Concept explainers
a.
Compute the amounts that Company J should report in its December 31, 2018, consolidated financial statements for Company S’s building (net of
b.
Compute the amounts that Company J should report in its December 31, 2018, consolidated financial statements for Company S’s technology processes (net of accumulated amortization).
c.
Compute the amounts that Company J should report in its December 31, 2018, consolidated financial statements for net income attributable to the non-controlling interest.
d.
Compute the amounts that Company J should report in its December 31, 2018, consolidated financial statements for net income attributable to controlling interest.
e.
Compute the amounts that Company J should report in its December 31, 2018, consolidated financial statements for non-controlling interest in Company S.
Trending nowThis is a popular solution!
Chapter 4 Solutions
ADVANCED ACCOUNTING
- On January 1, 2021, Johnsonville Enterprises, Inc., acquired 80 percent of Stayer Company's outstanding common shares in exchange for $3,000,000 cash. The price paid for the 80 percent ownership interest was proportionately representative of the fair value of all of Stayer's shares. At acquisition date, Stayer's books showed assets of $4,200,000 and liabilities of $1,600,000. The recorded assets and liabilities had fair values equal to their individual book values except that a building (10-year remaining life) with book value of $195,000 had an appraised fair value of $345,000. Stayer's books showed a $175,500 carrying amount for this building at the end of 2021. Also, at acquisition date Stayer possessed unrecorded technology processes (zero book value) with an estimated fair value of $1,000,000 and a 20-year remaining life. For 2021, Johnsonville reported net income of $650,000 (before recognition of Stayer's income), and Stayer separately reported earnings of $350,000. During 2021,…arrow_forwardOn January 1, 2015, Pomegranate Company acquired 80% of the voting stock of Starfruit Company for $47,100,000 in cash. The fair value of the noncontrolling interest in Starfruit at the date of acquisition was $6,900,000. Starfruit's book value was $12,000,000 at the date of acquisition. Starfruit's assets and liabilities were reported on its books at values approximating fair value, except its plant and equipment (10-year life, straight-line) was overvalued by $13,000,000. Starfruit Company had previously unreported intangible assets, with a market value of $16,000,000 and 5-year life, straight- line, which were capitalized following GAAP. Additional information: Pomegranate uses the complete equity method to account for its investment in Starfruit on its own books. Goodwill recognized in this acquisition was impaired by a total of $1,000,000 in 2015 and 2016, and by $250,000 in 2017. It is now December 31, 2017, the accounting year-end.Here is Starfruit Company's trial balance at…arrow_forwardAt the beginning of 2018, Esterlina Corporation purchased 40% of the ordinary shares outstanding of Mary Grace Incorporated for P15, 000,000 when the netassets of Mary Grace Incorporated amounted to P30,000,000. At the acquisition date, the carrying amounts of the identifiable assets and liabilities of Mary Grace Incorporated were equal to their fair value, except for the following: a. Equipment whose fair value was P7,000,000 greater than its carrying amount. b. Inventory whose fair value was P2,500,000 greater than its carrying amount. The equipment has a remaining life of 4 years, and the inventory was all sold during 2013. Mary Grace Incorporated has two classes of shares: Ordinary shares (par value, P100), 300,000 shares outstanding, 15% cumulative preference shares (par value, P50), 100,000 shares outstanding The investee reported the following net income (inclusive of enter-company transactions) and payment of cash dividend: Net Income Dividend payment 2018 20,000,000 5,000,000…arrow_forward
- At the beginning of 2018, Esterlina Corporation purchased 40% of the ordinary shares outstanding of Mary Grace Incorporated for P15, 000,000 when the netassets of Mary Grace Incorporated amounted to P30,000,000. At the acquisition date, the carrying amounts of the identifiable assets and liabilities of Mary Grace Incorporated were equal to their fair value, except for the following: a. Equipment whose fair value was P7,000,000 greater than its carrying amount. b. Inventory whose fair value was P2,500,000 greater than its carrying amount. The equipment has a remaining life of 4 years, and the inventory was all sold during 2013. Mary Grace Incorporated has two classes of shares: Ordinary shares (par value, P100), 300,000 shares outstanding, 15% cumulative preference shares (par value, P50), 100,000 shares outstanding. The investee reported the following net income (inclusive of enter-company transactions) and payment of cash dividend: 2018 20,000,000 5,000,000 2019 35,000,000 8,000,000…arrow_forwardAt the beginning of 2018, Esterlina Corporation purchased 40% of the ordinary shares outstanding of Mary Grace Incorporated for P15, 000,000 when the netassets of Mary Grace Incorporated amounted to P30,000,000. At the acquisition date, the carrying amounts of the identifiable assets and liabilities of Mary Grace Incorporated were equal to their fair value, except for the following: a. Equipment whose fair value was P7,000,000 greater than its carrying amount. b. Inventory whose fair value was P2,500,000 greater than its carrying amount. The equipment has a remaining life of 4 years, and the inventory was all sold during 2013. Mary Grace Incorporated has two classes of shares: Ordinary shares (par value, P100), 300,000 shares outstanding, 15% cumulative preference shares (par value, P50), 100,000 shares outstanding. The investee reported the following net income (inclusive of enter-company transactions) and payment of cash dividend: 2018 Net Income Dividend payment 20,000,000 5,000,000…arrow_forwardOn January 1, 2023, Flounder Corporation, a public company following IFRS, acquired 17,400 of the 58,000 outstanding common shares of Noah Corp. for $27 per share. Noah's statement of financial position reported the following information at the date of the acquisition: Assets not subject to depreciation $287,800 Assets subject to depreciation 863,600 Liabilities 148,600 Additional information: 1. On the acquisition date, the fair value is the same as the carrying amount for the assets that are not subject to depreciation and for the liabilities. 