ADVANCED ACCOUNTING(LL) W/CONNECT
13th Edition
ISBN: 9781260282382
Author: Hoyle
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Question
Chapter 4, Problem 36P
a.
To determine
Explain the way in which the accountant determines that the parent has applied the initial value method.
b.
To determine
Find the annual excess amortization initially recognized in connection with this acquisition.
c.
To determine
Find the investment income which the parent would have recorded in 2018 if the parent had applied the equity method.
D
To determine
Find the amount which the parent should report as
e.
To determine
Find the consolidated net income for 2018 and what amounts are attributable to the controlling and non-controlling interests.
f.
To determine
Find the balance which is included for the subsidiary’s Buildings account.
g.
To determine
Find the consolidated Buildings reported balance as of December 31, 2018.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Nascent, Inc., acquires 60 percent of Sea-Breeze Corporation for $414,000 cash on January 1, 2018. 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, 2018, Sea-Breeze had the following assets and liabilities:
Book Value
Fair Value
Current assets
$
150,000
$
150,000
Land
200,000
200,000
Buildings (net) (6-year remaining life)
300,000
360,000
Equipment (net) (4-year remaining life)
300,000
280,000
Patent (10-year remaining life)
0
100,000
Liabilities
(400,000
)
(400,000
)
The companies’ financial statements for the year ending December 31, 2021, follow:
Nascent
Sea-Breeze
Revenues
$
(600,000
)
$
(300,000
)
Operating expenses
410,000
210,000
Investment income
(42,000
)
0
Net income
$
(232,000
)
$
(90,000
)
Retained earnings, 1/1/21
$
(700,000
)
$
(300,000
)
Net income…
Nascent, Inc., acquires 60 percent of Sea-Breeze Corporation for $414,000 cash on January 1, 2018. 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, 2018, Sea-Breeze had the following assets and liabilities:
Book Value
Fair Value
Current assets
$
150,000
$
150,000
Land
200,000
200,000
Buildings (net) (6-year remaining life)
300,000
360,000
Equipment (net) (4-year remaining life)
300,000
280,000
Patent (10-year remaining life)
0
100,000
Liabilities
(400,000
)
(400,000
)
The companies’ financial statements for the year ending December 31, 2021, follow:
Nascent
Sea-Breeze
Revenues
$
(600,000
)
$
(300,000
)
Operating expenses
410,000
210,000
Investment income
(42,000
)
0
Net income
$
(232,000
)
$
(90,000
)
Retained earnings, 1/1/21
$
(700,000
)
$
(300,000
)
Net income…
Nascent, 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,…
Chapter 4 Solutions
ADVANCED ACCOUNTING(LL) W/CONNECT
Ch. 4 - Prob. 1QCh. 4 - Atwater Company acquires 80 percent of the...Ch. 4 - What is a control premium and how does it affect...Ch. 4 - Prob. 4QCh. 4 - How is the noncontrolling interest in a subsidiary...Ch. 4 - Prob. 6QCh. 4 - Prob. 7QCh. 4 - Prob. 8QCh. 4 - Prob. 9QCh. 4 - Prob. 10Q
Ch. 4 - Prob. 1PCh. 4 - Prob. 2PCh. 4 - Prob. 3PCh. 4 - Prob. 4PCh. 4 - Prob. 5PCh. 4 - Prob. 6PCh. 4 - Prob. 7PCh. 4 - Assuming that Pride, in its internal records,...Ch. 4 - Prob. 9PCh. 4 - Prob. 10PCh. 4 - Prob. 11PCh. 4 - Prob. 12PCh. 4 - Prob. 13PCh. 4 - Prob. 14PCh. 4 - Prob. 15PCh. 4 - Prob. 16PCh. 4 - Prob. 17PCh. 4 - Prob. 18PCh. 4 - Current liabilities: a. 50,000 b. 46,000 c. 40,000...Ch. 4 - Prob. 20PCh. 4 - Stockholders equity: a. 80,000 b. 90,000 c. 95,000...Ch. 4 - Prob. 22PCh. 4 - Prob. 23PCh. 4 - Prob. 24PCh. 4 - Prob. 25PCh. 4 - Prob. 26PCh. 4 - Prob. 27PCh. 4 - Prob. 28PCh. 4 - Prob. 29PCh. 4 - Prob. 30PCh. 4 - Prob. 31PCh. 4 - Prob. 32PCh. 4 - Prob. 33PCh. 4 - Prob. 34PCh. 4 - Prob. 35PCh. 4 - Prob. 36PCh. 4 - Prob. 37PCh. 4 - Prob. 38PCh. 4 - Prob. 39PCh. 4 - Prob. 40PCh. 4 - Prob. 41PCh. 4 - Prob. 42PCh. 4 - Prob. 43PCh. 4 - Prob. 44PCh. 4 - Prob. 1DYSCh. 4 - Prob. 2DYSCh. 4 - Costco Wholesale Corporation owns and operates...
