Soft Bound Version for Advanced Accounting 13th Edition
13th Edition
ISBN: 9781260110579
Author: Hoyle
Publisher: McGraw Hill Education
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 7, Problem 17P
To determine
Determine the figures that would appear on a consolidated income statement.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Baxter, Inc., owns 90 percent of Wisconsin, Inc., and 20 percent of Cleveland Company. Wisconsin, in turn, holds 60 percent of Cleveland’s outstanding stock. No excess amortization resulted from these acquisitions. During the current year, Cleveland sold a variety of inventory items to Wisconsin for $40,000 although the original cost was $30,000. Of this total, Wisconsin still held $12,000 in inventory (at transfer price) at year-end.During this same period, Wisconsin sold merchandise to Baxter for $100,000 although the original cost was only $70,000. At year-end, $40,000 of these goods (at the transfer price) was still on hand.The initial value method was used to record each of these investments. None of the companies holds any other investments.Using the following separate income statements, determine the figures that would appear on a consolidated income statement:
Baxter, Inc., owns 90 percent of Wisconsin, Inc., and 20 percent of Cleveland Company. Wisconsin, in turn, holds 60 percent of Cleveland's outstanding stock. No excess amortization resulted from these acquisitions. During the current year, Cleveland sold a variety of inventory items to Wisconsin for $40,000 although the original cost was $30,000. Of this total, Wisconsin still held $12,000 in inventory (at transfer price) at year-end.
Â
During this same period, Wisconsin sold merchandise to Baxter for $100,000 although the original cost was only $70,000. At year-end, $40,000 of these goods (at the transfer price) was still on hand.
Â
The initial value method was used to record each of these investments. None of the companies holds any other investments.
Â
Using the following separate income statements, determine the figures that would appear on a consolidated income statement:
Â
Â
Baxter
Wisconsin
Cleveland
Sales
$
(1,000,000
)
$
(450,000
)
$
(280,000
)
Cost of goods sold…
On December 31, Phoenix Corporation acquired all of Sedona Corporation’s voting stock in exchange for $560,000 cash. At the acquisition date, the fair values of Sedona’s assets and liabilities equaled their carrying values, except that the fair value of the inventory was $20,000 lower than the carrying value, the fair value of the equipment was $50,000 higher than the carrying value, and the fair value of the long-term debt was $4,000 lower than the carrying value.  The separate condensed balance sheets of the two companies immediately after the acquisition (on 12/31) are as follows:
                                                                                Phoenix  Sedona
        Cash                              $ 90,000  $  60,000
        Accounts receivable                  130,000  25,000
        Inventory                          160,000  70,000
        Plant and equipment (net)…
Chapter 7 Solutions
Soft Bound Version for Advanced Accounting 13th Edition
Ch. 7 - Prob. 1QCh. 7 - Prob. 2QCh. 7 - Prob. 3QCh. 7 - How does the presence of an indirect ownership...Ch. 7 - Prob. 5QCh. 7 - In accounting for mutual ownerships, what is the...Ch. 7 - Prob. 7QCh. 7 - Prob. 8QCh. 7 - Prob. 9QCh. 7 - Prob. 10Q
Ch. 7 - Prob. 11QCh. 7 - Jones acquires Wilson, in part because the new...Ch. 7 - Prob. 13QCh. 7 - Prob. 1PCh. 7 - Prob. 2PCh. 7 - Prob. 3PCh. 7 - Which of the following is correct for two...Ch. 7 - Prob. 5PCh. 7 - Prob. 6PCh. 7 - Prob. 7PCh. 7 - Prob. 8PCh. 7 - Prob. 9PCh. 7 - Prob. 10PCh. 7 - Prob. 11PCh. 7 - Prob. 12PCh. 7 - Prob. 13PCh. 7 - Prob. 14PCh. 7 - On January 1, 2016, Uncle Company purchased 80...Ch. 7 - Prob. 16PCh. 7 - Prob. 17PCh. 7 - Prob. 18PCh. 7 - Prob. 19PCh. 7 - Clarke has a controlling interest in Rogerss...Ch. 7 - Prob. 21PCh. 7 - Prob. 22PCh. 7 - Prob. 23PCh. 7 - Prob. 24PCh. 7 - Prob. 25PCh. 7 - Prob. 26PCh. 7 - Prob. 27PCh. 7 - Prob. 28PCh. 7 - Prob. 29PCh. 7 - Prob. 1DYSCh. 7 - Prob. 2DYS
