Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Tyler Company acquired all of Jasmine Company's outstanding stock on January 1, 2022, for $206,000 in cash. Jasmine had a book
value of only $140,000 on that date. However, equipment (having an eight-year remaining life) was undervalued by $54,400 on
Jasmine's financial records. A building with a 20-year remaining life was overvalued by $10,000. Subsequent to the acquisition,
Jasmine reported the following:
Year
2822
2023
2024
Net Income
$ 50,000
60,000
30,000
Dividends
Declared
$ 10,000
40,000
20,000
In accounting for this investment, Tyler has used the equity method. Selected accounts taken from the financial records of these two
companies as of December 31, 2024, follow:
Accounts
Revenues-operating
Expenses
Equipment (net)
Buildings (net)
Common stock
Retained earnings, 12/31/24
Tyler Company
$ (310,000)
198,000
320,000
220,000
a. Investment in Jasmine Company
b. Equity in Subsidiary Earnings
c. Consolidated Net Income
d. Consolidated Equipment (net)
e. Consolidated Buildings (net)…
Tyler Company acquired all of Jasmine Company's outstanding stock on January 1, 2019, for $286,400 in cash. Jasmine had a book
value of only $220,000 on that date. However, equipment (having an eight-year remaining life) was undervalued by $60,000 on
Jasmine's financial records. A building with a 20-year remaining life was overvalued by $15,700. Subsequent to the acquisition,
Jasmine reported the following:
2019
2020
2021
In accounting for this investment, Tyler has used the equity method. Selected accounts taken from the financial records of these two
companies as of December 31, 2021, follow:
Revenues-operating
Net Income
$ 74,400
62,500
47,800
Expenses
Equipment (net)
Buildings (net)
Common stock
Retained earnings, 12/31/21
a.
b.
C.
d.
Dividends
Declared
$10,000
40,000
20,000
e.
f.
Determine the following account balances as of December 31, 2021: (Input all amounts as positive values.)
Investment in Jasmine Company
Equity in Subsidiary Earnings
Consolidated Net Income
Consolidated…
Foxx Corporation acquired all of Greenburg Company's outstanding stock on January 1, 2019. for $586,000 cash. Greenburg's
accounting records showed net assets on that date of $440,000, although equipment with a 10-year remaining life was undervalued
on the records by $56,500. Any recognized goodwill is considered to have an indefinite life.
Greenburg reports net income in 2019 of $105,000 and $137,500 in 2020. The subsidiary declared dividends of $20,000 in each of
these two years.
Account balances for the year ending December 31, 2021, follow. Credit balances are indicated by parentheses.
Revenues
Cost of goods sold
Depreciation expense
Investment income
Foxx
$(1,164, 000)
145, 500
358, e00
(20,000)
$ (680, 500)
Greenburg
$ (620, 000)
155, e00
440, 000
Net income
(25, 000)
Retained earnings, 1/1/21
Net income
$(1,160, 000)
(689, 500)
120, e00
$ (342, 500)
(25, 000)
20,000
$ (347, 500)
Dividends declared
Retained earnings, 12/31/21
$(1,720,500)
Current assets
373, e00
586, 000
1,882,…
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Similar questions
- On May 1, 2015, Zoe Inc. purchased Branta Corp. for $15,000,000 in cash. They only received $12,000,000 in net assets. In 2016, the market value of the goodwill obtained from Branta Corp. was valued at $4,000,000, but in 2017 it dropped to $2,000,000. Prepare the journal entry for the creation of goodwill and the entry to record any impairments to it in subsequent years.arrow_forwardTyler Company acquired all of Jasmine Company’s outstanding stock on January 1, 2016, for $206,000 in cash. Jasmine had a book value of only $140,000 on that date. However, equipment (having an eight-year remaining life) was undervalued by $54,400 on Jasmine’s financial records. A building with a 20-year remaining life was overvalued by $10,000. Subsequent to the acquisition, Jasmine reported the following: In accounting for this investment, Tyler has used the equity method. Selected accounts taken from the financial records of these two companies as of December 31, 2018, follow: Determine and explain the following account balances as of December 31, 2018: a. Investment in Jasmine Company (on Tyler’s individual financial records). b. Equity in Subsidiary Earnings (on Tyler’s individual financial records). c. Consolidated Net Income. d. Consolidated Equipment (net). e. Consolidated Buildings (net). f. Consolidated Goodwill (net). g. Consolidated Common Stock. h. Consolidated Retained…arrow_forwardTyler Company acquired all of Jasmine Company’s outstanding stock on January 1, 2016, for $206,000 in cash. Jasmine had a book value of only $140,000 on that date. However, equipment (having an eight-year remaining life) was undervalued by $54,400 on Jasmine’s financial records. A building with a 20-year remaining life was overvalued by $10,000. Subsequent to the acquisition, Jasmine reported the following: Net Income Dividends Declared 2016 $ 50,000 $ 10,000 2017 60,000 40,000 2018 30,000 20,000 In accounting for this investment, Tyler has used the equity method. Selected accounts taken from the financial records of these two companies as of December 31, 2018, follow: Tyler Company Jasmine Company Revenues—operating $ (310,000 ) $ (104,000 ) Expenses 198,000 74,000 Equipment (net) 320,000 50,000 Buildings (net) 220,000 68,000 Common stock (290,000 ) (50,000 ) Retained earnings, 12/31/18…arrow_forward
