X) Alpha Company acquired 30 percent of the outstanding voting stock of Beta Company on January 1, 2020, for $254,000 in cash and had the ability to significantly influence the investee's operations and decision making, The book value of Beta's net assets on that date was $600,000, although one of the company's buildings, with a $40,000 carrying amount, was actually worth $120,000. This building had an 8-year remaining life. Beta owned a royalty agreement with a 5-year remaining life that was undervalued by $100,000. Alpha attributed to goodwill any unidentified excess cost. Beta reported net income of $100,000 in 2020 and $120,000 in 2021. Dividends of $20,000 and $30,000 are declared and paid in 2020 and 2021, respectively. Alpha sold inventory with an original cost of $24,000 to Beta during 2020 at a price of $40,000. Beta still held $10,000 (transfer price) of this amount in inventory as of December 31, 2020. These goods are to be sold to outside parties during 2021. During 2021, Alpha mađe aditional inventory sales of $100,000 to Beta during the period. The original cost of the merchandise was $80,000. Beta did not resell 40 percent of these 2021 purchase from Alpha until 2022. Answer the following questions: 1. How much of Alpha's $254,000 payment for Beta attributable to goodwill? 2. What amount should Alpha report for it Equity in Beta Earnings on its income statement for year 2021? 3. What amount should Alpha report for its Investment in Beta on its balance sheet at the end of 2021?
X)
Alpha Company acquired 30 percent of the outstanding voting stock of Beta Company on January 1, 2020, for $254,000 in cash and had the ability to significantly influence the investee's operations and decision making, The book value of Beta's net assets on that date was $600,000, although one of the company's buildings, with a $40,000 carrying amount, was actually worth $120,000. This building had an 8-year remaining life. Beta owned a royalty agreement with a 5-year remaining life that was undervalued by $100,000. Alpha attributed to
Beta reported net income of $100,000 in 2020 and $120,000 in 2021. Dividends of $20,000 and $30,000 are declared and paid in 2020 and 2021, respectively.
Alpha sold inventory with an original cost of $24,000 to Beta during 2020 at a price of $40,000. Beta still held $10,000 (transfer price) of this amount in inventory as of December 31, 2020. These goods are to be sold to outside parties during 2021.
During 2021, Alpha mađe aditional inventory sales of $100,000 to Beta during the period. The original cost of the merchandise was $80,000. Beta did not resell 40 percent of these 2021 purchase from Alpha until 2022.
Answer the following questions:
1. How much of Alpha's $254,000 payment for Beta attributable to goodwill?
2. What amount should Alpha report for it Equity in Beta Earnings on its income statement for year 2021?
3. What amount should Alpha report for its Investment in Beta on its balance sheet at the end of 2021?
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