Q. No. 3. On January 1, 2020, Larmer Corp. (a Canadian company) purchased 80% of Martin Inc, an American company, forUS$50,000. Martin's book values approximated its fair values on that date except for plant and equipment, which had a fairvalue of US$30,000 with a remaining life expectancy of 5 years. A goodwill impairment loss of US$1,000 occurred during2020. Martin's January 1, 2020 Balance Sheet is shown below (in U.S. dollars):Current Monetary AssetsInventoryPlant and EquipmentTotal AssetsCurrent LiabilitiesBonds Payable (maturity: January 1, 2026)Common SharesRetained EarningsTotal Liabilities and EquityThe following exchange rates were in effect during 2020.January 1, 2020:Average for 2020:Date when Ending Inventory Purchased:December 31, 2020:Current Monetary AssetsInventoryPlant and EquipmentInvestment in Martin (at Cost)Sales, purchases, and other expenses occurred evenly throughout the year. Dividends declared and paid December 31,2020. The financial statements of Larmer (in Canadian dollars) and Martin (in U.S. dollars) are shown below:Balance SheetsAssetsCurrent LiabilitiesBonds Payable (maturity: January 1, 2026)Common SharesRetained EarningsNet IncomeDividendsLiabilities and EquityIncome StatementsSalesDividend IncomeCost of SalesDepreciationOther expensesNet Income$50,000$40,000$25,000$115,000$45,000$20,000$30,000$20,000$115,000US $1 = CDN $1.3250US $1 = CDN $1.3350US $1 = CDN $1.34US $1 CDN $1.35Larmer$42,050$60,000$23,500$66,250$191,800$50,000$35,000$60,000$30,000$28,800($12,000)$191,800Larmer$80,000$10,800($40,000)($10,000)($12,000)$28,800Martin$65,000$50,000$20,000$135,000$48,000$20,000$30,000$20,000$27,000($10,000)$135,000Martin$50,000($15,000)($5,000)($3,000)$27,000Compute Martin's exchange gain or loss for 2020 if Martin's functional currency was the Canadian dollar (i.e. the samefunctional currency as the parent).

Consolidation - Financial reports from subsidiary companies are assembled and subsequently…

Q. No. 3. On January 1, 2020, Larmer Corp. (a Canadian company) purchased 80% of Martin Inc, an American company, for US$50,000. Martin's book values approximated its fair values on that date except for plant and equipment, which had a fair value of US$30,000 with a remaining life expectancy of 5 years. A goodwill impairment loss of US$1,000 occurred during 2020. Martin's January 1, 2020 Balance Sheet is shown below (in U.S. dollars): Current Monetary Assets Inventory Plant and Equipment Total Assets Current Liabilities Bonds Payable (maturity: January 1, 2026) Common Shares Retained Earnings Total Liabilities and Equity The following exchange rates were in effect during 2020. January 1, 2020: Average for 2020: Date when Ending Inventory Purchased: December 31, 2020: $50,000 $40,000 $25,000 $115,000 $45,000 $20,000 $30,000 $20,000 $115,000 US $1= CDN $1.3250 US $1= CDN $1.3350 US $1 = CDN $1.34 US $1= CDN $1.35

Q. No. 3. On January 1, 2020, Larmer Corp. (a Canadian company) purchased 80% of Martin Inc, an American company, for US$50,000. Martin's book values approximated its fair values on that date except for plant and equipment, which had a fair value of US$30,000 with a remaining life expectancy of 5 years. A goodwill impairment loss of US$1,000 occurred during 2020. Martin's January 1, 2020 Balance Sheet is shown below (in U.S. dollars): Current Monetary Assets Inventory Plant and Equipment Total Assets Current Liabilities Bonds Payable (maturity: January 1, 2026) Common Shares Retained Earnings Total Liabilities and Equity The following exchange rates were in effect during 2020. January 1, 2020: Average for 2020: Date when Ending Inventory Purchased: December 31, 2020: $50,000 $40,000 $25,000 $115,000 $45,000 $20,000 $30,000 $20,000 $115,000 US $1= CDN $1.3250 US $1= CDN $1.3350 US $1 = CDN $1.34 US $1= CDN $1.35

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter10: Cost Recovery On Property: Depreciation, Depletion, And Amortization

