Chapter 4, Problem 37P

Below are Lebnas Corp.’s 2019 income statement and comparative balance sheet at 12/31/2019 and 12/31/2018.  Additional information:                                                    On December 31, 2018, Lebnas acquired 25% of Island ’s common stock for $609,000. On that date, the carrying value of Island’s assets and liabilities, which approximated their fair values, was $2,435,000. Island reported income of $319,000 for the year ended December 31, 2019. No dividend income was received by Lebnas on Island’s common stock during the year 2019.   During 2018, Lebnas loaned $797,500 to POI , an unrelated company. POI made the first semi-annual principal repayment of $72,500, plus interest at 10%, on December 31, 2018. POI is current on the loan as of December 31, 2019.   On January 2, 2019, Lebnas sold equipment costing $145,000, with a carrying amount of $44,950 for cash.   On December 31, 2019, Lebnas entered into a finance lease for a new The present value of the annual rental…

On January 1, 2020, Pharoah Corporation purchased 40% of the common shares of Novak Company for $201,000. During the year, Novak earned net income of $77,000 and paid dividends of $19,250.Prepare the entries for Pharoah to record the purchase and any additional entries related to this investment in Novak Company in 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit             (To record purchase of stock.)                 (To record receipt of dividends.)                 (To record revenue.)

On July 31, 2020, Mexico Company paid $3,000,000 to acquire all of the common stock of Conchita Incorporated, which became a division (a reporting unit) of Mexico. Conchita reported the following balance sheet at the time of the acquisition. Current assets $  800,000 Current liabilities $  600,000 Noncurrent assets  2,700,000 Long-term liabilities 500,000     Total assets $3,500,000 Stockholders' equity  2,400,000         Total liabilities and stockholders' equity $3,500,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Conchita was $2,750,000. Over the next 6 months of operations, the newly purchased division experienced operating losses. In addition, it now appears that it will generate substantial losses for the foreseeable future. At December 31, 2020, Conchita reports the following balance sheet information. Current assets $  450,000  Noncurrent assets (including goodwill recognized in purchase)…

On 1 July 2019, Brad Ltd acquired all assets and liabilities of Pitt Ltd. In exchange for these assets and liabilities, Brad Ltd issued 100,000 shares that at date of issue had a fair value of $5.20 per share. Costs of issuing these shares amounted to $1,000. Legal cost associated with the acquisition of Pitt Ltd amounted to $1,200.The assets and liabilities of Pitt Ltd at 1 July 2019 were as follows:Carrying Amount ($) Fair Value ($)AssetsCash 2,000 2,000Accounts receivable 10,000 10,000Inventory 64,000 68,000Equipment 320,000 232,000Accumulated depn - Equipment (96,000) -Patents 280,000 280,000LiabilitiesAccounts payable (16,000) (16,000)Debentures (64,000) (64,000)Required:a) Prepare the acquisition analysis at 1 July 2019 for the acquisition of Pitt Ltd by Brad Ltd.b) Prepare the journal entries in the records of Brad Ltd at 1 July 2019.

Marie Bhd acquired 80% of Donny Bhd ordinary share capital on 1 January 2019. As at 31 December 2019, extracts from their individual statements of financial position showed: Accounts Marie Bhd (RM) Donny Bhd (RM) Current assets: Receivables 105,000 40,000 Current liabilities: Payables 90,000 21,000 As a result of trading during the year, Marie Bhd’s receivables balance included an amount due from Donny Bhd of RM5,000.Required:Explain the amount to be shown as the consolidated figure for receivables andpayables. Please show your calculation.

An investor company purchased 121,000 of the 250,000 outstanding shares of the investee company's common stock for $79,000 on January 1, 2021. During 2021, the investee company declared and paid dividends of $55,000 and reported earnings for the year of $355,000. If the investor company uses the equity method of accounting for its investment in the investee company, its Equity Investment in the investee company account at December 31, 2021 should be $____________. (Do not round your answer for any part of the computation.)

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…

Following are selected account balances from Peregrine Company and Sprano Corporation as of December 31, 2021:        On January 1, 2021, Peregrine acquired all of Sprano’s outstanding stock for $680,000 fair value in cash and common stock. At the date of acquisition, copyrights (with a 6-year remaining life) were undervalued by $120,000 (i.e., market value was higher than book value). Peregrine applies the equity method to maintain the Investment in Sprano account. For the year ending December 31, 2021 determined the total Equity Income in Sprano reported in Peregrine’s book.

On January 1, 2020, Sarasota Corporation purchased 20% of the common shares of Ivanhoe Company for $194,000. During the year, Ivanhoe earned net income of $82,000 and paid dividends of $20,500.Prepare the entries for Sarasota to record the purchase and any additional entries related to this investment in Ivanhoe Company in 2020.