Which of the following statements are true? (i) If an investor has more than 50% ownership, it always has control. (ii) Goodwill is amortised over the useful life which is traditionally 30 years. (iii) The elimination entry in the pro forma journal is not entered in the general ledger. Select one: a. (i), (ii) and (iii) b. (i) and (ii) only c. (i) and (iii) only d. (iii) only

Which of the following statements are true? (i) If an investor has more than 50% ownership, it always has control. (ii) Goodwill is amortised over the useful life which is traditionally 30 years. (iii) The elimination entry in the pro forma journal is not entered in the general ledger. Select one: a. (i), (ii) and (iii) b. (i) and (ii) only c. (i) and (iii) only d. (iii) only

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

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 8RE

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Hamilton Companys balance sheet on January 1, 2019, was as follows: Korbel Company is considering purchasing Hamilton (a privately held company) and discovers the following about Hamilton: a. No allowance for doubtful accounts has been established. A 10,000 allowance is considered appropriate. b. Marketable securities are valued at cost. The current market value is 60,000. c. The LIFO inventory method is used. The FIFO inventory of 140,000 would be used if the company is acquired. d. Land, included in property, plant, and equipment, which is recorded at its cost of 50,000, is worth 120,000. The remaining property, plant, and equipment is worth 10% more than its depreciated cost. e. The company has an unrecorded trademark that is worth 70,000. f. The companys bonds are currently trading for 130,000. g. The pension liability is understated by 40,000. Required: 1. Compute the amount of goodwill if Korbel agrees to pay 500,000 cash for Hamilton. 2. Next Level What are the reasons that the book value of Hamiltons net identifiable assets differ from their market value? 3. Prepare the journal entry to record the acquisition on the books of Korbel assuming Hamilton is liquidated. 4. If Korbel agrees to pay only 400,000 cash, how much goodwill exists? 5. If Korbel pays only 400,000 cash, prepare the journal entry to record the acquisition on its books, assuming Hamilton is liquidated.
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The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2021. The company buys debt securities, not intending to profit from short-term differences in price and not necessarily to hold debt securities to maturity, but to have them available for sale in years when circumstances warrant. Ornamental’s fiscal year ends on December 31. No investments were held by Ornamental on December 31, 2020. Mar. 31 Acquired 5% Distribution Transformers Corporation bonds costing $410,000 at face value. Sep. 1 Acquired $915,000 of American Instruments’ 8% bonds at face value. Sep. 30 Received semiannual interest payment on the Distribution Transformers bonds. Oct. 2 Sold the Distribution Transformers bonds for $436,000. Nov. 1 Purchased $1,410,000 of M&D Corporation 3% bonds at face value. Dec. 31 Recorded any necessary adjusting entry(s) relating to the investments. The market prices of the investments are:…
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