AC302: Final

Parsons Company acquired 90% of Roxy Company several years ago for which the consideration transferred included an amount paid for goodwill of $200,000 at that date. During 2020 an analysis of the fair value of Roxy's assets determined an impairment of goodwill in the amount of $50,000. At what amount would consolidated goodwill be reported for 2020?

$150,000.

Crown Company had common stock of $360,000 and retained earnings of $510,000. Baker Inc. had common stock of $750,000 and retained earnings of $970,000. On January 1, 2021, Baker issued 32,000 shares of common stock with a $13 par value and a $37 fair value for all of Crown Company's outstanding common stock. This combination was accounted for using the acquisition method. Immediately after the combination, what was the amount of total consolidated net assets?

$2,904,000.

Dodd Co. acquired 75% of the common stock of Wallace Corp. for $1,800,000. The fair value of Wallace's net assets was $2,100,000, and the book value was $1,900,000. The noncontrolling interest shares of Wallace Corp. are not actively traded. What amount of goodwill should be attributed to Dodd at the date of acquisition?

$225,000.

The Charlton Co. had three operating segments with the following information: Pens Pencils Erasers Sales to outsiders $11,450 $5,800 $8,900 Intersegment revenues 960 1,500 2,070 In addition, revenues generated at corporate headquarters are $1,500. What is the minimum amount of revenue that each of these segments must earn to be considered separately reportable?

$3,068.

Peterson Corporation has three operating segments with the following information: Mowers Edgers Weedeaters Sales to outsiders $25,000 $13,000 $1,000 Intersegment transfer $1,000 $none $2,000 What is the minimum amount of revenue an operating segment must have to be considered a reportable segment?

$4,200.

When Valley Co. acquired 80% of the common stock of Coleman Corp., Coleman owned land with a book value of $75,000 and a fair value of $125,000. What is the total amount of excess land allocation at the acquisition date?

$50,000.

On January 1, 2021, Doyle Corp. acquired 75% of the voting common stock of Bressant Inc. During the year, Doyle sold to Bressant for $510,000 goods that cost $380,000. At year-end, Bressant owned 20% of the goods transferred. Bressant reported net income of $215,000, and Doyle's net income was $902,000. Doyle decided to use the equity method to account for this investment. Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, what was the net income attributable to the noncontrolling interest?

$53,750.

Colbert Inc. acquired 100% of Stewart Manufacturing on January 2, 2020. During 2020, Colbert sold Stewart $640,000 of goods, which had cost $450,000. Stewart still owned 18% of the goods at the end of the year. In 2021, Colbert sold goods with a cost of $820,000 to Stewart for $1,000,000, and Stewart still owned 15% of the goods at year-end. For 2021, the cost of goods sold totaled $5,800,000 for Colbert, and $1,300,000 for Stewart. What was consolidated cost of goods sold for 2021?

$6,092,800.

Ryan Company purchased 80% of Chase Company for $270,000 when Chase's book value was $300,000. Chase has 50,000 shares outstanding and currently has a book value of $400,000. Assume Chase issues 30,000 additional shares common stock solely to Ryan for $12 per share. What is the new percent ownership Ryan owns in Chase?

87.5%.

Kenzie Co. acquired 70% of McCready Co. on January 1, 2021. During 2021, Kenzie made several sales of inventory to McCready. The cost and sales price of the goods were $150,000 and $220,000, respectively. McCready still owned one-fourth of the goods at the end of 2021. Consolidated cost of goods sold for 2021 was $2,280,000 due to a consolidating adjustment for intra-entity transfers less intra-entity gross profit in McCready's ending inventory. How would consolidated cost of goods sold have differed if the inventory transfers had been for the same amount and cost, but from McCready to Kenzie?

Consolidated cost of goods sold would have remained $2,280,000.

Dean Hardware, Inc. is comprised of five operating segments. Information about each of these segments is as follows (in thousands): Rakes Pails Shovels Hardware Acc Sales to outsiders $94 $506 $44 $122 $28 Intersegment transfers 4 26 14 30 24 Interest revenue - outsiders 2 - 4 8 - Interest revenue - intersegment - 6 - - 22 Operating expenses - outsiders 116 414 40 102 26 Operating expenses - intersegment 2 20 6 16 22 Interest expense - 12 - 2 22 Income taxes (4) 10 4 6 2 Tangible assets 18 116 12 12 8 Intangible assets - - 4 8 6 Intersegment receivables 8 6 - - - Which operating segments are reportable under the profit or loss test?

