Darnell Ltd. acquired 60 percent of Tisha Co. The acquisition calls for Darnell to issue an additional 100 shares to Tisha in one year if Tisha meets a predetermined sales goal. This contingent consideration a. should be reported only in the notes to the financial statement. b. should be valued at its fair value as of the acquisition date. c. should be valued at fair value as of the acquisition date and revalued at the year-end. d. should not be reported unless the goal is met.

Darnell Ltd. acquired 60 percent of Tisha Co. The acquisition calls for Darnell to issue an additional 100 shares to Tisha in one year if Tisha meets a predetermined sales goal. This contingent consideration a. should be reported only in the notes to the financial statement. b. should be valued at its fair value as of the acquisition date. c. should be valued at fair value as of the acquisition date and revalued at the year-end. d. should not be reported unless the goal is met.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 30E

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hf. Darnell Ltd. acquired 60 percent of Tisha Co. The acquisition calls for Darnell to issue an additional 100 shares to Tisha in one year if Tisha meets a predetermined sales goal. This contingent consideration a. should be reported only in the notes to the financial statement. b. should be valued at its fair value as of the acquisition date. c. should be valued at fair value as of the acquisition date and revalued at the year-end. d. should not be reported unless the goal is met.
Protrade Corporation acquired 80 percent of the outstanding voting stock of Seacraft Company on January 1, 2020, for $564,000 in cash and other consideration. At the acquisition date, Protrade assessed Seacraft's identifiable assets and liabilities at a collective net fair value of $705,000, and the fair value of the 20 percent noncontrolling interest was $141,000. No excess fair value over book value amortization accompanied the acquisition. The following selected account balances are from the individual financial records of these two companies as of December 31, 2021: Protrade Seacraft Sales $ 820,000 $ 540,000 Cost of goods sold 380,000 287,000 Operating expenses 168,000 123,000 Retained earnings, 1/1/21 920,000 360,000 Inventory 364,000 128,000 Buildings (net) 376,000 175,000 Investment income Not given 0 Each of the following problems is an independent situation: a. Assume that Protrade sells Seacraft…
Protrade Corporation acquired 80 percent of the outstanding voting stock of Seacraft Company on January 1, 2020, for $556,000 in cash and other consideration. At the acquisition date, Protrade assessed Seacraft's identifiable assets and liabilities at a collective net fair value of $695,000, and the fair value of the 20 percent noncontrolling interest was $139,000. No excess fair value over book value amortization accompanied the acquisition. The following selected account balances are from the individual financial records of these two companies as of December 31, 2021: Protrade Seacraft Sales $ 810,000 $ 530,000 Cost of goods sold 375,000 282,000 Operating expenses 167,000 122,000 Retained earnings, 1/1/21 910,000 350,000 Inventory 363,000 127,000 Buildings (net) 375,000 174,000 Investment income Not given 0 Each of the following problems is an independent situation: Assume that Protrade sells Seacraft…
The Hoover Corporation acquired 80 percent of the 100,000 outstanding voting shares of Rainbow, Inc., for $6.40 per share on January 1, 2020. The remaining 20 percent of Rainbow’s shares also traded actively at $4.89 per share before and after Hoover’s acquisition. An appraisal made on that date determined that all book values appropriately reflected the fair values of Rainbow’s underlying accounts except that a building with a 5-year future life was undervalued by $62,000 and a fully amortized trademark with an estimated 10-year remaining life had a $67,000 fair value. At the acquisition date, Rainbow reported common stock of $100,000 and a retained earnings balance of $260,000. On January 1, 2021, Rainbow reported retained earnings of $330,000. During year 2021, Rainbow reported net income of $170,000 and declared dividend of $20,000. What is the balance of the noncontrolling interest in the subsidiary on December 31, 2021?
ummer Company holds assets with a fair value of $126,000 and a book value of $95,000 and liabilities with a book value and fair value of $24,000. Required: Compute the following amounts if Parade Corporation acquires 70 percent ownership of Summer: What amount did Parade pay for the shares if the fair value of the noncontrolling interest at acquisition is $45,600 and goodwill of $50,000 is reported? What balance will be assigned to the noncontrolling interest in the consolidated balance sheet if Parade pays $87,500 to acquire its ownership and goodwill of $23,000 is reported?
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Carson, Inc., acquires 80 percent of the outstaniding common stock of Gardena corporation on January 1, 2020, in exchange for $900,000 cash. At the acquisition date, Gardena's total fair value, including the noncontrolling interest, was assessed at $1,125,000. Also at the acquisition date, Gardena's book value was $690,000. Several individual items on Gardena's financial records had fair values that differed from their book values as follows: Book value Fair value Trademark (indefinite life) $360,000 $383,000 Property and equipment (net, 8-year remaining useful life) 290,000 330,000 Patent (14-year remaining useful life) 132,000 272,000 For internal reporting purposes, Carson, inc., employs the equity method to account for this investment. The following account balances are for the year ending December 31, 2020, for both companies. At year-end, there…
On January 1, 2019, Monica Company acquired 70 percent of Young Company’s outstanding common stock for $798,000. The fair value of the noncontrolling interest at the acquisition date was $342,000. Young reported stockholders’ equity accounts on that date as follows: Common stock—$10 par value $ 200,000 Additional paid-in capital 100,000 Retained earnings 660,000 In establishing the acquisition value, Monica appraised Young's assets and ascertained that the accounting records undervalued a building (with a five-year remaining life) by $60,000. Any remaining excess acquisition-date fair value was allocated to a franchise agreement to be amortized over 10 years. During the subsequent years, Young sold Monica inventory at a 20 percent gross profit rate. Monica consistently resold this merchandise in the year of acquisition or in the period immediately following. Transfers for the three years after this business combination was created amounted to the…
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On January 1, 2019, Monica Company acquired 70 percent of Young Company’s outstanding common stock for $756,000. The fair value of the noncontrolling interest at the acquisition date was $324,000. Young reported stockholders’ equity accounts on that date as follows: Common stock—$10 par value $ 300,000 Additional paid-in capital 40,000 Retained earnings 600,000 In establishing the acquisition value, Monica appraised Young's assets and ascertained that the accounting records undervalued a building (with a five-year remaining life) by $60,000. Any remaining excess acquisition-date fair value was allocated to a franchise agreement to be amortized over 10 years. During the subsequent years, Young sold Monica inventory at a 20 percent gross profit rate. Monica consistently resold this merchandise in the year of acquisition or in the period immediately following. Transfers for the three years after this business combination was created amounted to…