Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Camille, Inc., bought all outstanding shares of Jordan Corporation on January 1, 2019, for $700,000 in cash. This portion of the consideration transferred results in a fair-value allocation of $35,000 to equipment and goodwill of $88,000. At the acquisition date, Camille also agrees to pay Jordan’s previous owners an additional $110,000 on January 1, 2021, if Jordan earns a 10 percent return on the fair value of its assets in 2019 and 2020. Jordan’s profits exceed this threshold in both years. Which of the following is true?
The $110,000 is recorded as a revaluation gain in 2021.
The additional $110,000 payment is reported as an adjustment to the beginning balance of consolidated retained earnings.
Consolidated goodwill as of January 1, 2021, increases by $110,000.
The fair value of the expected contingent payment increases goodwill at the acquisition date.
Camille, Inc., bought all outstanding shares of Jordan Corporation on January 1, 2019, for $700,000 in cash. This portion of the consideration transferred results in a fair-value allocation of $35,000 to equipment and goodwill of $88,000. At the acquisition date, Camille also agrees to pay Jordan’s previous owners an additional $110,000 on January 1, 2021, if Jordan earns a 10 percent return on the fair value of its assets in 2019 and 2020. Jordan’s profits exceed this threshold in both years. Which of the following is true?
Multiple Choice
Consolidated goodwill as of January 1, 2021, increases by $110,000.
The $110,000 is recorded as a revaluation gain in 2021.
The fair value of the expected contingent payment increases goodwill at the acquisition date.
The additional $110,000 payment is reported as an adjustment to the beginning balance of consolidated retained earnings.
Camille, Inc., bought all outstanding shares of Jordan Corporation on January 1, 2019, for $880,000 in cash. This portion of the consideration transferred results in a fair-value allocation of $36,600 to equipment and goodwill of $101,700. At the acquisition date, Camille also agrees to pay Jordan’s previous owners an additional $147,000 on January 1, 2021, if Jordan earns a 10 percent return on the fair value of its assets in 2019 and 2020. Jordan’s profits exceed this threshold in both years. Which of the following is true?
Multiple Choice
Consolidated goodwill as of January 1, 2021, increases by $147,000.
The additional $147,000 payment is reported as an adjustment to the beginning balance of consolidated retained earnings.
The $147,000 is recorded as a revaluation gain in 2021.
The fair value of the expected contingent payment increases goodwill at the acquisition date.
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- Camille, Inc., bought all outstanding shares of Jordan Corporation on January 1, 2019, for $792,000 in cash. This portion of the consideration transferred results in a fair- value allocation of $41,700 to equipment and goodwill of $108,300. At the acquisition date, Camille also agrees to pay Jordan's previous owners an additional $159,000 on January 1, 2021, if Jordan earns a 10 percent return on the fair value of its assets in 2019 and 2020. Jordan's profits exceed this threshold in both years. Which of the following is true? The additional $159,000 payment is reported as an adjustment to the beginning balance of consolidated retained earnings. Consolidated goodwill as of January 1, 2021, increases by $159,000. The $159,000 is recorded as a revaluation gain in 2021. The fair value of the expected contingent payment increases goodwill at the acquisition date.arrow_forwardCamille, Inc., bought all outstanding shares of Jordan Corporation on January 1, 2019, for $734,000 in cash. This portion of the consideration transferred results in a fair-value allocation of $53,400 to equipment and goodwill of $112,200. At the acquisition date, Camille also agrees to pay Jordan’s previous owners an additional $152,000 on January 1, 2021, if Jordan earns a 10 percent return on the fair value of its assets in 2019 and 2020. Jordan’s profits exceed this threshold in both years. Which of the following is true? Multiple Choice Consolidated goodwill as of January 1, 2021, increases by $152,000. The additional $152,000 payment is reported as an adjustment to the beginning balance of consolidated retained earnings. The fair value of the expected contingent payment increases goodwill at the acquisition date. The $152,000 is recorded as a revaluation gain in 2021.arrow_forwardOn 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_forward
- Boulder, Inc., obtained 90 percent of Rock Corporation on January 1, 2019. Annual amortization of $24,000 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 $10,600 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. Separate Operating Income $324,300 Dividends Declared Boulder $116,000 23,000 Rock 112,300 176,000 Stone 41,000 Required: a. What is consolidated net income for 2021? b. How is 2021 consolidated net income distributed to the controlling and noncontrolling interests? Amount a. Consolidated net income for 2021 b. Controlling interest in consolidated net income Noncontrolling interest in consolidated net incomearrow_forwardMighty Company purchased a 60 percent interest in Lowly Company on January 1, 2020, for $420,000 in cash. Lowly's book value at that date was reported as $600,000, and the fair value of the noncontrolling interest was assessed at $280,000. Any excess acquisition-date fair value over Lowly's book value is assigned to trademarks to be amortized over 20 years. Subsequently, on January 1, 2021, Lowly acquired a 20 percent interest in Mighty. The price of $240,000 was equivalent to 20 percent of Mighty's book and fair value. Neither company has paid dividends since these acquisitions occurred. On January 1, 2021, Lowly's book value was $800,000, a figure that rises to $840,000 (common stock of $300,000 and retained earnings of $540,000) by year- end. Mighty's book value was $1.70 million at the beginning of 2021 and $1.80 million (common stock of $1 million and retained earnings of $800,000) at December 31, 2021. No intra-entity transactions have occurred, and no additional stock has been…arrow_forwardMighty Company purchased a 60 percent interest in Lowly Company on January 1, 2020, for $459,900 in cash. Lowly's book value at that date was reported as $637,500, and the fair value of the noncontrolling interest was assessed at $306,600. Any excess acquisition-date fair value over Lowly's book value is assigned to trademarks to be amortized over 20 years. Subsequently, on January 1, 2021, Lowly acquired a 20 percent interest in Mighty. The price of $380,000 was equivalent to 20 percent of Mighty's book and fair value. Neither company has paid dividends since these acquisitions occurred. On January 1, 2021, Lowly's book value was $899,500, a figure that rises to $961,750 (common stock of $300,000 and retained earnings of $661,750) by year-end. Mighty's book value was $1.90 million at the beginning of 2021 and $2.00 million (common stock of $1 million and retained earnings of $1,000,000) at December 31, 2021. No intra-entity transactions have occurred, and no additional stock has…arrow_forward
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