Rakes, Pails, and Hardware.

Renfroe, Inc. acquired 10% of Stanley Corporation on January 4, 2020, for $90,000 when the book value of Stanley was $1,000,000. During 2020, Stanley reported net income of $215,000 and paid dividends of $50,000. The book value of the 10% investment was the same as the fair value of that investment when, on January 1, 2021, Renfroe purchased an additional 30% of Stanley for $325,000. Any excess of cost over book value is attributable to goodwill with an indefinite life. During 2021, Renfroe reported net income of $320,000 and paid dividends of $50,000. How much is the adjustment to the Investment in Stanley Corporation for the change from the fair-value method to the equity method on January 1, 2021?

There is no adjustment.

Natarajan, Inc. had the following operating segments, with the indicated amounts of segment revenues and segment expenses: Segment External Intersegment Segment A $7,600,000 $650,000 $6,400,000 B 2,950,000 1,100,000 4,200,000 C 750,000 1,300,000 2,250,000 D 4,000,000 300,000 4,000,000 E 1,700,000 850,000 2,800,000 For purposes of the profit or loss test, segment C's operating profit or (loss) is

$(200,000).

Renz Co. acquired 80% of the voting common stock of Sogers Corp. on January 1, 2022. During 2022, Sogers had revenues of $2,700,000 and expenses of $2,100,000. The amortization of fair value allocations totaled $65,000 in 2022. Not including its investment in Sogers, Renz Co. had its own revenues of $4,800,000 and expenses of $3,600,000 for the year 2022. The noncontrolling interest's share of the earnings of Sogers Corp. for 2022 is calculated to be

$107,000.

Priestly Corporation's revenues for the year ended December 31, 2020, were as follows: Consolidated Revenue per the Income Statement: $1,400,000 Division 1 Intersegment Sales: $200,000 Division 2 Intersegment Sales: $80,000 For purposes of the Revenue Test, what amount will be used as the benchmark for determining whether a segment is reportable?

$168,000.

Malone Co. owned 70% of Bernard Corp.'s common stock. During November 2021, Bernard sold merchandise to Malone for $150,000. At December 31, 2021, 40% of this merchandise remained in Malone's inventory. For 2021, gross profit percentages were 25% of sales for Malone and 30% of sales for Bernard. The amount of intra-entity gross profit remaining in ending inventory at December 31, 2021 that should be eliminated in the consolidation process is:

$18,000.

Natarajan, Inc. had the following operating segments, with the indicated amounts of segment revenues and segment expenses: Segment External Intersegment Segment A $7,600,000 $650,000 $6,400,000 B 2,950,000 1,100,000 4,200,000 C 750,000 1,300,000 2,250,000 D 4,000,000 300,000 4,000,000 E 1,700,000 850,000 2,800,000 According to the revenue test, which segments would require disaggregation?

A, B, D, and E.

Natarajan, Inc. had the following operating segments, with the indicated amounts of segment revenues and segment expenses: Segment External Intersegment Segment A $7,600,000 $650,000 $6,400,000 B 2,950,000 1,100,000 4,200,000 C 750,000 1,300,000 2,250,000 D 4,000,000 300,000 4,000,000 E 1,700,000 850,000 2,800,000 According to the profit or loss test, which segments would require disaggregation?

A, D, and E.

Coulanger Corp. identified four operating segments: A, B, C, and D. Segment A met the revenue test for identifying reportable segments while Segment C met the revenue test, profit or loss test, and asset test. Segment B and Segment D did not meet any of these tests. Which of these segments must be disclosed separately? Segment A Segment B Segment C Segment D A) Yes Yes No No B) Yes Yes Yes Yes C) Yes No Yes No D) No Yes No Yes E) No No Yes Yes

Option C.