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- On July 1, 2021, Gupta Corporation bought 25% of the outstanding common stock of VB Company for $100 million cash, giving Gupta the ability to exercise significant influence over VB’s operations. At the date of acquisition of the stock, VB’s net assets had a total fair value of $350 million and a book value of $220 million. Of the $130 million difference, $20 million was attributable to the appreciated value of inventory that was sold during the last half of 2021, $80 million was attributable to buildings that had a remaining depreciable life of 10 years, and $30 million related to equipment that had a remaining depreciable life of 5 years. Between July 1, 2021, and December 31, 2021, VB earned net income of $32 million and declared and paid cash dividends of $24 million.Required:1. Prepare all appropriate journal entries related to the investment during 2021, assuming Gupta accounts for this investment by the equity method.2. Determine the amounts to be reported by Gupta:a. As an…arrow_forwardOn July 1, 2021, Gupta Corporation bought 25% of the outstanding common stock of VB Company for $110 million cash, giving Gupta the ability to exercise significant influence over VB’s operations. At the date of acquisition of the stock, VB’s net assets had a total fair value of $360 million and a book value of $240 million. Of the $120 million difference, $22 million was attributable to the appreciated value of inventory that was sold during the last half of 2021, $84 million was attributable to buildings that had a remaining depreciable life of 15 years, and $14 million related to equipment that had a remaining depreciable life of 5 years. Between July 1, 2021, and December 31, 2021, VB earned net income of $24 million and declared and paid cash dividends of $16 million. Required:1. Prepare all appropriate journal entries related to the investment during 2021, assuming Gupta accounts for this investment by the equity method.2. Determine the amounts to be reported by Gupta.arrow_forwardOn July 1, 2021, Gupta Corporation bought 25% of the outstanding common stock of VB Company for $135 million cash, giving Gupta the ability to exercise significant influence over VB’s operations. At the date of acquisition of the stock, VB’s net assets had a total fair value of $440 million and a book value of $240 million. Of the $200 million difference, $28 million was attributable to the appreciated value of inventory that was sold during the last half of 2021, $132 million was attributable to buildings that had a remaining depreciable life of 15 years, and $40 million related to equipment that had a remaining depreciable life of 10 years. Between July 1, 2021, and December 31, 2021, VB earned net income of $36 million and declared and paid cash dividends of $28 million. Required:1. Prepare all appropriate journal entries related to the investment during 2021, assuming Gupta accounts for this investment by the equity method.2. Determine the amounts to be reported by Gupta.…arrow_forward
- On July 1, 2021, Gupta Corporation bought 30% of the outstanding common stock of VB Company for $170 million cash, giving Gupta the ability to exercise significant influence over VB’s operations. At the date of acquisition of the stock, VB’s net assets had a total fair value of $490 million and a book value of $220 million. Of the $270 million difference, $50 million was attributable to the appreciated value of inventory that was sold during the last half of 2021, $160 million was attributable to buildings that had a remaining depreciable life of 10 years, and $60 million related to equipment that had a remaining depreciable life of 5 years. Between July 1, 2021, and December 31, 2021, VB earned net income of $60 million and declared and paid cash dividends of $50 million. Required:1. Prepare all appropriate journal entries related to the investment during 2021, assuming Gupta accounts for this investment by the equity method. a. Record the purchase of VB company shares for $170.0…arrow_forwardAt the beginning of the current year, Occidental Company purchased 40% of the outstanding ordinary shares of Manapla Company for ₱3,500,000 when the net assets of Manapla amounted to ₱7,000,000. At acquisition date, the carrying amount of the identifiable