Knowledge Booster
Similar questions
- Peer, Inc. acquires 75 percent of Sea-breeze Corporation for P600,000 cash on January 1, 2016. The remaining percent of the Sea-breeze shares traded near a total value of 200,000 both before and after the acquisition date. NCI is measured on a full basis .On January 1, 2016, Sea-breeze had the following assets and liabilities: Book Value Fair Value Current Assets P 250,000 P 250,000 Land 100,000 100,000 Building (net) – 5-year-year life 400,000 350,000 Equipment (net) – 8-year life 300,000 400,000 Patent (10-year life) -0- 50,000 Accounts Payable (200,000) (200,000) Bonds Payable – 5-years (150,000) (175,000) Net P 700,000 P 775,000 Common Stock P 650,000 Retained Earnings P 50,000 The companies’ financial statements for the year ending December 31, 2016 using cost method are as follows: Peer Sea-Breeze Revenue P (800,000) P (250,000) Operating expenses…arrow_forwardOn May 1, Burns Corporation acquired 100 percent of the outstanding ownership shares of Quigley Corporation in exchange for $733,000 cash. At the acquisition date, Quigley's book and fair values were as follows: Cash Receivables Inventory Land Building and equipment (net) Patented technology Total assets Accounts payable Long-term liabilities Common stock ($5 par value) Additional paid-in capital Retained earnings Total liabilities and stockholders equity Total assets Book Value Fair Value $ 101,000 $ 101,000 229,000 229,000 254,000 323,000 157,500 118,500 330,000 409,000 0 220,000 Assets $1,071,500 $ 1,400,500 $ 146,000 $ 666,000 210,000 90,000 (40,500) $1,071,500 Burns directs Quigley to seek additional financing for expansion through a new long-term debt issue. Consequently, Quigley will issue a set of financial statements separate from that of its new parent to support its request for debt and accompanying regulatory filings. Quigley elects to apply pushdown accounting in order to…arrow_forwardStattgrue Ltd obtains control of Naonite Ltd through two cash acquisitions. At July 1, 2018 purchased 25% for $205,000 when the 100% fair value of Naonite Ltd was $820,000 book value $600,000 and on July 1, 2020 purchased 50% for $525,000, 100% fair value $1,050,000 and book value $750,000. A customer base with a 20-year life represented the initial excess payment. Naonite Ltd Income and Dividends for 2019-2021: Income Dividend June 30, 2019 90,000 30,000 June 30, 2020 120,000 30,000 June 30, 2021 150,000 60,000 Calculate the Investment in Naonite Ltd at July 1, 2020 (before purchase of the additional 50%) and June 30, 2021 (before consolidation).arrow_forward
- On May 1, Burns Corporation acquired 100 percent of the outstanding ownership shares of Quigley Corporation in exchange for $728,000 cash. At the acquisition date, Quigley's book and fair values were as follows: Cash Receivables Inventory Land Building and equipment (net) Patented technology Total assets Accounts payable Long-term liabilities Common stock ($5 par value) Additional paid-in capital Retained earnings Total liabilities and stockholders equity Total assets Assets Book Value $ 112,000 $ 218,000 232,000 $ 177,000 323,000 0 $1,062,000 $ 162,500 $ 638,000 210,000 90,000 (38,500) $1,062,000 Burns directs Quigley to seek additional financing for expansion through a new long-term debt issue. Consequently, Quigley will issue a set of financial statements separate from that of its new parent to support its request for debt and accompanying regulatory filings. Quigley elects to apply pushdown accounting in order to show recent fair valuations for its assets. Prepare a separate…arrow_forwardOn January 1, 2014, Pilar Company acquired 60% interest in Santos Company for P2,400,000 cash. The stockholder’s equity of Santos at the time of acquisition is P3,400,000. Non-controlling interest is measured at its fair value. The excess of cost over the book value of interest acquired is allocated to the following assets: Inventories – P100,000 (sold in 2014) and Building – P200,000 (5-year remaining life). During 2014, Santos Company reported net income of P800,000 and paid dividends of P100,000. What is the non-controlling interest in net assets of subsidiary on December 31, 2014? A. P1,824,000 B. P1,864,000 C. P1,704,000 D. P1,744,000arrow_forwardOn January 1, 2014, Pilar Company acquired 60% interest in Santos Company for P2,400,000 cash. The stockholder’s equity of Santos at the time of acquisition is P3,400,000. Non-controlling interest is measured at its fair value. The excess of cost over the book value of interest acquired is allocated to the following assets: Inventories – P100,000 (sold in 2014) and Building – P200,000 (5-year remaining life). During 2014, Santos Company reported net income of P800,000 and paid dividends of P100,000. What is the non-controlling interest in net income?arrow_forward
