Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Giant acquired all of Small’s common stock on January 1, 2017, in exchange for cash of $770,000. On that day, Small reported common stock of $170,000 and retained earnings of $400,000. At the acquisition date, $90,000 of the fair-value price was attributed to undervalued land while $50,000 was assigned to undervalued equipment having a 10-year remaining life. The $60,000 unallocated portion of the acquisition-date excess fair value over book value was viewed as goodwill. Over the next few years, Giant applied the equity method to the recording of this investment.
The following are individual financial statements for the year ending December 31, 2021. On that date, Small owes Giant $10,000. Small declared and paid dividends in the same period. Credits are indicated by parentheses.
How was the $135,000 Equity in Income of Small balance computed?
Without preparing a worksheet or consolidation entries, determine and explain the totals to be reported by this business combination for the…
Giant acquired all of Small’s common stock on January 1, 2017, in exchange for cash of $770,000. On that day, Small reported common stock of $170,000 and retained earnings of $400,000. At the acquisition date, $32,500 of the fair-value price was attributed to undervalued land while $95,500 was assigned to undervalued equipment having a 10-year remaining life. The $72,000 unallocated portion of the acquisition-date excess fair value over book value was viewed as goodwill. Over the next few years, Giant applied the equity method to the recording of this investment.
The following are individual financial statements for the year ending December 31, 2021. On that date, Small owes Giant $11,900. Small declared and paid dividends in the same period. Credits are indicated by parentheses.
Giant
Small
Revenues
$
(1,183,550
)
$
(462,500
)
Cost of goods sold
583,000
98,500
Depreciation expense
187,000
148,000
Equity in income of Small
(206,450
)
0…
Giant acquired all of Small’s common stock on January 1, 2017, in exchange for cash of $770,000. On that day, Small reported common stock of $170,000 and retained earnings of $400,000. At the acquisition date, $37,500 of the fair-value price was attributed to undervalued land while $98,000 was assigned to undervalued equipment having a 10-year remaining life. The $64,500 unallocated portion of the acquisition-date excess fair value over book value was viewed as goodwill. Over the next few years, Giant applied the equity method to the recording of this investment.
The following are individual financial statements for the year ending December 31, 2021. On that date, Small owes Giant $12,800. Small declared and paid dividends in the same period. Credits are indicated by parentheses.
Giant
Small
Revenues
$
(1,298,800
)
$
(460,000
)
Cost of goods sold
610,000
115,000
Depreciation expense
190,000
203,000
Equity in income of Small
(132,200
)
0…
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- On January 1, 2017, Palka, Inc., acquired 70 percent of the outstanding shares of Sellinger Company for $1,141,000 in cash. The price paid was proportionate to Sellinger’s total fair value, although at the acquisition date, Sellinger had a total book value of $1,380,000. All assets acquired and liabilities assumed had fair values equal to book values except for a patent (six-year remaining life) that was undervalued on Sellinger’s accounting records by $240,000. On January 1, 2018, Palka acquired an additional 25 percent common stock equity interest in Sellinger Company for $415,000 in cash. On its internal records, Palka uses the equity method to account for its shares of Sellinger.During the two years following the acquisition, Sellinger reported the following net income and dividends:Show Palka’s journal entry to record its January 1, 2018, acquisition of an additional 25 percent ownership of Sellinger Company shares.Prepare a schedule showing Palka’s December 31, 2018, equity…arrow_forwardOn January 1, 2016, Adams Corporation acquired all of the stock of Baker Company. The fair value of Adams’ shares used in the exchange was $37,500,000. At the time of acquisition, the book value of Baker’s shareholders’ equity was $5,000,000, and the book value of Baker’s building (25-year life) exceeded its fair value by $1,000,000. From the date of acquisition to December 31, 2021, Baker had cumulative net income of $1,300,000. For 2022, Baker reported net income of $300,000. Adams uses the complete equity method to account for its investment in Baker. There is no goodwill impairment loss for the period 2016 through 2021, but there is impairment loss of $100,000 in 2022. Baker declared no dividends during the period 2016–2022. Required Prepare the working paper eliminating entries necessary to consolidate the financial statements of Adams and Baker at December 31, 2019. Enter numerical answers using all zeros (do not abbreviate in thousands or in millions).arrow_forwardPython acquired 75% of Slither’s stock for $316 million in cash on January 2, 2015. The fair value of the noncontrolling interest in Slither was $89 million. Slither’s book value at that time was $120 million. The assets and liabilities reported on Slither’s balance sheet had balances that approximated fair value at the date of acquisition. However, Slither had previously unreported developed technology (10 year life, straight-line), valued at $40 million. There has been no impairment loss on the developed technology since acquisition. Goodwill was impaired $6 million in 2015, and a $3 million impairment loss should be recorded for 2016. It is now December 31, 2016. The trial balances of Python and Slither appear below. (in thousands) Python Dr (Cr) Slither Dr (Cr) Current assets $ 113,500 $ 35,000 Plant assets, net 1,200,000 500,000 Investment in Slither 323,800 – Liabilities (1,342,950) (387,000) Capital stock (40,000) (20,000) Retained earnings, Jan. 1 (215,000) (110,000)…arrow_forward
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