Section: Chapter Questions

Problem 62P

See similar textbooks

Similar questions

The Siri Company acquired equipment on January 1, 2015 at a cost of P400,000, depreciating it over 8 years with a nil residual value. On January 1, 2018. The Triss Company acquired 100% of Siri and estimated the fair value of the equipment at P230,000 with a remaining life of 5 years. This fair value was not incorporated into Siri’s books and the depreciation expense continued to be calculated by reference to original cost. What adjustments should be made to the depreciation expense for the year and the statement of financial position carrying amount in preparing the consolidated financial statements for the year ended December 31, 2019? DEPRECIATION EXPENSE -decrease by P4,000 ; CARRYING AMOUNT - decreased by P12,000 DEPRECIATION EXPENSE -decreased by P4,000 ; CARRYING AMOUNT - increased by P12,000 DEPRECIATION EXPENSE -increase by P4,000 ; CARRYING AMOUNT - decreased by P12,000 DEPRECIATION EXPENSE…
1. Morny Corporation sold equipment to its 80% owned subsidiary, Morrie Corporaiton on January 1, 2020. Morny sold the equipment for P110,000 when its book value was P85,000 and it had a 5-year remaining useful life with no expected salvage value. Separate balance sheets for Morny and Morrie included the following equipment and accumulated depreciation amounts on December 31, 2020:Morny MorrieEquipment P750,000 P300,000Less: Accumulated depreciation (200,000) (50,000)Equipment, net P550,000 P250,000Consolidated amounts for equipment and accumulated depreciation at December 31, 2020, were respectively.a. P1,025,000 and P250,000b. P1,050,000 and P250,000 c. P1,025,000 and P245,000d. P1,045,000 and P245,000 2. Rommel, Inc. acquired a 60% interest in Mikee Company several years ago. During 2020, Mikee sold inventory costing P75,000 to Rommel for P100,000. A…
The R Company acquired an equipment on January 1, 2016 at a cost of P900,000, depreciating it over 8 years with a nil residual value. On January 1, 2019 the M Company acquired 100% of R and estimated the fair value of the equipment at P520,000, with a remaining life of 5 years. This fair value was not incorporated into R’s books and the depreciation expense continued to be calculated by reference to original cost. What adjustments should be made to the carrying amount of equipment in preparing the consolidated statements of financial position for the year ended December 31, 2020? Increase or decrease? *a. P42,500 increaseb. P17,000 decreasec. P25,500 decreased. P42,500 decrease
The Siri Company acquired equipment on January 1, 2015 at a cost of P400,000, depreciating it over 8 years with a nil residual value. On January 1, 2018. The Triss Company acquired 100% of Siri and estimated the fair value of the equipment at P230,000 with a remaining life of 5 years. This fair value was not incorporated into Siri’s books and the depreciation expense continued to be calculated by reference to original cost. What adjustments should be made to the depreciation expense for the year and the statement of financial position carrying amount in preparing the consolidated financial statements for the year ended December 31, 2019? a. DEPRECIATION EXPENSE -decrease by P4,000 ; CARRYING AMOUNT - decreased by P12,000 b. DEPRECIATION EXPENSE -increase by P4,000 ; CARRYING AMOUNT - decreased by P12,000 c. DEPRECIATION EXPENSE -decreased by P4,000 ; CARRYING AMOUNT - increased by P12,000 d. DEPRECIATION EXPENSE -increase by P4,000 ; CARRYING AMOUNT - increased by P12,000
The Siri Company acquired equipment on January 1, 2015 at a cost of P400,000, depreciating it over 8 years with a nil residual value. On January 1, 2018. The Triss Company acquired 100% of Siri and estimated the fair value of the equipment at P230,000 with a remaining life of 5 years. This fair value was not incorporated into Siri's books and the depreciation expense continued to be calculated by reference to original cost. What adjustments should be made to the depreciation expense for the year and the statement of financial position carrying amount in preparing the consolidated financial statements for the year ended December 31, 2019? DEPRECIATION EXPENSE -increase by P4,000 ; CARRYING AMOUNT - increased by P12,000 DEPRECIATION EXPENSE -decrease by P4,000 ; CARRYING AMOUNT - decreased by P12,000 DEPRECIATION EXPENSE -increase by P4,000; CARRYING AMOUNT - decreased by P12,000 DEPRECIATION EXPENSE -decreased by P4,000 ; CARRYING AMOUNT - increased by P12,000
The Siri Company acquired equipment on January 1, 2015 at a cost of P400,000, depreciating it over 8 years with a nil residual value. On January 1, 2018. The Triss Company acquired 100% of Siri and estimated the fair value of the equipment at P230,000 with a remaining life of 5 years. This fair value was not incorporated into Siri's books and the depreciation expense continued to be calculated by reference to original cost. What adjustments should be made to the depreciation expense for the year and the statement of financial position carrying amount in preparing the consolidated financial statements for the year ended December 31, 2019?