- Foxx Corporation acquired all of Greenburg Company’s outstanding stock on January 1, 2019, for $640,000 cash. Greenburg’s accounting records showed net assets on that date of $465,000, although equipment with a 10-year remaining life was undervalued on the records by $86,500. Any recognized goodwill is considered to have an indefinite life. Greenburg reports net income in 2019 of $130,500 and $126,000 in 2020. The subsidiary declared dividends of $20,000 in each of these two years. Account balances for the year ending December 31, 2021, follow. Credit balances are indicated by parentheses. Foxx Greenburg Revenues $ (948,000 ) $ (764,000 ) Cost of goods sold 118,500 191,000 Depreciation expense 312,000 443,000 Investment income (20,000 ) 0 Net income $ (537,500 ) $ (130,000 ) Retained earnings, 1/1/21 $ (1,198,000 ) $ (381,500 ) Net income (537,500 ) (130,000 ) Dividends declared 120,000 20,000 Retained…arrow_forwardFoxx Corporation acquired all of Greenburg Company's outstanding stock on January 1, 2019, for $743,000 cash. Greenburg's accounting records showed net assets on that date of $609,000, although equipment with a 10-year remaining life was undervalued on the records by $59,500. Any recognized goodwill is considered to have an indefinite life. Greenburg reports net income in 2019 of $125,000 and $127,500 in 2020. The subsidiary declared dividends of $20,000 in each of these two years. Account balances for the year ending December 31, 2021, follow. Credit balances are indicated by parentheses. Greenburg $ (920,000) 230,000 425,000 Foxx $(1,184,000) 148, 000 392,000 (20,000) $ (664,000) $(1,140,000) (664,000) Revenues Cost of goods sold Depreciation expense Investment income Net income $ (265,000) Retained earnings, 1/1/21 Net income (521,500) (265,000) 20,000 Dividends declared 120,000 Retained earnings, 12/31/21 $(1,684,000) $ (766, 500) 328,000 743,000 1,022,000 844,000 652,000 $…arrow_forwardHerbert, Inc., acquired all of Rambis Company’s outstanding stock on January 1, 2020, for $592,000 in cash. Annual excess amortization of $15,700 results from this transaction. On the date of the takeover, Herbert reported retained earnings of $408,000, and Rambis reported a $205,000 balance. Herbert reported internal net income of $45,000 in 2020 and $58,700 in 2021 and declared $10,000 in dividends each year. Rambis reported net income of $25,900 in 2020 and $39,600 in 2021 and declared $5,000 in dividends each year. a. Assume that Herbert’s internal net income figures above do not include any income from the subsidiary. If the parent uses the equity method, what is the amount reported as consolidated retained earnings on December 31, 2021? What would be the amount of consolidated retained earnings on December 31, 2021, if the parent had applied either the initial value or partial equity method for internal accounting purposes? Consolidated retained earnings (equity method),…arrow_forward
- Foxx Corporation acquired all of Greenburg Company’s outstanding stock on January 1, 2019, for $858,000 cash. Greenburg’s accounting records showed net assets on that date of $717,000, although equipment with a 10-year remaining life was undervalued on the records by $60,000. Any recognized goodwill is considered to have an indefinite life. Greenburg reports net income in 2019 of $113,000 and $148,500 in 2020. The subsidiary declared dividends of $20,000 in each of these two years. Account balances for the year ending December 31, 2021, follow. Credit balances are indicated by parentheses. Foxx Greenburg Revenues $ (828,000 ) $ (968,000 ) Cost of goods sold 103,500 242,000 Depreciation expense 424,000 358,000 Investment income (20,000 ) 0 Net income $ (320,500 ) $ (368,000 ) Retained earnings, 1/1/21 $ (1,234,000 ) $ (638,500 ) Net income (320,500 ) (368,000 ) Dividends declared 120,000 20,000 Retained…arrow_forwardFoxx Corporation acquired all of Greenburg Company’s outstanding stock on January 1, 2019, for $662,000 cash. Greenburg’s accounting records showed net assets on that date of $490,000, although equipment with