Problem 4-27 (Static) (LO 4-10) Posada Company acquired 7,000 of the 10,000 outstanding shares of Sabathia Company on January 1, 2022, for $840,000. The subsidiary's total fair value was assessed at $1,200,000 although its book value on that date was $1,130,000. The $70,000 fair value in excess of Sabathia's book value was assigned to a patent with a five-year remaining life. On January 1, 2024, Posada reported a $1,085,000 equity method balance in the Investment in Sabathia Company account. On October 1, 2024, Posada sells 1,000 shares of the investment for $191,000. During 2024, Sabathia reported net income of $120,000 and declared dividends of $40,000. These amounts are assumed to have occurred evenly throughout the year. Required: a. How should Posada report the 2024 income that accrued to the 1,000 shares prior to their sale? b. What is the effect on Posada's financial statements from this sale of 1,000 shares? a. b. Answer is not complete. Posada's income for shares sold Credit to Posada's additional paid-in capital

Problem 4-27 (Static) (LO 4-10) Posada Company acquired 7,000 of the 10,000 outstanding shares of Sabathia Company on January 1, 2022, for $840,000. The subsidiary's total fair value was assessed at $1,200,000 although its book value on that date was $1,130,000. The $70,000 fair value in excess of Sabathia's book value was assigned to a patent with a five-year remaining life. On January 1, 2024, Posada reported a $1,085,000 equity method balance in the Investment in Sabathia Company account. On October 1, 2024, Posada sells 1,000 shares of the investment for $191,000. During 2024, Sabathia reported net income of $120,000 and declared dividends of $40,000. These amounts are assumed to have occurred evenly throughout the year. Required: a. How should Posada report the 2024 income that accrued to the 1,000 shares prior to their sale? b. What is the effect on Posada's financial statements from this sale of 1,000 shares? a. b. Answer is not complete. Posada's income for shares sold Credit to Posada's additional paid-in capital

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter20: Corporations: Distributions In Complete Liquidation And An Overview Of Reorganizations