Popper Co. acquired 80% of the common stock of Cocker Co. on January 1, 2019, when Cocker had the following stockholders' equity accounts. Common stock — 40,000 shares outstanding $140,000 Additional paid-in capital 105,000 Retained earnings 476,000 Total stockholders' equity $721,000 To acquire this interest in Cocker, Popper paid a total of $682,000 with any excess acquisition date fair value over book value being allocated to goodwill, which has been measured for impairment annually and has not been determined to be impaired as of January 1, 2022. Popper did not pay any premium when it acquired its original interest in Cocker. On January 1, 2022, Cocker reported a net book value of $1,113,000 before the following transactions were conducted. Popper uses the equity method to account for its investment in Cocker, thereby reflecting the change in book value of Cocker. On January 1, 2022, Cocker issued 10,000 additional shares of common stock for $35 per share. Popper acquired 8,000 of these shares. How would this transaction affect the additional paid-in capital of the parent company?

$0.

On January 2, 2021, Barley Corp. purchased 40% of the voting common stock of Wheat Co., paying $3,000,000. Barley properly accounts for this investment using the equity method. At the time of the investment, Wheat's total stockholders' equity was $5,000,000. Barley gathered the following information about Wheat's assets and liabilities whose book values and fair values differed: Book Value FairValue Buildings (20-year life) $1,000,000$ 1,800,000 Equipment (5-year life) 1,500,000 2,000,000 Franchises (10-year life) 0 700,000 Any excess of cost over fair value was attributed to goodwill, which has not been impaired. Wheat Co. reported net income of $400,000 for 2021, and paid dividends of $200,000 during that year. What is the amount of the excess of purchase price over book value?

$1,000,000.

On January 1, 2021, Jackie Corp. purchased 30% of the voting common stock of Rob Co., paying $2,000,000. Jackie properly accounts for this investment using the equity method. At the time of the investment, Rob's total stockholders' equity was $3,000,000. Jackie gathered the following information about Rob's assets and liabilities whose book values and fair values differed: Book Value Fair Value Buildings (15-year life) $1,000,000 $1,500,000 Equipment (5-year life) 2,500,000 3,000,000 Franchises (10-year life) $0 $500,000 Any excess of cost over fair value was attributed to goodwill, which has not been impaired. Rob Co. reported net income of $300,000 for 2021, and paid dividends of $100,000 during that year. What is the amount of the excess of purchase price over book value?

$1,100,000.

On January 1, 2021, the Moody Company entered into a transaction for 100% of the outstanding common stock of Osorio Company. To acquire these shares, Moody issued $400 in long-term liabilities and also issued 40 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Moody paid $20 to lawyers, accountants, and brokers for assistance in bringing about this acquisition. Another $15 was paid in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows: Moody Osorio Cash $180 $40 Receivables 810 180 Inventories 1,080 280 Land600360 Buildings (net) 1,260 440 Equipment (net) 480 100 Accounts payable( 450) (80) Long-term liabilities (1,290) 400) Common stock ($1 par) (330) Common stock ($20 par) (240) Additional paid-in capital (1,080) (340) Retained earnings (1,260) (340) Note: Parentheses indicate a credit balance. In Moody's appraisal of Osorio, three assets were deemed to be undervalued on the subsidiary's books: Inventory by $10, Land by $40, and Buildings by $60. Compute the amount of consolidated inventories at date of acquisition.

$1,370.

Webb Company purchased 90% of Jones Company for $990,000 when the book value of Jones was $1,000,000. There was no premium paid by Webb. Jones currently has 100,000 shares outstanding and a book value of $1,200,000. Assume Jones issues 20,000 new shares of its common stock to outside parties for $15 per share. What is the adjusted book value of Jones after the stock issuance?

$1,500,000.

The financial statement amounts for the Atwood Company and the Franz Company as of December 31, 2021, are presented below. Also included are the fair values for Franz Company's net assets (all numbers are in thousands). Atwood Franz Co. Franz Co. Book Value Book Value Fair Value 12/31/2021 12/31/2021 12/31/2021 Cash $870 $240 $240 Receivables 660 600 600 Inventory 1,230 420 580 Land 1,800 260 250 Buildings (net) 1,800 540 650 Equipment (net) 660 380 400 Accounts payable (570) (240) (240) Accrued expenses (270) (60) (60) Long-term liabilities (2,700) (1,020) (1,120) Common stock ($20 par) (1,980) Common stock ($5 par) (420) Additional paid-in capital (210) (180) Retained earnings 1/1/18 (1,170) (480) Revenues (2,880) (660) Expenses 2,760 620 Note: Parenthesis indicate a credit balance Assume an acquisition business combination took place at December 31, 2021. Atwood issued 50 shares of its common stock with a fair value of $35 per share for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in thousands) and direct costs of $10 (in thousands) were paid. Compute the amount of the consideration transferred by Atwood to acquire Franz.

