On January 1, 2017, Greenly Corporation acquired all of Lindy Company's common stock for $935,000. At the date of combination, Lindy had common stock outstanding with a par value of $100,000, additional paid- in capital of $400,000, and retained earnings of $175,000. The fair values and book values of all Lindy's assets and liabilities were equal at the date of combination, except for the following: Book Value 75,000 400,000 500,000 Fair Value Land Buildings Equipment 160,000 500,000 570,000 The buildings had a remaining life of 20 years, and the equipment was expected to last another 10 years. In accounting for the business combination, Greenly decided to use push-down accounting on Lindy's books. During 2017, Lindy earned net income of $88,000 and paid a dividend ,000. Required: 1. Record the acquisition of Lindy's stock on Greenly's books on December 31, 20X6. 2. Record any entries that would be made during 2017, on Lindy's books related to the business combination if push-down accounting is employed. 3. Which of the consolidations entries would not be needed in case push-down accounting has been employed on Lindy's books?

On January 1, 2017, Greenly Corporation acquired all of Lindy Company's common stock for $935,000. At the date of combination, Lindy had common stock outstanding with a par value of $100,000, additional paid- in capital of $400,000, and retained earnings of $175,000. The fair values and book values of all Lindy's assets and liabilities were equal at the date of combination, except for the following: Book Value 75,000 400,000 500,000 Fair Value Land Buildings Equipment 160,000 500,000 570,000 The buildings had a remaining life of 20 years, and the equipment was expected to last another 10 years. In accounting for the business combination, Greenly decided to use push-down accounting on Lindy's books. During 2017, Lindy earned net income of $88,000 and paid a dividend ,000. Required: 1. Record the acquisition of Lindy's stock on Greenly's books on December 31, 20X6. 2. Record any entries that would be made during 2017, on Lindy's books related to the business combination if push-down accounting is employed. 3. Which of the consolidations entries would not be needed in case push-down accounting has been employed on Lindy's books?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 8MC

See similar textbooks

Similar questions

On January 1, 2013, Pepper Corporation acquired 90 percent of Salt Company's voting common stock for $810,000. At the time of the combination, Salt reported common stock outstanding of $400,000 and retained earnings of $250,000, and the fair value of the noncontrolling interest was $90,000. The book value of Salt's net assets approximated market value except for limited-life patents that had a market value of $100,000 more than their book value, equipment had $20,000 more than book value and Inventory had $30,000 more than book value. The patents and equipment had a remaining economic life of 4 years and 5 years, respectively, at the date of the business combination. The inventory had a 2 month life. Salt reported net income of $150,000 and paid dividends of $20,000 during 2013. Salt’s Accumulated Depreciation at the time of acquisition was $70K and Pepper’s was 80K. Depreciation Expense in 2013 for Salt was $20K. Prepare the "Excess Expense (Amortization Reclassification) Entry at…
On January 1, 2013, Pepper Corporation acquired 90 percent of Salt Company's voting common stock for $810,000. At the time of the combination, Salt reported common stock outstanding of $400,000 and retained earnings of $250,000, and the fair value of the noncontrolling interest was $90,000. The book value of Salt's net assets approximated market value except for limited-life patents that had a market value of $100,000 more than their book value, equipment had $20,000 more than book value and Inventory had $30,000 more than book value. The patents and equipment had a remaining economic life of 4 years and 5 years, respectively, at the date of the business combination. The inventory had a 2 month life. Salt reported net income of $150,000 and paid dividends of $20,000 during 2013. Salt’s Accumulated Depreciation at the time of acquisition was $70K and Pepper’s was 80K. Depreciation Expense in 2013 for Salt was $20K. Prepare the basic elimination entry at December 31, 2013