Panama Company acquired 60% of Samoa Corporation on 1/2018. Fair values of Samoa's assets and liabilities approximated book values on that date. Panama uses the initial value method to account for its investment in Samoa. On 1/2019, Panama bought equipment from Samoa for $60,000 that had originally cost Samoa $120,000 and had $ 110,000of Accumulated depreciation at the time. The equipment had a five-year remaining life and was being depreciated using the straight-line method. You are preparing the worksheet for the 2020 fiscal year. a. Was this equipment sale upstream or downstream?b. How much unrealized net gain from the equipment transfer remains at the beginning of 2020? (this is the amount you will need for the *TA entry at 1/2020.)c. Which company's Retained earnings account will be adjusted in the *TA entry in part a? (Which company was the "initiator" of the transaction?)d. How much excess depreciation will there be in each of the first five years after the transfer?e. Panama's…
Panama Company acquired 60 %of Samoa Corporation on 1/2018. Fair values of Samoa's assets and liabilitiesapproximated book values on that date. Panama uses the initial value methodto account for its investment in Samoa.On 1/2019, Panama bought equipment from Samoa for $60,000 that hadoriginally cost Samoa $120,000 and had $ 90,000of Accumulated depreciation at the time. The equipment had a five-yearremaining life and was being depreciated using the straight line method.You are preparing the worksheet for the 2020 fiscal year.a. Was this equipment sale upstream or downstream?b. How much unrealized net gain from the equipment transfer remains at thebeginning of 2020? (this is the amount you will need for the *TA entry at 1/2020.)c. Which company's Retained earnings account will be adjusted in the *TA entryin part a? (Which company was the “initiator” of the transaction?)d. How much excess depreciation will there be in each of the first five yearsafter the transfer?e. Panama's 2020 net…
Panama Company acquired 60 %of Samoa Corporation on 1/2018. Fair values of Samoa's assets and liabilitiesapproximated book values on that date. Panama uses the initial value methodto account for its investment in Samoa.On 1/2019, Panama bought equipment from Samoa for $60,000 that hadoriginally cost Samoa $120,000 and had $ 90,000of Accumulated depreciation at the time. The equipment had a five-yearremaining life and was being depreciated using the straight line method.You are preparing the worksheet for the 2020 fiscal year.d. How much excess depreciation will there be in each of the first five yearsafter the transfer?e. Panama's 2020 net income, without including any investment income, was$ 360,000 and Samoa reported net income of $ 115,000 in 2020.What consolidated income will be reported before removing the noncontrollinginterest's share of the subsidiary's net income? (This includes the effectof the ED entry.)f. What will the noncontrolling interest's share of the subsidiary's net…
Panama Company acquired 60 % of Samoa Corporation on 1/2018. Fair values of Samoa's assets and liabilities approximated book values on that date. Panama uses the initial value method to account for its investment in Samoa. only answer D.) E.) F.) On 1/2019, Panama bought equipment from Samoa for $60,000 that had originally cost Samoa $120,000 and had $ 90,000 of Accumulated depreciation at the time. The equipment had a five-year remaining life and was being depreciated using the straight line method. You are preparing the worksheet for the 2020 fiscal year. a. Was this equipment sale upstream or downstream?b. How much unrealized net gain from the equipment transfer remains at the beginning of 2020? (this is the amount you will need for the *TA entry at 1/2020.)c. Which company's Retained earnings account will be adjusted in the *TA entry in part a? (Which company was the “initiator” of the transaction?)d. How much excess depreciation will there be in each of the first five years after…
Barbay Ltd has two divisions. It acquired one of them, Tibay Products, on January 1, 2022 for $400,000, and recorded goodwill of $50,750 as a result of that purchase. If at December 31, 2022, Tibay Products will have a recoverable amount of $370,000 and carrying value of its net assets of $355,000 (including goodwill). What amount of loss on impairment of goodwill should Barbay Ltd record in 2022, if any?
On January 1, 2022, Paulson Corporation purchased 65% of the outstanding common stock of Sun Company, which became a subsidiary of Paulson. No goodwill was reported on this acquisition. Differences between book value and fair value of the net identifiable assets of Sun Company on January 1, 2022, were limited to the following: Book value $ 19,000 Inventories (FIFO) Building (net) [remaining life: 5 years; straight-line depreciation; no salvage value] | 45,000 40,000 Sun's cost of goods sold was $38,000 in 2022. Sun reported an income of 20,000 in 2023. The noncontrolling interest in net income for the year ended December 31, 2023 (second year after business combination) was a. $7,350 b. $7,175 C. $6,825 d. $6,650 Fair value $ 18,500