Chapter 3, Problem 5DYS

On July 1, 2019, Killearn Company acquired 120,000 of the outstanding shares of Shaun Company for $15 per share. This acquisition gave Killearn a 20 percent ownership of Shaun and allowed Killearn to significantly influence the investee’s decisions.   As of July 1, 2019, the investee had assets with a book value of $7 million and liabilities of $148,000. At the time, Shaun held equipment appraised at $581,000 more than book value; it was considered to have a seven-year remaining life with no salvage value. Shaun also held a copyright with a five-year remaining life on its books that was undervalued by $1,235,000. Any remaining excess cost was attributable to goodwill. Depreciation and amortization are computed using the straight-line method. Killearn applies the equity method for its investment in Shaun.   Shaun's policy is to declare and pay a $1 per share cash dividend every April 1 and October 1. Shaun's income, earned evenly throughout each year, was $566,000 in 2019, $593,400 in…

On January 1, 2020, Shell Corporation acquired the net assets of Petron Inc. The acquirertransferred cash amounting to P3,000,000 and obligates itself to pay additional P1,500,000 afterone year if the market price of Shell Corporation increased by 50%. The businesscombination resulted to a goodwill of P300,000.At the date of acquisition, it is estimated that there is a 70% probability that the condition will bemet.On March 1, 2020, The operations of Shell Corporation was halted due to COVID 19 –pandemic lockdown and restrictions, this resulted to a 30% decrease in probability estimation ofthe contingent consideration. 1. What is the value of contingent consideration on March 1, 2020?a. 1,500,000b. 1,050,000c. 450,000d. 600,000 2. What is the effect of the March 1, 2020 information to the recognized goodwill?a. Goodwill decreased by P450,000.b. Gain on bargain purchase will be recognized in the amount of P150,000.c. Gain on bargain purchase will be recognized in the amount of…

On January 1, 2020, P Company purchased 32,000 shares of the 40,000 outstanding shares of S Company at a price of P1,2000,000 with an excess of P30,000 over the book value of S Company’s net assets. P13,000 of the excess is attributed to an undervalued equipment with a remaining useful life of eight years from the date of acquisition and the rest of the amount is attributed to goodwill. For the year 2020, P Company reported a net income of P750,000 and paid dividends of P180,000. While S Company reported a net income of P240,000 and paid dividends to P Company amounting to P39,000. Goodwill has not impaired in 2020. The retained earnings of P Company at the end of 2020 per books is P1,025,000. P Company uses the cost method to account for its investment in S Company. Non-controlling interest is measured at fair market value.What is the non-controlling interest in net assets?a. 339,875b. 337,925c. 334,525d. 336,475

At the beginning of 2022, Metatec Incorporated acquired Ellison Technology Corporation for $630 million. In addition to cash, receivables, and inventory, the following assets and their fair values were also acquired: Plant and equipment (depreciable assets) Patent Goodwill The plant and equipment are depreciated over a 10-year useful life on a straight-line basis. There is no estimated residual value. The patent is estimated to have a five-year useful life, no residual value, and is amortized using the straight-line method. $ 153 million 43 million 100 million At the end of 2024, a change in business climate indicated to management that the assets of Ellison might be impaired. The following amounts have been determined: Plant and equipment: Undiscounted sun of future cash flows Fair value Patent: Undiscounted sum of future cash flows Fair value $ 83 million 63 million $ 20 million 13 million Goodwill: Fair value of Ellison Technology Corporation Book value of Ellison's net assets…

On January 2, 2024, Cole Inc. paid $100,000 for a 30% interest in Johnas Corp. This investee had assets with a book value of $550,000 and liabilities of $300,000. A patent held by Johnas having a book value of $10,000 was actually worth $40,000 with a six-year remaining life. Any goodwill associated with this acquisition is considered to have an indefinite life. In 2024, Johnas reported a net income of $50,000 and paid dividends of $20,000 while in 2025 it reported a net income of $75,000 and dividends of $30,000. Assume Cole has the ability to significantly influence the operations of Johnas. The equity in income of Johnas for 2025, is: O $22,500. O $21,000. O $12,000. O $13,500. $75,000.

On January 1, 2020. Alison, Inc., paid $69,500 for a 40 percent interest in Holister Corporation's common stock. This investee had assets with a book value of $219,500 and liabilities of $95,500. A patent held by Holister having a $12,000 book value was actually worth $31,500. This patent had a six-year remaining life. Any further excess cost associated with this acquisition was attributed to goodwill. During 2020, Holister earned income of $32,500 and declared and paid dividends of $11,000. In 2021, it had income of $71,500 and dividends of $16,000. During 2021, the fair value of Allison's investment in Holister had risen from $79,200 to $89,900. a. Assuming Alison uses the equity method, what balance should appear in the Investment in Holister account as of December 31, 2021? b. Assuming Alison uses fair-value accounting, what income from the investment in Holister should be reported for 2021? a. Investment in Holister b. Investment income

On July 1, 2019, Killearn Company acquired 88,000 of the outstanding shares of Shaun Company for $13 per share. This acquisition gave Killearn a 25 percent ownership of Shaun and allowed Killearn to significantly influence the investee’s decisions.   As of July 1, 2019, the investee had assets with a book value of $3 million and liabilities of $74,400. At the time, Shaun held equipment appraised at $364,000 more than book value; it was considered to have a seven-year remaining life with no salvage value. Shaun also held a copyright with a five-year remaining life on its books that was undervalued by $972,000. Any remaining excess cost was attributable to goodwill. Depreciation and amortization are computed using the straight-line method. Killearn applies the equity method for its investment in Shaun.   Shaun’s policy is to declare and pay a $1 per share cash dividend every April 1 and October 1. Shaun’s income, earned evenly throughout each year, was $598,000 in 2019, $639,600 in 2020,…

On March 31, 2021, JISOO Company purchased 32,000 shares of the 40,000 outstanding shares of ROSECompany at a price of P1,200,000 with an excess of P30,000 over the book value of ROSE Company’snet assets. P13,000 of the excess is attributed to an undervalued equipment with a remaining usefullife of 10 years from the date of acquisition and the rest of the amount is attributed to goodwill. Forthe year 2021, JISOO Company reported a net income of P750,000 and paid dividends of P180,000.While ROSE Company reported a net income of P240,000 which was evenly earned during the yearand paid dividends to JISOO Company amounting to P39,000. Goodwill was not impaired in 2021.The retained earnings of JISOO Company at the end of 2021 per books is P1,025,000. JISOO Companyuses the cost method to account for its investment in ROSE Company. Non-controlling interest ismeasured at fair market value. Requirement:Compute for the non-controlling interest in net assets on December 31, 2021.

At the beginning of 2022, Metatec Incorporated acquired Ellison Technology Corporation for $600 million. In addition to cash, receivables, and inventory, the following assets and their fair values were also acquired: Plant and equipment (depreciable assets) Patent Goodwill The plant and equipment are depreciated over a 10-year useful life on a straight-line basis. There is no estimated residual value. The patent is estimated to have a five-year useful life, no residual value, and is amortized using the straight-line method. Plant and equipment: Undiscounted sum of future cash flows At the end of 2024, a change in business climate indicated to management that the assets of Ellison might be impaired. The following amounts have been determined: Fair value $ 150 million 40 million 100 million Patent: aved Undiscounted sum of future cash flows Fair value Goodwill: Fair value of Ellison Technology Corporation Book value of Ellison's net assets (excluding goodwill) Book value of Ellison's net…