Answered: On January 1, ABC Acquired 60% of the…

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter13: Accounting For Merchandise Inventory

Section: Chapter Questions

Problem 1CE: LO1 If the ending inventory is overstated by 10,000, indicate what, if anything, is incorrect about...

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Determine the net income (net loss) attributable to the non-controlling asset.

On January 1, ABC Acquired 60% of the outstanding voting stock of XYZ for P301,500 cash consideration. The remaining 40% of XYZ had an acquisition date fair value of P138,500. On January 1, XYZ possessed equipment (5-year life) that was undervalued on its books P25,000.XYZ also had developed several secret formulas that ABC assessed at P50,000. Theses formulas, although not recorded on XYZ's financial records, were estimated to have a 20-year future life. ABC also determined that the inventory of XYZ is overvalued by P10,000. 80% of these inventories remain unsold by the end of the year. As of December 31. the financial statements appeared as follows:

АВС
XYZ
Revenues (from sales and
dividends)
P (300, 000)
P (200, 000)
Cost of goods sold
Expenses
Net Income
140, 000
20, 000
P (140, 000)
80,000
10, 000
P (110, 000)
Retained eamings 1/1
Р 300, 000)
(140, 000)
Р (150, 000)
(110, 000)
10,000 |
P (250, 000)
Net Income
Dividends paid
-0-
Retained eamings 12/31
P (440, 000)
Cash and Receivables
Inventory
Investment in SS
Equipment (net)
Total Assets
P90 000
110, 000
-0-
300, 000
P500, 000
P 210, 000
150, 000
301,500
398,500
P 1,060, 000
P (420, 000)
(200, 000)
(440, 000)
Total Liabilities and Equities P (1,060,000)
Liabilities
P (150, 000)
(100, 000)
(250,000)
P (500, 000)
Common stock
Retained earnings 12/31

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