Fred, Inc., and Herman Corporation formed a business combination on January 1, 2016, when Fred acquired a 60 percent interest in Herman’s common stock for $312,000 in cash. The book value of Herman’s assets and liabilities on that day totaled $300,000 and the fair value of the noncontrolling interest was $208,000. Patents being held by Herman (with a 12-year remaining life) were undervalued by $90,000 within the company’s financial records and a customer list (10-year life) worth $130,000 was also recognized as part of the acquisition-date fair value. Intra-entity inventory transfers occur regularly between the two companies. Merchandise carried over from one year to the next is always sold in the subsequent period. Fred had not paid for half of the 2018 inventory transfers by year-end. On January 1, 2017, Fred sold $15,000 in land to Herman for $22,000. Herman is still holding this land. On January 1, 2018, Herman acquired $20,000 (face value) of Fred’s bonds in the open market. These…
Francisco Inc. acquired 100 percent of the voting shares of Beltran Company on January 1, 2017. In exchange, Francisco paid $450,000 in cash and issued 104,000 shares of its own $1 par value common stock. On this date, Francisco’s stock had a fair value of $12 per share. The combination is a statutory merger with Beltran subsequently dissolved as a legal corporation. Beltran’s assets and liabilities are assigned to a new reporting unit.The following reports the fair values for the Beltran reporting unit for January 1, 2017, and December 31, 2018, along with their respective book values on December 31, 2018.a. Prepare Francisco’s journal entry to record the assets acquired and the liabilities assumed in the Beltran merger on January 1, 2017.b. On December 31, 2018, Francisco opts to forgo any goodwill impairment qualitative assessment and estimates that the total fair value of the entire Beltran reporting unit is $1,425,000. What amount of goodwill impairment, if any, should Francisco…
On January 1, 2016, Aspen Company acquired 80 percent of Birch Company’s voting stock for $288,000. Birch reported a $300,000 book value, and the fair value of the noncontrolling interest was $72,000 on that date. Then, on January 1, 2017, Birch acquired 80 percent of Cedar Company for $104,000 when Cedar had a $100,000 book value and the 20 percent noncontrolling interest was valued at $26,000. In each acquisition, the subsidiary’s excess acquisition-date fair over book value was assigned to a trade name with a 30-year remaining life.These companies report the following financial information. Investment income figures are not included.Assume that each of the following questions is independent:a. If all companies use the equity method for internal reporting purposes, what is the December 31, 2017, balance in Aspen’s Investment in Birch Company account?b. What is the consolidated net income for this business combination for 2018?c. What is the net income attributable to the…
On January 1, 2016, Aspen Company acquired 80 percent of Birch Company's voting stock for $372,000. Birch reported a $360,000 book value and the fair value of the noncontrolling interest was $93,000 on that date. Then, on January 1, 2017, Birch acquired 80 percent of Cedar Company for $180,000 when Cedar had a $126,000 book value and the 20 percent noncontrolling interest was valued at $45,000. In each acquisition, the subsidiary's excess acquisition-date fair over book value was assigned to a trade name with a 30-year remaining life. These companies report the following financial information. Investment income figures are not included. 2016 2017 2018 Sales: Aspen Company $ 517,500 $ 655,000 $ 910,000 Birch Company 272,000 344,250 575,400 Cedar Company Not available 171,900 288,600 Expenses: Aspen Company $ 425,000 $ 545,000 $ 747,500 Birch Company 231,000 266,000 495,000 Cedar Company Not available 161,000 249,000…
Arther Corporation acquired all of the outstanding $10 par voting common stock of Trent Inc., on January 1, 2016, in exchange for 50,000 shares of its $10 par voting common stock. On December 31, 2015, the common stock of Arther had a closing market price of $15 per share on a national stock exchange. The retained earnings balance of Trent Inc., was $156,000 on the date of the acquisition. Both companies continued to operate as separate business entities maintaining separate accounting records with years ending December 31.On December 31, 2018, after year-end adjustments but before the nominal accounts were closed, the companies had the following condensed statements: (see attachment)Additional information is as follows: a. There have been no changes in the common stock and additional paid-in capital in excess of par accounts since the one necessitated in 2016 by Arther’s acquisition of Trent, Inc. b. At the acquisition date, the market value of Trent’s machinery exceeded book value by…