2. 3. 4. On the acquisition date, the fair value of the assets that are subject to depreciation is $957,600. These assets had a remaining useful life of eight years at that time. Noah reported 2023 net income of $94,000 and paid dividends of $4,500 in December 2023. Noah's shares are not actively traded on the stock exchange, but Flounder has determined that they have a fair value of $25 per share on December 31, 2023. (a) Prepare the journal…arrow_forward
- On 1 July 2019, Brad Ltd acquired all assets and liabilities of Pitt Ltd. In exchange for these assets and liabilities, Brad Ltd issued 100,000 shares that at date of issue had a fair value of $5.20 per share. Costs of issuing these shares amounted to $1,000. Legal cost associated with the acquisition of Pitt Ltd amounted to $1,200.The assets and liabilities of Pitt Ltd at 1 July 2019 were as follows:Carrying Amount ($) Fair Value ($)AssetsCash 2,000 2,000Accounts receivable 10,000 10,000Inventory 64,000 68,000Equipment 320,000 232,000Accumulated depn - Equipment (96,000) -Patents 280,000 280,000LiabilitiesAccounts payable (16,000) (16,000)Debentures (64,000) (64,000)Required:a) Prepare the acquisition analysis at 1 July 2019 for the acquisition of Pitt Ltd by Brad Ltd.b) Prepare the journal entries in the records of Brad Ltd at 1 July 2019.arrow_forwardNascent, Inc., acquires 60 percent of Sea-Breeze Corporation for $414,000 cash on January 1, 2015. The remaining 40 percent of the Sea-Breeze shares traded near a total value of $276,000 both before and after the acquisition date. On January 1, 2015, Sea-Breeze had the following assets and liabilities:The companies’ financial statements for the year ending December 31, 2018, follow:Answer the following questions:a. How can the accountant determine that the parent has applied the initial value method?b. What is the annual excess amortization initially recognized in connection with this acquisition?c. If the parent had applied the equity method, what investment income would the parent have recorded in 2018?d. What amount should the parent report as retained earnings in its January 1, 2018, consolidated balance sheet?e. What is consolidated net income for 2018 and what amounts are attributable to the controlling and noncontrolling interests?f. Within consolidated statements at January 1,…arrow_forwardOn January 1, 2015, Pomegranate Company acquired 80% of the voting stock of Starfruit Company for $70,000,000 in cash. The fair value of the noncontrolling interest in Starfruit at the date of acquisition was $9,400,000. Starfruit's book value was $11,600,000 at the date of acquisition. Starfruit's assets and liabilities were reported on its books at values approximating fair value, except its plant and equipment (10-year life, straight-line) was overvalued by $13,000,000. Starfruit Company had previously unreported intangible assets, with a market value of $16,000,000 and 5-year life, straight-line, which were capitalized following GAAP. Additional information: Pomegranate uses the complete equity method to account for its investment in Starfruit on its own books. Goodwill recognized in this acquisition was impaired by a total of $3,000,000 in 2015 and 2016, and by $1,000,000 in 2017. It is now December 31, 2017, the accounting year-end. Here is Starfruit Company's trial balance at…arrow_forward
- On May 31, 2020, Roddick Company paid $3,400,000 to acquire all of the ordinary shares of Bolt Corporation, which became a division of Roddick. Bolt reported the following statement of financial position at the time of the acquisition: Equity $2,500,000 Non-current assets $2,700,000 Non-current liabilities 500,000 Current assets 900,000 Current liabilities 600,000 Total assets $3,600,000 Total equity and liabilities $3,600,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Bolt was $2,800,000. On December 31, 2020, Bolt reports the following statement of financial position information: Current assets $ 800,000 Non-current assets (including goodwill recognized in purchase) 2,400,000 Current liabilities (700,000) Non-current liabilities (500,000) Net assets $2,000,000 It is determined that the recoverable amount value of the Bolt…arrow_forwardOn January 1, 2017, Palka, Inc., acquired 70 percent of the outstanding shares of Sellinger Company for $1,666,000 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 $2,070,000. 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 $300,000. On January 1, 2018, Palka acquired an additional 25 percent common stock equity interest in Sellinger Company for $656,250 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: 2017 2018 $525,000 $701,000 Net…arrow_forwardOn 1 July 2019, BPL Ltd acquired all of the assets and liabilities of HTC Ltd. In exchange for these assets and liabilities, BPL Ltd issued 100 000 shares that at date of issue had a fair value of $4.95 per share. Costs of issuing these shares amounted to $1050. Legal costs associated with the acquisition of HTC Ltd amounted to $1520. The asset and liabilities of HTC Ltd at 1 July 2019 were as follows: Carrying amountFair value Assets: Cash$12 000$20 000 Accounts receivable10 50012 000 Inventory64 00071 000 Equipment 320 000239 000 Accumulated depreciation – equipment(96 000)— Patents240 000270 000 Liabilities: Accounts payable(16 000)(20 000) Debentures(64 000)(69 000) REQUIRED: a. Prepare the acquisition analysis at 1 July 2019 for the acquisition of HTC Ltd by BPL Ltd.arrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningAuditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage Learning