Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Angela Corporation (a private company) acquired all of the outstanding voting stock of Eddy Tech, Inc., on January 1, 2018, in exchange for $9,000,000 in cash. At the acquisition date, Eddy Tech’s stockholders’ equity was $7,200,000 including retained earnings of $3,000,000.
At the acquisition date, Angela prepared the following fair value allocation schedule for its newly acquired subsidiary:
At the end of 2018, Angela and Eddy Tech report the following amounts from their individually maintained account balances, before consideration of their parent-subsidiary relationship. Parentheses indicate a credit balance.
Required:
Prepare a 2018 consolidated income statement for Angela and its subsidiary Eddy Tech. Assume that Angela, as a private company, elects to amortize goodwill over a 10-year period.
Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2020, in exchange for $6,162,000 in cash. Allison intends to maintain Mathias as a wholly owned subsidiary. Both companies have December 31 fiscal year-ends. At the acquisition date, Mathias’s stockholders’ equity was $2,070,000 including retained earnings of $1,570,000.
At the acquisition date, Allison prepared the following fair-value allocation schedule for its newly acquired subsidiary:
Consideration transferred $ 6,162,000
Mathias stockholders' equity 2,070,000
Excess fair over book value $ 4,092,000
to unpatented technology (8-year remaining life) $ 912,000
to patents (10-year remaining life) 2,640,000
to increase long-term debt (undervalued, 5-year remaining life) (170,000 ) 3,382,000
Goodwill $ 710,000
Postacquisition, Allison employs the equity method to account for its investment in…
The Individual financial statements for Gibson Company and Keller Company for the year ending December 31, 2021, follow. Gibson
acquired a 60 percent Interest in Keller on January 1, 2020, In exchange for various considerations totaling $480,000. At the
acquisition date, the fair value of the noncontrolling interest was $320,000 and Keller's book value was $630,000. Keller had
developed internally a customer list that was not recorded on its books but had an acquisition-date fair value of $170,000. This
Intangible asset is being amortized over 20 years. Gibson uses the partial equity method to account for Its Investment in Keller.
Gibson sold Keller land with a book value of $80,000 on January 2, 2020, for $160,000. Keller still holds this land at the end of the
current year.
Keller regularly transfers Inventory to Gibson. In 2020, It shipped Inventory costing $154,000 to Gibson at a price of $220,000. During
2021, Intra-entity shipments totaled $270,000, although the original cost to…
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- Allison Corporation acquired all of the outstanding voting stock of Mathias, Incorporated, on January 1, 2023, in exchange for $6,059,500 in cash. Allison intends to maintain Mathias as a wholly owned subsidiary. Both companies have December 31 fiscal year-ends. At the acquisition date, Mathias’s stockholders’ equity was $2,045,000 including retained earnings of $1,545,000. At the acquisition date, Allison prepared the following fair-value allocation schedule for its newly acquired subsidiary: Consideration transferred $ 6,059,500 Mathias stockholders' equity 2,045,000 Excess fair over book value $ 4,014,500 to unpatented technology (8-year remaining life) $ 872,000 to patents (10-year remaining life) 2,590,000 to increase long-term debt (undervalued, 5-year remaining life) (145,000) 3,317,000 Goodwill $ 697,500 Postacquisition, Allison employs the equity method to account for its investment in Mathias. During the two years following the business…arrow_forwardThe individual financial statements for Gibson Company and Keller Company for the year ending December 31, 2021, follow. Gibson acquired a 60 percent interest in Keller on January 1, 2020, in exchange for various considerations totaling $1,050,000. At the acquisition date, the fair value of the noncontrolling interest was $700,000 and Keller’s book value was $1,400,000. Keller had developed internally a customer list that was not recorded on its books but had an acquisition-date fair value of $350,000. This intangible asset is being amortized over 20 years. Gibson uses the partial equity method to account for its investment in Keller. Gibson sold Keller land with a book value of $80,000 on January 2, 2020, for $180,000. Keller still holds this land at the end of the current year. Keller regularly transfers inventory to Gibson. In 2020, it shipped inventory costing $280,000 to Gibson at a price of $400,000. During 2021, intra-entity shipments totaled $450,000, although the original cost…arrow_forwardThe individual financial statements for Gibson Company and Keller Company for the year ending December 31, 2021, follow. Gibson acquired a 60 percent interest in Keller on January 1, 2020, in exchange for various considerations totaling $1,050,000. At the acquisition date, the fair value of the noncontrolling interest was $700,000 and Keller’s book value was $1,400,000. Keller had developed internally a customer list that was not recorded on its books but had an acquisition-date fair value of $350,000. This intangible asset is being amortized over 20 years. Gibson uses the partial equity method to account for its investment in Keller. Gibson sold Keller land with a book value of $80,000 on January 2, 2020, for $180,000. Keller still holds this land at the end of the current year. Keller regularly transfers inventory to Gibson. In 2020, it shipped inventory costing $280,000 to Gibson at a price of $400,000. During 2021, intra-entity shipments totaled $450,000, although the original cost…arrow_forward