$1,750.

Presented below are the financial balances for the Boxwood Company and the Tranz Company as of December 31, 2020, immediately before Boxwood acquired Tranz. Also included are the fair values for Tranz Company's net assets at that date (all amounts in thousands). Boxwood Tranz Co. Tranz Co. Book Value Book Value Fair Value 12/31/20 12/31/20 12/31/20 Cash $870 $240 $240 Receivables 660 600 600 Inventory 1,230 420 580 Land 1,800 260 250 Buildings (net) 1,800 540 650 Equipment (net) 660 380 400 Accounts payable (570) (240) (240) Accrued expenses (270) (60) (60) Long-term liabilities (2,700) (1,020) (1,120) Common stock ($20 par) (1,980) Common stock ($5 par) (420) Additional paid-in capital (210) (180) Retained earnings (1,170) (480) Revenues (2,880) (660) Expenses 2,760 620 Note: Parenthesis indicate a credit balance Assume a business combination took place at December 31, 2020. Boxwood issued 50 shares of its common stock with a fair value of $35 per share for all of the outstanding common shares of Tranz. Stock issuance costs of $15 (in thousands) and direct costs of $10 (in thousands) were paid to effect this acquisition transaction. To settle a difference of opinion regarding Tranz's fair value, Boxwood promises to pay an additional $5.2 (in thousands) to the former owners if Tranz's earnings exceed a certain sum during the next year. Given the probability of the required contingency payment and utilizing a 4% discount rate, the expected present value of the contingency is $5 (in thousands). Compute the investment to be recorded at the date of acquisition.

$1,755.

On January 1, 2021, Anderson Company purchased 40% of the voting common stock of Barney Company for $2,000,000, which approximated book value. During 2021, Barney paid dividends of $30,000 and reported a net loss of $70,000. What is the balance in the investment account on December 31, 2021?

$1,960,000.

Wilkins Inc. acquired 100% of the voting common stock of Granger Inc. on January 1, 2021. The book value and fair value of Granger's accounts on that date (prior to creating the combination) are as follows, along with the book value of Wilkins's accounts: Wilkins Granger Granger Book Value Book Value Fair Value Retained earnings, 1/1/21 $250,000 $240,000 Cash and receivables 170,000 70,000 $70,000 Inventory 230,000 180,000 210,000 Land 320,000 220,000 240,000 Buildings (net) 480,000 240,000 280,000 Equipment (net) 120,000 90,000 90,000 Liabilities 650,000 440,000 430,000 Common stock 360,000 80,000 Additional paid -in capital 60,000 40,000 Assume that Wilkins issued 13,000 shares of common stock, with a $5 par value and a $46 fair value, to obtain all of Granger's outstanding stock. In this acquisition transaction, how much goodwill should be recognized?

$138,000.

Hudson Corp. owned a 85% interest in Martin Co. Martin frequently made sales of inventory to Hudson. The sales, which include a markup over cost of 25%, were $460,000 in 2020 and $520,000 in 2021. At the end of each year, Hudson still owned 40% of the goods. Net income for Martin was $932,000 during 2021. Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, what was the net income attributable to the noncontrolling interest for 2021?

$139,080.

On January 1, 2021, Kapoor Co. sold equipment to its subsidiary, Howard Corp., for $125,000. The equipment had cost $150,000, and the balance in accumulated depreciation was $70,000. The equipment had an estimated remaining useful life of eight years and no salvage value. Both companies use straight-line depreciation. On their separate 2021 income statements, Kapoor and Howard reported depreciation expense of $86,000 and $64,000, respectively. The amount of depreciation expense on the consolidated income statement for 2021 would have been:

$144,375.

