Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Branson paid $573,200 cash for all of the outstanding common stock of Wolfpack, Inc., on January 1, 2020. On that date, the
subsidiary had a book value of $430,000 (common stock of $200,000 and retained earnings of $230,000), although various
unrecorded royalty agreements (10-year remaining life) were assessed at a $133,000 fair value. Any remaining excess fair value was
considered goodwill.
In negotiating the acquisition price, Branson also promised to pay Wolfpack's former owners an additional $44,000 if Wolfpack's
income exceeded $150,000 total over the first two years after the acquisition. At the acquisition date, Branson estimated the
probability-adjusted present value of this contingent consideration at $30,800. On December 31, 2020, based on Wolfpack's earnings
to date, Branson increased the value of the contingency to $35,200.
During the subsequent two years, Wolfpack reported the following amounts for income and dividends:
Dividends Declared
$ 15,000
25,000
Net Income
$…
Branson paid $540,800 cash for all of the outstanding common stock of Wolfpack, Inc., on January 1, 2020. On that date, the subsidiary had a book value of $390,000 (common stock of $200,000 and retained earnings of $190,000), although various unrecorded royalty agreements (10-year remaining life) were assessed at a $126,000 fair value. Any remaining excess fair value was considered goodwill.
In negotiating the acquisition price, Branson also promised to pay Wolfpack’s former owners an additional $36,000 if Wolfpack’s income exceeded $140,000 total over the first two years after the acquisition. At the acquisition date, Branson estimated the probability-adjusted present value of this contingent consideration at $25,200. On December 31, 2020, based on Wolfpack’s earnings to date, Branson increased the value of the contingency to $28,800.
During the subsequent two years, Wolfpack reported the following amounts for income and dividends:
Net Income
Dividends Declared
2020
$…
Branson paid $607,500 cash for all of the outstanding common stock of Wolfpack, Inc., on January 1, 2020.
On that date, the subsidiary had a book value of $373,000 (common stock of $200,000 and retained
earnings of $173, 000), although various unrecorded royalty agreements (10-year remaining life) were
assessed at a $199, 000 fair value. Any remaining excess fair value was considered goodwill. In negotiating
the acquisition price, Branson also promised to pay Wolfpack's former owners an additional $45,000 if
Wolfpack's income exceeded $150,000 total over the first two years after the acquisition. At the acquisition
date, Branson estimated the probability - adjusted present value of this contingent consideration at $
31,500. On December 31, 2020, based on Wolfpack's earnings to date, Branson increased the value of the
contingency to $36,000. During the subsequent two years, Wolfpack reported the following amounts for
income and dividends: Net Income Dividends Declared 2020 $ 80,500 $…
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- Branson paid $465,000 cash for all of the outstanding common stock of Wolfpack, Inc., on January 1, 2017. On that date, the subsidiary had a book value of $340,000 (common stock of $200,000 and retained earnings of $140,000), although various unrecorded royalty agreements (10-year remaining life) were assessed at a $100,000 fair value. Any remaining excess fair value was considered goodwill. In negotiating the acquisition price, Branson also promised to pay Wolfpack’s former owners an additional $50,000 if Wolfpack’s income exceeded $120,000 total over the first two years after the acquisition. At the acquisition date, Branson estimated the probability-adjusted present value of this contingent consideration at $35,000. On December 31, 2017, based on Wolfpack’s earnings to date, Branson increased the value of the contingency to $40,000. During the subsequent two years, Wolfpack reported the following amounts for income and dividends: In keeping with the original acquisition agreement,…arrow_forwardBranson paid $543,800 cash for all of the outstanding common stock of Wolfpack, Inc., on January 1, 2020. On that date, the subsidiary had a book value of $401,000 (common stock of $200,000 and retained earnings of $201,000). although various unrecorded royalty agreements (10-year remaining life) were assessed at a $124.000 fair value. Any remaining excess fair value was considered goodwill. In negotiating the acquisition price, Branson also promised to pay Wolfpack's former owners an additional $56,000 if Wolfpack's income exceeded $130,000 total over the first two years after the acquisition. At the acquisition date, Branson estimated the probability-adjusted present value of this contingent consideration at $39,200. On December 31, 2020, based on Wolfpack's earnings to date, Branson increased the value of the contingency to $44,800. During the subsequent two years, Wolfpack reported the following amounts for income and dividends: Net Income 2020 $72,400 2021 82,400 Dividends…arrow_forwardBranson paid $537,100 cash for all of the outstanding common stock of Wolfpack, Inc., on January 1, 2017. On that date, the subsidiary had a book value of $353,000 (common stock of $200,000 and retained earnings of $153,000), although various unrecorded royalty agreements (10-year remaining life) were assessed at a $153,000 fair value. Any remaining excess fair value was considered goodwill. In negotiating the acquisition price, Branson also promised to pay Wolfpack’s former owners an additional $57,000 if Wolfpack’s income exceeded $120,000 total over the first two years after the acquisition. At the acquisition date, Branson estimated the probability-adjusted present value of this contingent consideration at $39,900. On December 31, 2017, based on Wolfpack’s earnings to date, Branson increased the value of the contingency to $45,600. During the subsequent two years, Wolfpack reported the following amounts for income and dividends: Net Income Dividends Declared 2017 $ 66,400…arrow_forward
