Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Chapter 4, Problem 2Q
Atwater Company acquires 80 percent of the outstanding voting stock of Belwood Company. On that date, Belwood possesses a building with a $160,000 book value but a $220,000 fair value. At what value would this building be consolidated?
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Atwater Company acquires 80 percent of the outstanding voting stock of Belwood Company. On that date, Belwood possesses a building with a $160,000 book value but a $220,000 fair value. At what value would this building be consolidated?
Company Aero is about to acquire 100% of company Berry. Company Berry has identifiable net assets with book value of $300,000 and $500,000 respectively. As payment Company Aero will issue common stock with a fair value of $75,000. How should the transaction be recorded if the acquisition is:a) An acquisition of net assets?b) An acquisition of Company B’s common stock and Company B remains a separate legal entity?
Padre, Incorporated, buys 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2024, for $757,280
cash. At the acquisition date, Sierra's total fair value, including the noncontrolling interest, was assessed at $946,600, although
Sierra's book value was only $696,000. Also, several individual items on Sierra's financial records had fair values that differed from
their book values as follows:
Land
Buildings and equipment (10-year remaining life)
Copyright (20-year remaining life)
Notes payable (due in 8 years)
Revenues
Cost of goods sold
Depreciation expense
Amortization expense
Account
For internal reporting purposes, Padre, Incorporated, employs the equity method to account for this investment. The following
account balances are for the year ending December 31, 2024, for both companies.
Current assets
Investment in Sierra
Interest expense
Equity in income of Sierra
Net income
Retained earnings, 1/1/24
Net income
Dividends declared
Retained earnings, 12/31/24…
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- Godoarrow_forwardSummer Company holds assets with a fair value of $124,000 and a book value of $96,000 and liabilities with a book value and fair value of $23,000. Required: Compute the following amounts if Parade Corporation acquires 65 percent ownership of Summer: What amount did Parade pay for the shares if no goodwill and no gain on a bargain purchase are reported? What amount did Parade pay for the shares if the fair value of the noncontrolling interest at acquisition is $48,650 and goodwill of $38,000 is reported? What balance will be assigned to the noncontrolling interest in the consolidated balance sheet if Parade pays $82,550 to acquire its ownership and goodwill of $26,000 is reported?arrow_forwardPanther Company is about to acquire a 100% interest in Snake Company. Snake has identifiable net assets with book and fair values of $300,000 and $500,000, respectively. As payment, Panther will issue common stock with a fair value of $750,000. How would the transaction be recorded if the acquisition is: a. An acquisition of net assets? b. An acquisition of Snake’s common stock and Snake remains a separate legal entity?arrow_forward
- Summer Company holds assets with a fair value of $122,000 and a book value of $81,000 and liabilities with a book value and fair value of $23,000. Required: Compute the following amounts if Parade Corporation acquires 70 percent ownership of Summer: What amount did Parade pay for the shares if no goodwill and no gain on a bargain purchase are reported? What amount did Parade pay for the shares if the fair value of the noncontrolling interest at acquisition is $43,200 and goodwill of $45,000 is reported?arrow_forwardPadre, Incorporated, buys 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2024, for $791,520 cash. At the acquisition date, Sierra's total fair value, including the noncontrolling interest, was assessed at $989,400, although Sierra's book value was only $638,000. Also, several individual items on Sierra's financial records had fair values that differed from their book values as follows: Account Land Buildings and equipment (10-year remaining life) Copyright (20-year remaining life) Notes payable (due in 8 years) Book Value $ 65,200 295,000 Fair Value $ 307,200 276,000 104,000 (187,000) 218,000 (172,600) For internal reporting purposes, Padre, Incorporated, employs the equity method to account for this investment. The following account balances are for the year ending December 31, 2024, for both companies. Account Revenues Cost of goods sold Depreciation expense Amortization expense Interest expense Equity in income of Sierra Net income Retained earnings,…arrow_forwardPadre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2021, for $802,720 cash. At the acquisition date, Sierra's total fair value, including the noncontrolling interest, was assessed at $1,003,400 although Sierra's book value was only $690,000. Also, several individual items on Sierra's financial records had fair values that differed from their book values as follows: Book Value Land $ 65,000 Fair Value $ 290,000 Buildings and equipment (10-year remaining life) 287,000 Copyright (20-year remaining life) Notes payable (due in 8 years) 122,000 (176,000) 263,000 216,000 (157,600) For internal reporting purposes, Padre, Inc., employs the equity method to account for this investment. The following account balances are for the year ending December 31, 2021, for both companies. Padre Revenues Cost of goods sold Depreciation expense Amortization expense Interest expense Equity in income of Sierra Net income Retained earnings, 1/1/21 Net income…arrow_forward
- Plaza, Incorporated, acquires 80 percent of the outstanding common stock of Stanford Corporation on January 1, 2024, in exchange for $941, 800 cash. At the acquisition date, Stanford's total fair value, including the noncontrolling interest, was assessed at $1,177,250. Also at the acquisition date, Stanford's book value was $546, 100. Several individual items on Stanford's financial records had fair values that differed from their book values as follows: Items Book Value Fair Value Trade names (indefinite life) $ 300, 900 $ 360, 900 Property and equipment (net, 8-year remaining life) 233, 600 262, 400 Patent (14-year remaining life) 120, 900 154, 500 For internal reporting purposes, Plaza, Incorporated, employs the equity method to account for this investment. The following account balances are for the year ending December 31, 2024, for both companies. Accounts Plaza Stanford Revenues $ (795, 100) $ (782,600) Cost of goods sold 439, 600 331, 000 Depreciation expense 186, 400 29, 200…arrow_forwardPlaza, Incorporated, acquires 80 percent of the outstanding common stock of Stanford Corporation on January 1, 2024, in exchange for $1,007,100 cash. At the acquisition date, Stanford’s total fair value, including the noncontrolling interest, was assessed at $1,258,875. Also at the acquisition date, Stanford's book value was $533,800. Several individual items on Stanford’s financial records had fair values that differed from their book values as follows: Items Book Value Fair Value Trade names (indefinite life) $ 272,600 $ 405,100 Property and equipment (net, 8-year remaining life) 225,600 244,800 Patent (14-year remaining life) 130,400 161,200 For internal reporting purposes, Plaza, Incorporated, employs the equity method to account for this investment. The following account balances are for the year ending December 31, 2024, for both companies. Accounts Plaza Stanford Revenues $ (829,600) $ (681,100) Cost of goods sold 458,600 300,000 Depreciation expense…arrow_forwardPatty Corporation acquired 70 percent of the outstanding voting stock of Ally Company on January 1, 2023, for $490,000 in cash and other consideration. At the acquisition date, Patty assessed Ally's identifiable assets and liabilities at a collective net fair value of $700,000, and the fair value of the 30 percent noncontrolling interest was $210,000. No excess fair value over book value amortization accompanied the acquisition. Ally sells inventory to Patty at a markup equal to 25 percent of cost. Intra-entity transfers were $100,000 in 2023 and $150,000 in 2024. Of this inventory, S 25,000 of the 2023 transfers were retained and then sold by Patty in 2024, whereas $40,000 of the 2024 transfers were held until 2025. Ally reports net income of $120,000 for year 2024. The amount of net income attributable to noncontrolling interest on 2024 consolidated financial statement would be: 0 $33,600 $35,100 $36,000 $34,200arrow_forward
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