Section: Chapter Questions

Problem 35P

See similar textbooks

Similar questions

4. On January 1, 2021, Evan Co. purchased all of the common stock of Kristopher Corp. by issuing 15,000 shares of $1 par value common stock. Evan’s shares had a $30 per share fair value. On that date, Kristopher reported a net book value of $275,000. However, its equipment (with a five-year remaining life) was undervalued by $60,000 in the company’s accounting records. Any excess of consideration transferred over fair value of assets and liabilities is assigned to an unrecorded patent to be amortized over ten years. During 2021, Kristopher earned net income of $155,000 and paid dividends of $40,000. Kristopher’s net income and dividends for 2022 were $178,000 and $65,000, respectively. Required: Calculate the balance in the investment account on the books of Evan Co. at the end of 2022 under each of the following methods: a. equity method b. partial equity method c. initial value method. .
7 On January 1, 2018, WONG NOODLES Corporation acquired the net assets of Natasha, Inc., by issuing 600,000 shares of its P10 par value common stock. Subsequently, Natasha was liquidated and its assets and liabilities merged into WONG NOODLES Corporation. WONG NOODLES’ stock was selling for P50 per share on January 1, 2018. The amount of goodwill recorded by WONG NOODLES in connection with the combination was P6,120,000. WONG NOODLES incurred P300,000 of legal and broker’s fees associated with the combination and P30,000 of stock issuance costs. What is the (1) fair value of Natasha’s net assets and (2) the amount of the increase in WONG NOODLES’ stockholders equity as a result of the combination? Group of answer choices (1) 24,180,000; (2) 29,970,000 (1) 23,880,000; (2) 30,000,000 (1) 24,180,000; (2) 30,000,000 (1) 23,880,000; (2) 29,970,000
Q7- On January 1, 20X8, Zeta Company acquired 85 percent of Theta Company's common stock for $100,000 cash. The fair value of the noncontrolling interest was determined to be 15 percent of the book value of Theta at that date. What portion of the retained earnings reported in the consolidated balance sheet prepared immediately after the business combination assigned to the noncontrolling interest? a- None b- 15 percent c- 100 percent d- Cannot be determined With calculations please
P Corporation purchased 80% interest in S Company on December 31, 2020 for P208,000. S Company’s property and equipment had a fair value of P40,000 more than the book value shown above. All other book values approximated fair value. In the consolidated balance sheet on December 31, 2020. Questions: 1. The amount of total stockholders’ equity to be reported will be 2.
7. On January 1, 2021, April Company purchased 40% of the outstanding shares of another entity for P5,000,000 when the net assets of the investee amounted to P10,000,000. At acquisition date, the carrying amount of the identifiable assets and liabilities of the investee were equal to their fair values, except for equipment for which the fair value was P2,000,000 greater than its carrying amount and inventory whose fair value was P1,000,000 greater than its cost. The equipment has a remaining life of 4 years and the inventory was all sod during 2021. The investee reported net income of P6,000,000 for 2021 and paid no dividends during 2021. What is the maximum amount which could be included in April Company’s income before tax to reflect April’s equity in earnings of the investee
Problems 7 and 8 relate to the following: On January 1, 2016, Pride Corporation purchased 90 percent of the outstanding voting shares of Star, Inc., for $540,000 cash. The acquisition-date fair value of the noncontrolling interest was $60,000. At January 1, 2016, Star’s net assets had a total carrying amount of $420,000. Equipment (eight-year remaining life) was undervalued on Star’s financial records by $80,000. Any remaining excess fair value over book value was attributed to a customer list developed by Star (four-year remaining life), but not recorded on its books. Star recorded net income of $70,000 in 2016 and $80,000 in 2017. Each year since the acquisition, Star has declared a $20,000 dividend. At January 1, 2018, Pride’s retained earnings show a $250,000 balance. Selected account balances for the two companies from their separate operations were as follows Assuming that Pride, in its internal records, accounts for its investment in Star using the equity method, what amount of…
Problems 7 and 8 relate to the following: On January 1, 2016, Pride Corporation purchased 90 percent of the outstanding voting shares of Star, Inc., for $540,000 cash. The acquisition-date fair value of the noncontrolling interest was $60,000. At January 1, 2016, Star’s net assets had a total carrying amount of $420,000. Equipment (eight-year remaining life) was undervalued on Star’s financial records by $80,000. Any remaining excess fair value over book value was attributed to a customer list developed by Star (four-year remaining life), but not recorded on its books. Star recorded net income of $70,000 in 2016 and $80,000 in 2017. Each year since the acquisition, Star has declared a $20,000 dividend. At January 1, 2018, Pride’s retained earnings show a $250,000 balance. Selected account balances for the two companies from their separate operations were as follows What is consolidated net income for 2018? a. $194,000 b. $197,500 c. $203,000 d. $238,000
28 On February 28, 2022, P Corp. purchased 80% of S Co.’s P10 par ordinary shares for P986,000. On this date, the carrying amount of S’s net assets was P1,000,000. The fair values of S Co.’s identifiable assets and liabilities were the same as their carrying amounts except for inventory which is overvalued by P15,000 and plant assets (net), which were P120,000 in excess of the carrying amount. The estimated remaining life of the asset is 5 years. For the year ended December 31, 2022, S had net income of P354,000 and paid cash dividends to P Corp. of P112,000 (all coming from post-acquisition Retained Earnings). Loss on impairment of goodwill in 2022 amounted to P20,000. P Corp. uses the fair value method in measuring non-controlling interest. Revenues were earned evenly throughout the year Determine the non-controlling interest in net asset of subsidiary on December 31, 2022.
Goyard Corp, a privately-owned company, has 31 December year-end. The company has elected to apply ASPE for its financial reporting. On January 1, 2016, Goyard Corp bought 3,000 of the 10,000 outstanding common shares of Investee Inc. for $65,000. Coyard Corp has significant influence. On this date, Investee Inc. had assets and liabilities as follows: As of January 1, 2016 Book Value Fair Value Assets not subject to depreciation $ 54,000 $ 65,000 Assets subject to depreciation (net) 280,500 308,500 Liabilities 180,500 180,500 The difference between book value and fair value were related to land and to equipment (which is estimated to have remaining 5-years of useful life and is depreciated using straight-line method). At the fiscal year end December 31, 2016, Investee Inc. reported net Income of $50,000, and declared and paid total common dividends of $30,000. Goodwill was not impaired in 2016. How much goodwill is…
Hello please help me with f-1 and f-2. Thank you! Placid Lake Corporation acquired 70 percent of the outstanding voting stock of Scenic, Inc., on January 1, 2017, when Scenic had a net book value of $440,000. Any excess fair value was assigned to intangible assets and amortized at a rate of $7,000 per year. Placid Lake's 2018 net income before consideration of its relationship with Scenic (and before adjustments for intra-entity sales) was $340,000. Scenic reported net income of $150,000. Placid Lake declared $140,000 in dividends during this period; Scenic paid $44,000. At the end of 2018, selected figures from the two companies' balance sheets were as follows: Placid Lake Scenic Inventory $ 180,000 $ 94,000 Land 640,000 240,000 Equipment (net) 440,000 340,000 During 2017, intra-entity sales of $95,000 (original cost of $50,000) were made. Only 10 percent of this inventory was still held within the consolidated entity at the end of 2017.…
Item 7 On January 1, 20X1, the Husky Corporation acquired 90% of the Spartan Company’s voting stock for $2,700,000. Spartan’s net assets had a book value of $2,450,000; the fair value of Spartan’s building was $325,000 greater than its book value. The book value of Husky’s net assets immediately after the acquisition of Spartan totaled $6,850,000.What is total stockholders’ equity on the January 1, 20X1 consolidated balance sheet? Multiple Choice $9,300,000 $6,850,000 $7,150,000 $7,120,000
15 On January 1, 2020, Pfizer Corp. acquired 80% of Vaxx Corp.’s common stock for P160,000 cash. The fair value of the non-controlling interest at the date was determined to be P40,000. Data from the balance sheets of the two companies included the following accounts as of the date of acquisition: On the date of the business combination, the book values of Vaxx Corp’s net assets and liabilities approximated fair value except for inventory, which has a fair value of P45,000, and land, which had a fair value of P60,000. (using full goodwill approach). Pfizer Corporation Vaxx Corporation Cash 60,000 20,000 Accounts receivable 80,000 30,000 Inventory 90,000 40,000 Land 100,000 40,000 Buildings and equipment 200,000 150,000 Less: Accumulated depreciation (80,000) (50,000) Investment in Vaxx Corp. stock 160,000 - Total Assets 610,000 230,000 Accounts payable 110,000 30,000…