4. On January 1, 2017, the Z Corporation acquired a 20% interest in D Company by purchasing 4,800shares of its 24,000 outstanding shares of common stock. The acquisition price was $30 per share.On the date of purchase, D Company's net assets were as follows:Book Value$ 60,000160,000$220,000Fair Value$ 74,000196.000$270,000Total liabilities$ 80,000$80,000During 2017, D Company earned income of $70,000 and paid dividends of $18,000.The depreciable assets have a ten-year remaining life and no residual value.Nondepreciable assetsDepreciable assetsTotal assetsDifference$14,00036,000$50,000Required:Prepare all of the journal entries on Z Corporation's books to record the acquisition andsubsequent events in 2017 related to the investment in D Company.

Equity method is used by the acquirer entity when the percentage investment lies between 20%-50%. As…

Answered: 4. On January 1, 2017, the Z.…

Financial Accounting

14th Edition

ISBN:9781305088436

Author:Carl Warren, Jim Reeve, Jonathan Duchac

Publisher:Carl Warren, Jim Reeve, Jonathan Duchac

Chapter15: Investments And Fair Value Accounting

Section: Chapter Questions

Problem 1E: Parilo Company acquired 170,000 of Makofske Co., 5% bonds on May 1, 2016, at their face amount....

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prepare of the related journal entries. On 1 January 2017, FIBERBOATS acquired 100% of BELL Corporation. FIBERBOATS issued 50,000 shares of its BD0.600 par ordinary shares, with a market price of BD0.400 on the date the acquisition was announced and BD0.800 on the date the acquisition was completed, for all of BELL Corporation ordinary shares. The book value of net assets of BELL Corporation at the date of acquisition was BD10,000. On that date, the fair value of BELL Corporation assets and liabilities equalled their respective carrying amounts with the exception of property, plant and equipment (PPE) that exceeded its book value by BD120,000. The fair value of BELL’s identifiable intangibles (in-process research and development) is BD70,000. The in-process research and development will be amortized over 5 years.
Pineapple Company acquired an 80% interest in Samsung Company for $272,000 cash on January 1, 2018. Samsung had the following Balance Sheet on the date of acquisition: Assets $ Liabilities $ Accounts receivable 90,000 Accounts payable 50,000 Depreciable fixed asstes 200,000 Bonds payable 50,000 Land 50,000 Discount on bonds payable (1,620) Goodwill 10,000 Comm stock ($10 par) 100,000 Retained Earnings 151,620 Total Asstes 350,000 Total liabilities & Equity 350,000 The excess of the price paid over book value is attributable to the Depreciable Fixed Assets, which have a fairvalue of $260,000. The Depreciable Assets have a 10 year remaining life.Samsung sold a piece of Land to Pineapple for $60,000 on January 1, 2019. It cost Samsung $50,000 to purchasethe land.On January 1, 2020, Samsung held merchandise acquired from Pineapple for $20,000. This beginning inventoryhad an applicable gross profit of 40%. During 2020, Pineapple sold $60,000 worth of merchandise…
9 On January 1, 2017, Sparky Co. acquired 80% of the outstanding stock of Panda Co. for P225,000 cash. Relevant information for Panda Co. on this date is as follows: Inventory 120,000 Land 240,000 Goodwill 10,000 Liabilities 30,000 Common Stock, P100 par 240,000 Retained earnings 100,000 At acquisition date, the book values of Panda Co.’s net identifiable assets and liabilities approximated their fair values. What amount shall be assigned to the minority interest on January 1, 2017? Group of answer choices 66,000 Cannot be determined 56,250 68,000
3 On January 1, 2017, Sparky Co. acquired 80% of the outstanding stock of Panda Co. for P225,000 cash. Relevant information for Panda Co. on this date is as follows: Inventory 120,000 Land 240,000 Goodwill 10,000 Liabilities 30,000 Common Stock, P100 par 240,000 Retained earnings 100,000 At acquisition date, the book values of Panda Co.’s net identifiable assets and liabilities approximated their fair values. How much is the gain on acquisition? Group of answer choices 48,750 47,000 58,750 39,000
Nascent, 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,…