- On January 1, 2014, Pilar Company acquired 60% interest in Santos Company for P2,400,000 cash. The stockholder’s equity of Santos at the time of acquisition is P3,400,000. Non-controlling interest is measured at its fair value. The excess of cost over the book value of interest acquired is allocated to the following assets: Inventories – P100,000 (sold in 2014) and Building – P200,000 (5-year remaining life). During 2014, Santos Company reported net income of P800,000 and paid dividends of P100,000. What is the amount of the non-controlling interest on January 1, 2014? A. P1,360,000 B. P1,600,000 C. P1,480,000 D. P960,000arrow_forwardOn January 1, 2015 P company acquired 80% interest in S Company for P2,000,000 cash. The stockholders' equity of S at the time of acquisition is P 1,875,000. On January 1, 2015, NCI is measured at its implied fair value. The excess of cost over book value of interest acquired is allocated to the following assets: Inventories: 100,000 (sold in 2013) Building: 200,000 (5-year remaining life) During 2015, S company reported total comprehensive income of 500,000 and paid dividends of P 100,000. How much goodwill (gain on bargain purchase) is reported in the consolidated statement of financial position on January 1, 2015? A. 325,000 B. 200,000 C. (325,000) D. (375,000)arrow_forwardOn January 1, 2015 P company acquired 80% interest in S Company for P2,000,000 cash. The stockholders' equity of S at the time of acquisition is P 1,875,000. On January 1, 2015, NCI is measured at its implied fair value. The excess of cost over book value of interest acquired is allocated to the following assets: Inventories: 100,000 (sold in 2013) Building: 200,000 (5-year remaining life) During 2015, S company reported total comprehensive income of 500,000 and paid dividends of P 100,000. What is the consolidated total comprehensive income attributable to parent on December 31, 2015, if P's net income for 2015 is 600,000? A. 860,000 B. 888,000 C. 808,000 D. 948,000arrow_forward
- On January 2, 2020, Sheffield Company acquired 90% of the outstanding common stock of Wildhorse Company for $459,000 cash. Just before the acquisition, the balance sheets of the two companies were as follows: Sheffield Wildhorse Cash $630,000 $180,000 Accounts Receivable (net) 405,000 74,000 Inventory 275,000 130,000 Plant and Equipment (net) 980,000 210,000 Land 205,000 88,000 Total Assets $2,495,000 $682,000 Accounts Payable $248,000 $144,000 Mortgage Payable 150,000 100,000 Common Stock, $2 par value 1,030,000 190,000 Other Contributed Capital 590,000 55,000 Retained Earnings 477,000 193,000 Total Equities $2,495,000 $682,000 The fair values of Wildhorse's assets and liabilities are equal to their book values with the exception of land. Cash Accounts Receivable Inventory Plant and Equipment Land. Total Assets Liabilities Accounts Payable Mortgage Payable Total Liabilities Stockholder's Equity Noncontrolling Interest Common Stock SHEFFIELD COMPANY AND SUBSIDIARY Consolidated Balance…arrow_forwardOn January 1, 2014, Punch Corporation purchased 100% of the common stock of Soopy Co. Separate balance sheet data for the companies at the acquisition date (after the acquisition) are given below: Punch Soopy Cash $34,000 $206,000 A/R 144,000 26,000 Inventory 132,000 38,000 Land 68,000 32,000 Plant assets 460,000 240,000 Investment in Soopy 392,000 Accounts payable $206,000 $142,000 Capital stock 800,000 300,000…arrow_forwardPretzel Company purchased a 90% interest in Salt Corporation for $8,100,000 on January 1, 2023. Salt Corporation had $6,200,000 of common stock and $2,100,000 of retained earnings on that date. The following values were determined for Salt Corporation on the date of purchase: Inventory Land Equipment Book Value $220,000 6,200,000 1,920,000 Fair Value $280,000 6,520,000 1,900,000 Required: A. Prepare a computation and allocation schedule for the difference between the implied and book value at the date of acquisition. B. Prepare the January 1, 2023, workpaper entries to (1) eliminate the investment account and (2) allocate the difference between implied and book value.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage Learning
Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
Auditing: A Risk Based-Approach to Conducting a Q...AccountingISBN:9781305080577Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:South-Western College Pub
Auditing: A Risk Based-Approach (MindTap Course L...
Accounting
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Auditing: A Risk Based-Approach to Conducting a Q...
Accounting
ISBN:9781305080577
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:South-Western College Pub