- On January 1, 2021, Brooks Corporation exchanged $1,235,000 fair-value consideration for all of the outstanding voting stock of Chandler, Inc. At the acquisition date, Chandler had a book value equal to $1,185,000. Chandler’s individual assets and liabilities had fair values equal to their respective book values except for the patented technology account, which was undervalued by $246,000 with an estimated remaining life of six years. The Chandler acquisition was Brooks’s only business combination for the year. In case expected synergies did not materialize, Brooks Corporation wished to prepare for a potential future spin-off of Chandler, Inc. Therefore, Brooks had Chandler maintain its separate incorporation and independent accounting information system as elements of continuing value. On December 31, 2021, each company submitted the following financial statements for consolidation. Dividends were declared and paid in the same period. Brooks Corp. Chandler Inc. Income…arrow_forwardOn January 1, 2021, Brooks Corporation exchanged $1,259,000 fair-value consideration for all of the outstanding voting stock of Chandler, Inc. At the acquisition date, Chandler had a book value equal to $1,145,000. Chandler’s individual assets and liabilities had fair values equal to their respective book values except for the patented technology account, which was undervalued by $264,000 with an estimated remaining life of six years. The Chandler acquisition was Brooks’s only business combination for the year. In case expected synergies did not materialize, Brooks Corporation wished to prepare for a potential future spin-off of Chandler, Inc. Therefore, Brooks had Chandler maintain its separate incorporation and independent accounting information system as elements of continuing value. On December 31, 2021, each company submitted the following financial statements for consolidation. Dividends were declared and paid in the same period. Brooks Corp. Chandler Inc. Income…arrow_forwardAllison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2017, in exchange for $5,875,000 in cash. Allison intends to maintain Mathias as a wholly owned subsidiary. Both companies have December 31 fiscal year-ends. At the acquisition date, Mathias’s stockholders’ equity was $2,000,000 including retained earnings of $1,500,000. At the acquisition date, Allison prepared the following fair value allocation schedule for its newly acquired subsidiary Post-acquisition, Allison employs the equity method to account for its investment in Mathias. During the two years following the business combination, Mathias reports the following income and dividends: Year Income Dividends 2020 480,000 25,000 2021 960,000 50,000 No asset impairments have occurred since the acquisition date. Individual financial statements for each company as of December 31, 2018, appear below. Parentheses indicate credit balances. Dividends declared were paid in the same…arrow_forward
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- On January 1, 2021, Morey, Inc., exchanged $167,900 for 25 percent of Amsterdam Corporation. Morey appropriately applied the equity method to this investment. At January 1, the book values of Amsterdam's assets and liabilities approximated their fair values. On June 30, 2021, Morey paid $602,000 for an additional 70 percent of Amsterdam, thus increasing its overall ownership to 95 percent. The price paid for the 70 percent acquisition was proportionate to Amsterdam's total fair value. At June 30, the carrying amounts of Amsterdam's assets and liabilities approximated their fair values. Any remaining excess fair value was attributed to goodwill. Amsterdam reports the following amounts at December 31, 2021 (credit balances shown in parentheses): Revenues Expenses Retained earnings, January 1 Dividends declared, October 1 Common stock Amsterdam's revenue and expenses were distributed evenly throughout the year, and no changes in Amsterdam's stock have occurred. a. Using the acquisition…arrow_forwardUse the following to answer questions 8 through 10: On 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%. In the 2021 income statement for Jazzie Co., they would report after tax income from discontinued operations of: Group of answer choices $9.2 million. $13.2 million. $22 million. $26 million.arrow_forwardBoulder, Inc., obtained 90 percent of Rock Corporation on January 1, 2019. Annual amortization of $26,000 is applicable on the allocations of Rock's acquisition-date business fair value. On January 1, 2020, Rock acquired 75 percent of Stone Company's voting stock. Excess business fair-value amortization on this second acquisition amounted to $13,000 per year. For 2021, each of the three companies reported the following information accumulated by its separate accounting system. Separate operating Income figures do not include any Investment or dividend Income. Boulder Rock Stone Separate Operating Income $397,500 a. b. 137,500 200,000 Dividends Declared Required: a. What is consolidated net Income for 2021? b. How is 2021 consolidated net income distributed to the controlling and noncontrolling Interests? $123,000 27,000 47,000 Answer is not complete. Consolidated net income for 2021 Controlling interest in consolidated net income Noncontrolling interest in consolidated net income…arrow_forward
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