Payday Company acquired an 80% interest in Sunday Company for $272,000 cash on January 1, 2018. Sunday had the following Balance Sheet on the date of acquisition: Sunday Company Balance Sheet January 1, 2018 Assets ($) Liabilities (S) 90,000 Accounts Payable 200,000 Bonds Payable 50,000 Discount on Bonds Payable 10,000 Common Stock ($10 par) Retained Earnings 350,000 Total Liabilities & Equity Accounts Receivable 50,000 50,000 Depreciable Fixed Assets Land (1,620) 100,000 Goodwill 151,620 Total Assets 350,000 The excess of the price paid over book value is attributable to the Depreciable Fixed Assets, which have a fair value of $260,000. The Depreciable Assets have a 10-year remaining life. Sunday sold a piece of Land to Payday for $60,000 on January 1, 2019. It cost Sunday $50,000 to purchase the land from an external party. On January 1, 2020, Sunday held merchandise acquired from Payday for $20,000. This beginning inventory had an applicable gross profit of 40%. During 2020, Payday…
On January 1, 2017, Sparky Co. acquired 80% of the outstanding stock of Panda Co. for P225,000 cash. Relevant information for Panda Co. on this date is as follows: Inventory              120,000 Land              240,000 Goodwill               10,000 Liabilities               30,000 Common Stock, P100 par              240,000 Retained earnings              100,000 At acquisition date, the book values of Panda Co.’s net identifiable assets and liabilities approximated their fair values. What amount shall be assigned to the minority interest on January 1, 2017? Group of answer choices Cannot be determined 66,000 56,250 68,000 PreviousNext
On January 1, 2017, Sparky Co. acquired 80% of the outstanding stock of Panda Co. for P225,000 cash. Relevant information for Panda Co. on this date is as follows: Inventory              120,000 Land              240,000 Goodwill               10,000 Liabilities               30,000 Common Stock, P100 par              240,000 Retained earnings              100,000 At acquisition date, the book values of Panda Co.’s net identifiable assets and liabilities approximated their fair values. How much is the gain on acquisition?
On January 1, 2020, Prestige Corporation acquired 100 percent of the voting stock of Stylene Corporation in exchange for $2,281,500 in cash and securities. On the acquisition date, Stylene had the following balance sheet:    Cash $ 40,600 Accounts payable $ 1,641,600 Accounts receivable 124,000 Inventory 141,000 Equipment (net) 1,990,000 Common stock 800,000 Trademarks 1,040,000 Retained earnings 894,000 Total assets $ 3,335,600 Total liabilities and equity $ 3,335,600 At the acquisition date, the book values of Stylene’s assets and liabilities were generally equivalent to their fair values except for the following assets: Asset Book Value Fair Value RemainingUseful Life Equipment $ 1,990,000 $ 2,145,000 8 years Customer lists 0 196,000 4 years Trademarks 1,040,000 1,121,500 indefinite During the next two years, Stylene has the following income and dividends in its own separately prepared financial…
D. On 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…
On January 1, 2015 ,Pub Corporation made a significant acquisition, purchasing 75 percent of Sub Corporation's outstanding voting stock for a total of $4,200,000. Sub Corporation's stockholders'equity at that time was made up of the following components (all values in thousands):Capital stock with a par value of $10: $2,000Additional paid-in capital: $1200Retained earnings as of December 31, 2014: $1500Total stockholders' equity: $4700The surplus fair value of the net assets obtained from this acquisition was allocated as follows: 10percent to underappreciated inventory (which was subsequently sold in 2015), 40 percent tounderappreciated plant assets with a remaining useful life of eight years, and the remaining 50 percentto goodwill.Fast forward to December 31, 2019, and we have the comparative trial balances for both PubCorporation and Sub Corporation.…
2. Cinema Company acquired 75 percent of Movie Corporation's shares on December 31, 2015, at underlying book value of $98,000. At that date, the fair value of the noncontrolling interest was equal to 25 percent of the book value of Movie Corporation. Movie's balance sheet on January 1, 2018, contained the following balances: Cash Accounts Receivable Inventory Buildings and Equipment Less: Accumulated Depreciation Total Assets $50,000 Accounts Payable 35,000 Bonds Payable 40,000 Common Stock 300,000 Additional Paid-In Capital (100,000) Retained Earnings $325,000 Total Liabilities and Equities $40,000 100,000 50,000 Prepare the entries recorded on the books of each company. 75,000 60,000 $325,000 On January 1, 2018, Movie acquired 3,500 of its own $2 par value comm on shares from Nonaffiliated Corporation for $6 per share.

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