- On January 1, 2020, Harrison, Inc., acquired 90 percent of Starr Company in exchange for $1,125,000 fair-value consideration. The total fair value of Starr Company was assessed at $1,200,000. Harrison computed annual excess fair-value amortization of $8,000 based on the difference between Starr's total fair value and its underlying book value. The subsidiary reported net income of $70,000 in 2020 and $90,000 in 2021 with dividend declarations of $30,000 each year. Apart from its investment in Starr, Harrison had net income of $220,000 in 2020 and $260,000 in 2021. a. What is the consolidated net income in each of these two years? b. What is the balance of the noncontrolling interest in Starr at December 31, 2021? a. b. Consolidated net income Noncontrolling interest balance 2020 $ 260,000 2021arrow_forwardOn May 1, 2021, Jazzie Co. agreed to sell the assets of its Mister Division to Shawna Inc. for $80 million. The sale was completed on December 31, 2021. Jazzie’s year ends on December 31st. The following additional facts pertain to the transaction: The Mister Division qualifies as a component of an entity as defined by GAAP. Mister's net assets totaled $48 million on Jazzie's books at the time of the sale. Mister incurred a pre-tax operating loss of $10 million in 2021. Jazzie’s income tax rate is 40%. Suppose that the Mister Division's assets had not been sold by December 31, 2021, but were considered held for sale. Assume that the fair value of these assets at December 31 was $80 million. In their 2021 income statement, Jazzie Co. would report for discontinued operations: Group of answer choices a $6 million after tax loss. a $10 million after tax loss after tax income of $13.2 million. after tax income of $22 million.arrow_forwardOn May 1, 2021, Jazzie Co. agreed to sell the assets of its Mister Division to Shawna Inc. for $80 million. The sale was completed on December 31, 2021. Jazzie’s year ends on December 31st. The following additional facts pertain to the transaction: The Mister Division qualifies as a component of an entity as defined by GAAP. Mister's net assets totaled $48 million on Jazzie's books at the time of the sale. Mister incurred a pre-tax operating loss of $10 million in 2021. Jazzie’s income tax rate is 40%. Suppose that the Mister Division's assets had not been sold by December 31, 2021, but were considered held for sale. Assume that the fair value of these assets at December 31 was $40 million. In their 2021 income statement, Jazzie Co. would report for discontinued operations: Group of answer choices a $6 million after tax loss. a $10 million after tax loss. a $10.8 million after tax loss. an $18 million after tax loss.arrow_forward
- On May 1, Freeman Company agreed to sell the assets of its Footwear Division to Albanese Incorporated for $97 million. The sale was completed on December 31, 2024. The following additional facts pertain to the transaction: • The Footwear Division qualifies as a component of the entity according to GAAP regarding discontinued operations. • The book value of Footwear's assets totaled $65 million on the date of the sale. • Footwear's operating income was a pre-tax loss of $14 million in 2024. . Freeman's income tax rate is 25%. In the income statement for the year ended December 31, 2024, Freeman Company would report income from discontinued operations of:arrow_forwardOn May 1. Foxtrot Co. agreed to sel the assets of its Footwear Division to Albanese Inc. for $80 milion. The sale was completed on December 31, 2021 The following additional facts pertain to the transaction: The Footwear Division qualifies as a component of the entity according to GAAP regarding discontinued operations. The book value of Footwear's assets totaled $48 million on the date of the sale. Footwear's operating income was a pre-tax loss of $10 million in 2021. Foxtrot's income tax rate is 25% In the Income statement for the year ended December 31, 2021, Foxtrot Co. would report Mutple Choice Income teves separted tor cortinuing and discortinued operations ncome tases reponed for income and gains only None of these answer choices are comect All ncome taes combined into one line tem Why is the second option not correct?arrow_forwardOn January 1, 2020, Palka, Inc., acquired 70 percent of the outstanding shares of Sellinger Company for $1,274,000 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 $1,540,000. 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 $270,000. On January 1, 2021, Palka acquired an additional 25 percent common stock equity interest in Sellinger Company for $512,500 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: 2020 2021 Net income $ 505,000 $ 626,000 Dividends declared 170,000 200,000 Show Palka’s journal entry to record its January 1, 2021, acquisition of an additional…arrow_forward
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