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On the 2017 consolidation working paper, eliminating entry (R) reduces Investment in Salem by: $6,850,000 $5,350,000 $2,650,000 $8,000,000

On the 2017 consolidation working paper, eliminating entry (R) reduces Investment in Salem by: $6,850,000 $5,350,000 $2,650,000 $8,000,000

Intermediate Accounting: Reporting And Analysis
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
Chapter12: Intangibles
Section: Chapter Questions
Problem 8P
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On January 1, 2014, Portland Company acquired all of Salem Company's voting stock for $18,000,000 in cash. Some of Salem's assets and liabilities at the date of purchase had fair values that differed from reported values, as follows: Book value Fair value $12,000,000 $ Buildings and equipment, net (20 years, straight-line) 3,000,000 Identifiable intangibles (5 years, straight-line) 12,500,000 Salem's total shareholders' equity at January 1, 2014, was $5,000,000. It is now December 31, 2017 (four years later). Salem's retained earnings reflect the accumulation of net income less dividends; there have been no other changes in its retained earnings. Salem does not report any other comprehensive income. Cumulative goodwill impairment to the beginning of 2017 is $1,500,000. Goodwill impairment for 2017 is $500,000. Portland uses the complete equity method to account for its investment. The December 31, 2017, trial balance for Salem appears below. Salem Dr (Cr) $3,500,000 27,000,000 Current assets Plant assets, net Liabilities (11,500,000) Capital stock (2,000,000) Retained earnings, January 1 (14,000,000) (15,000,000) 7,500,000 4,500,000 $0 Sales revenue Cost of goods sold Operating expense 0 On the 2017 consolidation working paper, eliminating entry (R) reduces Investment in Salem by: $6,850,000 $5,350,000 $2,650,000 $8,000,000
Transcribed Image Text:On January 1, 2014, Portland Company acquired all of Salem Company's voting stock for $18,000,000 in cash. Some of Salem's assets and liabilities at the date of purchase had fair values that differed from reported values, as follows: Book value Fair value $12,000,000 $ Buildings and equipment, net (20 years, straight-line) 3,000,000 Identifiable intangibles (5 years, straight-line) 12,500,000 Salem's total shareholders' equity at January 1, 2014, was $5,000,000. It is now December 31, 2017 (four years later). Salem's retained earnings reflect the accumulation of net income less dividends; there have been no other changes in its retained earnings. Salem does not report any other comprehensive income. Cumulative goodwill impairment to the beginning of 2017 is $1,500,000. Goodwill impairment for 2017 is $500,000. Portland uses the complete equity method to account for its investment. The December 31, 2017, trial balance for Salem appears below. Salem Dr (Cr) $3,500,000 27,000,000 Current assets Plant assets, net Liabilities (11,500,000) Capital stock (2,000,000) Retained earnings, January 1 (14,000,000) (15,000,000) 7,500,000 4,500,000 $0 Sales revenue Cost of goods sold Operating expense 0 On the 2017 consolidation working paper, eliminating entry (R) reduces Investment in Salem by: $6,850,000 $5,350,000 $2,650,000 $8,000,000
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