a 10-year remaining life was undervalued on the records by $99,500. Any recognized goodwill is considered to have an indefinite life. Greenburg reports net income in 2019 of $106,000 and $133,000 in 2020. The subsidiary declared dividends of $20,000 in each of these two years. Account balances for the year ending December 31, 2021, follow. Credit balances are indicated by parentheses. Foxx Greenburg Revenues $ (912,000 ) $ (764,000 ) Cost of goods sold 114,000 191,000 Depreciation expense 370,000 406,000 Investment income (20,000 ) 0 Net income $ (448,000 ) $ (167,000 ) Retained earnings, 1/1/21 $ (1,204,000 ) $ (389,000 ) Net income (448,000 ) (167,000 ) Dividends declared 120,000 20,000 Retained…arrow_forwardHerbert, Inc., acquired all of Rambis Company’s outstanding stock on January 1, 2020, for $592,000 in cash. Annual excess amortization of $15,700 results from this transaction. On the date of the takeover, Herbert reported retained earnings of $408,000, and Rambis reported a $205,000 balance. Herbert reported internal net income of $45,000 in 2020 and $58,700 in 2021 and declared $10,000 in dividends each year. Rambis reported net income of $25,900 in 2020 and $39,600 in 2021 and declared $5,000 in dividends each year. a. Assume that Herbert’s internal net income figures above do not include any income from the subsidiary. If the parent uses the equity method, what is the amount reported as consolidated retained earnings on December 31, 2021? What would be the amount of consolidated retained earnings on December 31, 2021, if the parent had applied either the initial value or partial equity method for internal accounting purposes? b. Under each of the following situations, what is…arrow_forward
- Herbert, Inc., acquired all of Rambis Company's outstanding stock on January 1, 2020, for $622,000 in cash. Annual excess amortization of $11,300 results from this transaction. On the date of the takeover, Herbert reported retained earnings of $465,000, an Rambis reported a $211,000 balance. Herbert reported internal net income of $43,500 in 2020 and $56,900 in 2021 and declared $10,000 in dividends each year. Rambis reported net income of $22,100 in 2020 and $35,500 in 2021 and declared $5,000 in dividends each year. a. Assume that Herbert's internal net income figures above do not include any income from the subsidiary. • If the parent uses the equity method, what is the amount reported as consolidated retained earnings on December 31, 2021? • What would be the amount of consolidated retained earnings on December 31, 2021, if the parent had applied either the initial value or partial equity method for internal accounting purposes? b. Under each of the following situations, what is…arrow_forwardBassett Inc. acquired all of the outstanding common stock of Brinkman Corp. on January 1, 2019, for $422,000. Equipment with a ten-year life was undervalued on Brinkman's financial records by $48,000. Brinkman also owned an unrecorded customer list with an assessed fair value of $71,000 and an estimated remaining life of five years. Brinkman earned reported net income of $185,000 in 2019 and $226,000 in 2020. Dividends of $75,000 were paid in each of these two years. Selected account balances as of December 31, 2021, for the two companies follow. Revenues Expenses Investment income Retained earnings, 1/1/21 Dividends paid Multiple Choice $806,000. $811,000. If the equity method had been applied, what would be the Investment in Brinkman Corp. account balance within the records of Bassett at the end of 2021? $863,000. $920,000. Bassett $1,120,000 $1,036,000. 500,000 Not given 850,000 132,000 Brinkman $860,000 600,000 Ø 650,000 80,000arrow_forwardHerbert, Inc., acquired all of Rambis Company’s outstanding stock on January 1, 2020, for $652,000 in cash. Annual excess amortization of $13,700 results from this transaction. On the date of the takeover, Herbert reported retained earnings of $498,000, and Rambis reported a $232,000 balance. Herbert reported internal net income of $44,750 in 2020 and $58,350 in 2021 and declared $10,000 in dividends each year. Rambis reported net income of $23,300 in 2020 and $36,900 in 2021 and declared $5,000 in dividends each year. a. Assume that Herbert’s internal net income figures above do not include any income from the subsidiary. If the parent uses the equity method, what is the amount reported as consolidated retained earnings on December 31, 2021? What would be the amount of consolidated retained earnings on December 31, 2021, if the parent had applied either the initial value or partial equity method for internal accounting purposes? Equity method, initial value method and partial…arrow_forward
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