On January 1, 2016, Aspen Company acquired 80 percent of Birch Company's voting stock for $428,000. Birch reported a $445,000 book value and the fair value of the noncontrolling interest was $107,000 on that date. Then, on January 1, 2017, Birch acquired 80 percent of Cedar Company for $176,000 when Cedar had a $193,000 book value and the 20 percent noncontrolling interest was valued at $44,000. In each acquisition, the subsidiary's excess acquisition-date fair over book value was assigned to a trade name with a 30-year remaining life. These companies report the following financial information. Investment income figures are not included. 2016 2017 2018 Sales: Aspen Company $ 572,500 $ 625,000 $ 767,500 Birch Company 255,750 363,250 582,600 Cedar Company Not available 231,900 267,000 Expenses: Aspen Company $ 390,000 $ 607,500 $ 722,500 Birch Company 193,000 289,000 517,500 Cedar Company Not available 217,000…
On January 1, 2018, PNB and Allied Bank entered into a contract of merger wherein PNB will issue 100,000 ordinary shares with par value of P10 and quoted price of P20 to the existing shareholders of Allied in exchange for the net assets of Allied Bank. PNB paid acquisition related cost of business combination amounting to P100,000 and stock issuance cost amounting to P200,000. As of December 31, 2017, PNB has total assets with book value of P50M and fair market value of P60M while Allied Bank has total assets with book value of P5M and fair market value of P4M. The amount net assets of Allied Bank on December 31, 2017 is P2.6M. What is the goodwill/(gain on bargain purchase) arising from business combination? Group of answer choices 400,000 (600,000) 600,000 800,000
On January 1, 2018, PNB and Allied Bank entered into a contract of merger wherein PNB will issue 100,000 ordinary shares with par value of P10 and quoted price of P20 to the existing shareholders of Allied in exchange for the net assets of Allied Bank. PNB paid acquisition related cost of business combination amounting to P100,000 and stock issuance cost amounting to P200,000. As of December 31, 2017, PNB has total assets with book value of P50M and fair market value of P60M while Allied Bank has total assets with book value of P5M and fair market value of P4M. The amount net assets of Allied Bank on December 31, 2017 is P2.6M. What is the amount of total assets of PNB on January 1, 2018 after the merger? Group of answer choices 54,100,000 64,100,000 65,100,000 55,100,000
On January 1, 2016, Aspen Company acquired 80 percent of Birch Company's voting stock for $480,000. Birch reported a $495,000 book value and the fair value of the noncontrolling interest was $120,000 on that date. Then, on January 1, 2017, Birch acquired 80 percent of Cedar Company for $168,000 when Cedar had a $165,000 book value and the 20 percent noncontrolling interest was valued at $42,000. In each acquisition, the subsidiary's excess acquisition-date fair over book value was assigned to a trade name with a 30-year remaining life. These companies report the following financial information. Investment income figures are not included. 2016 2017 2018 Sales: Aspen Company $ 472,500 $ 645,000 $ 850,000 Birch Company 262,250 337,500 607,300 Cedar Company Not available 233,800 251,600 Expenses: Aspen Company $ 397,500 $ 642,500 $ 690,000 Birch Company 205,000 267,000 520,000 Cedar Company Not available 219,000…
On January 1, 2016, Plymouth Corporation acquired 80 percent of the outstanding voting stock of Sander Company in exchange for $1,200,000 cash. At that time, although Sander’s book value was $925,000, Plymouth assessed Sander’s total business fair value at $1,500,000. Since that time, Sander has neither issued nor reacquired any shares of its own stock. The book values of Sander’s individual assets and liabilities approximated their acquisition-date fair values except for the patent account, which was undervalued by $350,000. The undervalued patents had a five-year remaining life at the acquisition date. Any remaining excess fair value was attributed to goodwill. No goodwill impairments have occurred. Sander regularly sells inventory to Plymouth. Below are details of the intra-entity inventory sales for the past three years: Gross Profit Intra-Entity Rate on Ending Inv. Intra-Entity Intra-Entity Transfer Inventory Year Sales Price Transfers 2016 $…