What is the CONSOLIDATED total for buildings at that date ? b. Prepare journal entry “A” that will show up on the consolidated worksheet as of December 31, 2020. 4. How much is consolidated Equity Income in 2020.
On January 1, 2020, Adams acquires 100% of Baker in a transaction accounted for using
the acquisition method. Adams will use equity accounting for its investment in Baker.
Baker will remain a wholly owned subsidiary of Adams. The following is information
about this acquisition.
To pay for this purchase, Adams issues 20,000 shares of common stock with a $5 par and
$20 market value. Legal and accounting costs were $50,000. Stock issuance costs were
$20,000. If Baker has net income of $50,000 in 2021, Adams will pay an additional
$100,000. At acquisition date there is a 40% probability of this occurring.
The book value of net assets acquired of Baker was $200,000 at acquisition date. Adams
was willing to pay in excess of book value to acquire Baker because Baker had a building
(10 year life) with a book value of $300,000 and a fair value of $340,000.
Baker has $40,000 in net income in 2020 and pays a dividend of $30,000. Adams has
$100,000 of net income in 2020 and pays a dividend of $70,000.
At December 31, 2020 assume Adams has Buildings with a book value of
$500,000 and fair value of $600,000 and Baker has Buildings with a book value
of $400,000 and a fair value of $450,000.
a. What is the CONSOLIDATED total for buildings at that date ?
b. Prepare
of December 31, 2020.
4. How much is consolidated Equity Income in 2020.
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