assets and liabilities of Manapla were equal to their fair value, except for equipment for which the fair value was ₱1,500,000 greater than carrying amount and inventory whose fair value was ₱500,000 greater than cost. The equipment has a remaining life of 4 years and the inventory was all sold during the current year. Manapla Company reported net income of ₱4,000,000 and paid no dividends during the year. What is the maximum amount of the “equity in earnings of the investee”. a. 1,350,000b. 1,250,000c. 1,600,000d. 1,700,000 What is the solution for the option A?arrow_forwardAt the beginning of the current year, Boyet Company bought 40% of Aubrey Company’s outstanding ordinary shares for P3,500,000. The company also paid P700,000 to a business broker who helped find a suitable business and negotiated the purchase. The carrying amount of Aubrey Company’s net assets at the purchase date totaled P9,000,000. The difference was attributed to plant which had a carrying amount of P1,100,000 and a fair value of P2,000,000 and to inventory which had a carrying amount of P250,000 and a fair value of P350,000. The plant has 18-year life. All inventory was sold during the current year. During the current year, the investee reported net income of P1,200,000 and paid a P200,000 cash dividend. Of the amount paid for the investment, how much is attributable to goodwill? How much is the amortization of purchase differential during the current year? What amount should be reported as investment income for the current year? What is the carrying amount of the investment in…arrow_forward
- On January 1, 2021, Cameron Inc. bought 20% of the outstanding common stock of Lake Construction Company for $300 million cash, giving Cameron the ability to exercise significant influence over Lake’s operations. At the date of acquisition of the stock, Lake’s net assets had a fair value of $900 million. Its book value was $800 million. The difference was attributable to the fair value of Lake’s buildings and its land exceeding book value, each accounting for one-half of the difference. Lake’s net income for the year ended December 31, 2021, was $150 million. During 2021, Lake declared and paid cash dividends of $30 million. The buildings have a remaining life of 10 years. Required:1. Prepare all appropriate journal entries related to the investment during 2021, assuming Cameron accounts for this investment by the equity method.2. Determine the amounts to be reported by Cameron:a. As an investment in Cameron’s 2021 balance sheet. b. As net investment revenue in the income statement.c.…arrow_forwardPitino acquired 90 percent of Brey's outstanding shares on January 1, 2019, in exchange for $486,000 in cash. The subsidiary's stockholders' equity accounts totaled $470,000, and the noncontrolling interest had a fair value of $54,000 on that day. However, a building (with a ten-year remaining life) in Brey's accounting records was undervalued by $45,000. Pitino assigned the rest of the excess fair value over book value to Brey's patented technology (four-year remaining life).  Brey reported net income from its own operations of $80,000 in 2019 and $96,000 in 2020. Brey declared dividends of $27,000 in 2019 and $31,000 in 2020.  Brey sells inventory to Pitino as follows:  Year Cost to Brey Transfer Price to Pitino Inventory Remaining at Year-End (at transfer price) 2019 $ 85,000  $ 195,000  $ 41,000  2020  118,250   215,000   53,000  2021  156,000   240,000   40,000    At December 31, 2021, Pitino owes Brey $32,000 for inventory acquired during the…arrow_forwardPepper Corporation owns 75 percent of Salt Company's voting shares. During 20X8, Pepper produced 50,000 chairs at a cost of $79 each and sold 35,000 chairs to Salt for $90 each. Salt sold 18,000 of the chairs to unaffiliated companies for $117 each prior to December 31, 20X8, and sold the remainder in early 20X9 to unaffiliated companies for $130 each. Both companies use perpetual inventory systems. Based on the information given above, what amount of cost of goods sold must be eliminated from the consolidated income statement for 20X8? Multiple Choice A. $2,963,000 B. $1,620,000 C. $2,765,000 D. $1,422,000arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning