ADVANCED ACCOUNTING W/ACCESS >CUSTOM<
14th Edition
ISBN: 9781307594683
Author: Hoyle
Publisher: MCG/CREATE
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On January 1, Intergen, Inc., invests $200,000 for a40 percentinterest in Ryan, a new jointventure with two other partners, each investing $150,000 for 30 percent interests. Intergen plansto sell all of its production to Ryan, which will resell the inventory to retail outlets. The equitypartners agree that Ryan will buy inventory only from Intergen. Also, Intergen plans to use theequity methodfor financial reporting.During the year, Intergen expects to incur costs of $850,000 to produce goods with a final retailmarket value of $1,200,000. Ryan projects that, during this year, it will resell three-fourths ofthese goods for $900,000. It should sell the remainder in the following year.The equity partners plan a meeting to set the price Intergen will charge Ryan for its production.One partner suggests a transfer price of $1,025,000but is unsure whether it will result in anequitable return across the equity holders. Importantly, Intergen agrees that its total rate of return(including its…
On January 1, 2020, Ridge Road Company acquired 30 percent of the voting shares of Sauk Trail, Inc., for $4,400,000 in cash. Both companies provide commercial Internet support services but serve markets in different industries. Ridge Road made the investment to gain access to Sauk Trail’s board of directors and thus facilitate future cooperative agreements between the two firms. Ridge Road quickly obtained several seats on Sauk Trail’s board, which gave it the ability to significantly influence Sauk Trail’s operating and investing activities.
The January 1, 2020, carrying amounts and corresponding fair values for Sauk Trail’s assets and liabilities follow:
Carrying Amount
Fair Value
Cash and receivables
$
195,000
$
195,000
Computing equipment
5,765,000
7,060,000
Patented technology
185,000
4,170,000
Trademark
235,000
2,170,000
Liabilities
(270,000
)
(270,000
)
Also, as of January 1, 2020, Sauk Trail’s computing equipment had a…
On January 1, 2020, Ridge Road Company acquired 25 percent of the voting shares of Sauk Trail, Inc., for $3,700,000 in cash. Both companies provide commercial Internet support services but serve markets in different industries. Ridge Road made the investment to gain access to Sauk Trail’s board of directors and thus facilitate future cooperative agreements between the two firms. Ridge Road quickly obtained several seats on Sauk Trail’s board, which gave it the ability to significantly influence Sauk Trail’s operating and investing activities.
The January 1, 2020, carrying amounts and corresponding fair values for Sauk Trail’s assets and liabilities follow:
Carrying Amount
Fair Value
Cash and receivables
$
160,000
$
160,000
Computing equipment
5,450,000
6,500,000
Patented technology
150,000
4,100,000
Trademark
200,000
2,100,000
Liabilities
(235,000
)
(235,000
)
Also, as of January 1, 2020, Sauk Trail’s computing equipment had a…
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