash and other assets. Nephew had a book value of $719,000, and the 20 percent noncontrolling interest fair value was $153,600 on that date. On January 1, 2021, Nephew had acquired 30 percent of Uncle for $344,500. Uncle's appropriately adjusted book value as of that date was $1,115,000. Separate operating income figures (not including investment income) for these two companies follow. In addition, Uncle declares and pays $20,000 in dividends to shareholders each year and Nephew distributes $5,000 annually. Any excess fair-value allocations are amortized over a 10-year period. Nephew Company $ 33,800 53,000 57,800 Uncle Company $ 165,000 190,000 205,000 Year 2019 2020 2021 a. Assume that Uncle applies the equity method to account for this investment in Nephew. What is the subsidiary's income recognized by Uncle in 2021? b. What is the net income attributable to the noncontrolling…

On January 1, 2021, Morey, Inc., exchanged $176,425 for 25 percent of Amsterdam Corporation. Morey appropriately applied the equity method to this investment. At January 1, the book values of Amsterdam's assets and liabilities approximated their fair values On June 30, 2021, Morey paid $626,500 for an additional 70 percent of Amsterdam, thus increasing its overall ownership to 95 percent. The price paid for the 70 percent acquisition was proportionate to Amsterdam's total fair value. At June 30, the carrying amounts of Amsterdam's assets and liabilities approximated their fair values. Any remaining excess fair value was attributed to goodwill Amsterdam reports the following amounts at December 31, 2021 (credit balances shown in parentheses); Revenues Expenses Retained earnings, January 11 Dividends declared, October 1 Common stock Amsterdam's revenue and expenses were distributed evenly throughout the year, and no changes in Amsterdam's stock have occurred a. Using the acquisition…

On January 1, 2019, Uncle Company purchased 80 percent of Nephew Company's capital stock for $510,000 in cash and other assets. Nephew had a book value of $617,500, and the 20 percent noncontrolling interest fair value was $127,500 on that date. On January 1, 2021, Nephew had acquired 30 percent of Uncle for $330,250. Uncle's appropriately adjusted book value as of that date was $1,067,500. Separate operating income figures (not including investment income) for these two companies follow. In addition, Uncle declares and pays $20,000 in dividends to shareholders each year and Nephew distributes $5,000 annually. Any excess fair-value allocations are amortized over a 10-year period. Uncle Year Company 2019 $ 92,000 2020 2021 159,000 167,000 a. b. Nephew Company $ 31,800 48,400 51,400 a. Assume that Uncle applies the equity method to account for this investment in Nephew. What is the subsidiary's income recognized by Uncle in 2021? b. What is the net income attributable to the…

The individual financial statements for Gibson Company and Keller Company for the year ending December 31, 2021, follow. Gibson acquired a 60 percent interest in Keller on January 1, 2020, in exchange for various considerations totaling $1,050,000. At the acquisition date, the fair value of the noncontrolling interest was $700,000 and Keller’s book value was $1,400,000. Keller had developed internally a customer list that was not recorded on its books but had an acquisition-date fair value of $350,000. This intangible asset is being amortized over 20 years. Gibson uses the partial equity method to account for its investment in Keller. Gibson sold Keller land with a book value of $80,000 on January 2, 2020, for $180,000. Keller still holds this land at the end of the current year. Keller regularly transfers inventory to Gibson. In 2020, it shipped inventory costing $280,000 to Gibson at a price of $400,000. During 2021, intra-entity shipments totaled $450,000, although the original cost…