On January 1, 2020, Mona, Inc., acquired 80 percent of Lisa Company’s common stock as well as 60 percent of its preferred shares. Mona paid $76,000 in cash for the preferred stock, with a call value of 110 percent of the $50 per share par value. The remaining 40 percent of the preferred shares traded at a $45,000 fair value. Mona paid $588,000 for the common stock. At the acquisition date, the noncontrolling interest in the common stock had a fair value of $147,000. The excess fair value over Lisa’s book value was attributed to franchise contracts of $77,000. This intangible asset is being amortized over a 20-year period. Lisa pays all preferred stock dividends (a total of $19,000 per year) on an annual basis. During 2020, Lisa’s book value increased by $65,000. On January 2, 2020, Mona acquired one-half of Lisa's outstanding bonds payable to reduce the business combination's debt position. Lisa's bonds had a face value of $100,000 and paid cash interest of 8 percent per year. These bonds had been issued to the public to yield 10 percent. Interest is paid each December 31. On January 2, 2020, these bonds had a total $93,660 carrying amount. Mona paid $53,465, indicating an effective interest rate of 6 percent. On January 3, 2020, Mona sold Lisa fixed assets that had originally cost $111,000 but had accumulated depreciation of $70,000 when transferred. The transfer was made at a price of $142,000. These assets were estimated to have a remaining useful life of 10 years. The individual financial statements for these two companies for the year ending December 31, 2021, are as follows: Mona, Inc. Lisa Company Sales and other revenues $ (522,000 ) $ (222,000 ) Expenses 231,000 131,000 Dividend income—Lisa common stock (16,800 ) 0 Dividend income—Lisa preferred stock (11,400 ) 0 Net income $ (319,200 ) $ (91,000 ) Retained earnings, 1/1/21 $ (711,000 ) $ (522,000 ) Net income (above) (319,200 ) (91,000 ) Dividends declared—common stock 103,800 21,000 Dividends declared—preferred stock 0 19,000 Retained earnings, 12/31/21 $ (926,400 ) $ (573,000 ) Current assets $ 141,419 $ 511,000 Investment in Lisa—common stock 588,000 0 Investment in Lisa—preferred stock 76,000 0 Investment in Lisa—bonds 51,833 0 Fixed assets 1,111,000 811,000 Accumulated depreciation (311,000 ) (211,000 ) Total assets $ 1,657,252 $ 1,111,000 Accounts payable $ (419,852 ) $ (119,472 ) Bonds payable 0 (100,000 ) Discount on bonds payable 0 3,472 Common stock (311,000 ) (211,000 ) Preferred stock 0 (111,000 ) Retained earnings, 12/31/21 (926,400 ) (573,000 ) Total liabilities and equities $ (1,657,252 ) $ (1,111,000 ) Note: Credits are indicated by parentheses. Assume that consolidated financial statements are being prepared for the year ending December 31, 2021. Calculate the consolidated balance for each of the following accounts: Expenses ?

On January 1, 2020, Mona, Inc., acquired 80 percent of Lisa Company’s common stock as well as 60 percent of its preferred shares. Mona paid $76,000 in cash for the preferred stock, with a call value of 110 percent of the $50 per share par value. The remaining 40 percent of the preferred shares traded at a $45,000 fair value. Mona paid $588,000 for the common stock. At the acquisition date, the noncontrolling interest in the common stock had a fair value of $147,000. The excess fair value over Lisa’s book value was attributed to franchise contracts of $77,000. This intangible asset is being amortized over a 20-year period. Lisa pays all preferred stock dividends (a total of $19,000 per year) on an annual basis. During 2020, Lisa’s book value increased by $65,000. On January 2, 2020, Mona acquired one-half of Lisa's outstanding bonds payable to reduce the business combination's debt position. Lisa's bonds had a face value of $100,000 and paid cash interest of 8 percent per year. These bonds had been issued to the public to yield 10 percent. Interest is paid each December 31. On January 2, 2020, these bonds had a total $93,660 carrying amount. Mona paid $53,465, indicating an effective interest rate of 6 percent. On January 3, 2020, Mona sold Lisa fixed assets that had originally cost $111,000 but had accumulated depreciation of $70,000 when transferred. The transfer was made at a price of $142,000. These assets were estimated to have a remaining useful life of 10 years. The individual financial statements for these two companies for the year ending December 31, 2021, are as follows: Mona, Inc. Lisa Company Sales and other revenues $ (522,000 ) $ (222,000 ) Expenses 231,000 131,000 Dividend income—Lisa common stock (16,800 ) 0 Dividend income—Lisa preferred stock (11,400 ) 0 Net income $ (319,200 ) $ (91,000 ) Retained earnings, 1/1/21 $ (711,000 ) $ (522,000 ) Net income (above) (319,200 ) (91,000 ) Dividends declared—common stock 103,800 21,000 Dividends declared—preferred stock 0 19,000 Retained earnings, 12/31/21 $ (926,400 ) $ (573,000 ) Current assets $ 141,419 $ 511,000 Investment in Lisa—common stock 588,000 0 Investment in Lisa—preferred stock 76,000 0 Investment in Lisa—bonds 51,833 0 Fixed assets 1,111,000 811,000 Accumulated depreciation (311,000 ) (211,000 ) Total assets $ 1,657,252 $ 1,111,000 Accounts payable $ (419,852 ) $ (119,472 ) Bonds payable 0 (100,000 ) Discount on bonds payable 0 3,472 Common stock (311,000 ) (211,000 ) Preferred stock 0 (111,000 ) Retained earnings, 12/31/21 (926,400 ) (573,000 ) Total liabilities and equities $ (1,657,252 ) $ (1,111,000 ) Note: Credits are indicated by parentheses. Assume that consolidated financial statements are being prepared for the year ending December 31, 2021. Calculate the consolidated balance for each of the following accounts: Expenses ?

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

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Question

On January 2, 2020, Mona acquired one-half of Lisa's outstanding bonds payable to reduce the business combination's debt position. Lisa's bonds had a face value of $100,000 and paid cash interest of 8 percent per year. These bonds had been issued to the public to yield 10 percent. Interest is paid each December 31. On January 2, 2020, these bonds had a total $93,660 carrying amount. Mona paid $53,465, indicating an effective interest rate of 6 percent.

On January 3, 2020, Mona sold Lisa fixed assets that had originally cost $111,000 but had accumulated depreciation of $70,000 when transferred. The transfer was made at a price of $142,000. These assets were estimated to have a remaining useful life of 10 years.

The individual financial statements for these two companies for the year ending December 31, 2021, are as follows:

	Mona, Inc.		Lisa Company
Sales and other revenues	$	(522,000	)	$	(222,000	)
Expenses		231,000			131,000
Dividend income—Lisa common stock		(16,800	)		0
Dividend income—Lisa preferred stock		(11,400	)		0
Net income	$	(319,200	)	$	(91,000	)
Retained earnings, 1/1/21	$	(711,000	)	$	(522,000	)
Net income (above)		(319,200	)		(91,000	)
Dividends declared—common stock		103,800			21,000
Dividends declared—preferred stock		0			19,000
Retained earnings, 12/31/21	$	(926,400	)	$	(573,000	)
Current assets	$	141,419		$	511,000
Investment in Lisa—common stock		588,000			0
Investment in Lisa—preferred stock		76,000			0
Investment in Lisa—bonds		51,833			0
Fixed assets		1,111,000			811,000
Accumulated depreciation		(311,000	)		(211,000	)
Total assets	$	1,657,252		$	1,111,000
Accounts payable	$	(419,852	)	$	(119,472	)
Bonds payable		0			(100,000	)
Discount on bonds payable		0			3,472
Common stock		(311,000	)		(211,000	)
Preferred stock		0			(111,000	)
Retained earnings, 12/31/21		(926,400	)		(573,000	)
Total liabilities and equities	$	(1,657,252	)	$	(1,111,000	)