On January 1, 2019, Palk Corp. and Spraz Corp. had condensed balance sheets as follows: Palk Corp. Spraz Corp. Current assets $99,000 $28,000 Noncurrent assets 125,000 56,000 Total assets 224,000 84,000 Current liabilities 42,000 14,000 Long-term debt 70,000 - Stockholders' equity 112,000 70,000 Total liabilities and stockholders' equity $224,000 $84,000 On January 2, 2019, Palk borrowed the entire $84,000 it needed to acquire 80% of the outstanding common shares of Spraz. Shares of Spraz are not actively traded on the market. The loan was to be paid in ten equal annual principal payments, plus interest, beginning December 31, 2019. The excess consideration transferred over the underlying book value of the acquired net assets was allocated 60% to inventory and 40% to goodwill. What amount represents consolidated current assets at January 2, 2019?

$148,000.

Poole Co. acquired 100% of Mullen Inc. on January 3, 2021. During 2021, Poole sold goods to Mullen for $2,500,000 that cost Poole $1,850,000. Mullen still owned 30% of the goods at the end of the year. Cost of goods sold was $11,200,000 for Poole and $6,600,000 for Mullen. What was consolidated cost of goods sold?

$15,495,000.

Flynn acquires 100 percent of the outstanding voting shares of Macek Company on January 1, 2021. To obtain these shares, Flynn pays $400 cash (in thousands) and issues 10,000 shares of $20 par value common stock on this date. Flynn's stock had a fair value of $36 per share on that date. Flynn also pays $15 (in thousands) to a local investment firm for arranging the acquisition. An additional $10 (in thousands) was paid by Flynn in stock issuance costs. The book values for both Flynn and Macek immediately preceding the acquisition follow. The fair value of each of Flynn and Macek accounts is also included. In addition, Macek holds a fully amortized trademark that still retains a $40 (in thousands) value. The figures below are in thousands. Any related question also is in thousands. Flynn, Inc Macek Company Book Value Fair Value Cash $900 $80 $80 Receivables 480 180 160 Inventory 660 260 300 Land 300 120 130 Buildings (net) 1,200 220 280 Equipment 360 100 75 Accounts payable 480 60 60 Long-term liabilities 1,140 340 300 Common stock 1,000 80 Additional paid-in capital 200 0 Retained earnings 1,080 480 By how much will Flynn's additional paid-in capital increase as a result of this acquisition?

$150,000.

On January 1, 2020, Mehan, Incorporated purchased 15,000 shares of Cook Company for $150,000 giving Mehan a 15% ownership of Cook. The fair value of the 15% investment was the same as the carrying value of the investment when, on January 1, 2021, Mehan purchased an additional 25,000 shares (25%) of Cook for $300,000. This last purchase gave Mehan the ability to apply significant influence over Cook. The book value of Cook on January 1, 2020 was $1,000,000. The book value of Cook on January 1, 2021, was $1,100,000. Any excess of cost over book value for this second transaction is assigned to a database and amortized over four years. Cook reports net income and dividends as follows. These amounts are assumed to have occurred evenly throughout the years: Net Income Dividends 2020 $200,000 $50,000 2021 225,000 50,000 2022 250,000 60,000 On April 1, 2022, just after its first dividend receipt, Mehan sells 10,000 shares of its investment. What is the balance in the investment account for the 15% ownership interest, at January 1, 2021?

$150,000.

On January 1, 2020, Hemingway Co. acquired all of the common stock of Crotec Corp. For 2020, Crotec earned net income of $375,000 and paid dividends of $200,000. Amortization of the patent allocation that was included in the acquisition was $8,000. How much difference would there have been in Hemingway's income with regard to the effect of the investment, between using the equity method or using the initial value method of internal recordkeeping?

$167,000.

Dean Hardware, Inc. is comprised of five operating segments. Information about each of these segments is as follows (in thousands): Rakes Pails Shovels Hardware Acc Sales to outsiders $94 $506 $44 $122 $28 Intersegment transfers 4 26 14 30 24 Interest revenue - outsiders 2 - 4 8 - Interest revenue - intersegment - 6 - - 22 Operating expenses - outsiders 116 414 40 102 26 Operating expenses - intersegment 2 20 6 16 22 Interest expense - 12 - 2 22 Income taxes (4) 10 4 6 2 Tangible assets 18 116 12 12 8 Intangible assets - - 4 8 6 Intersegment receivables 8 6 - - - In applying the asset test, what is the minimum amount an operating segment must have in order to meet the asset test for a reportable segment?

$19.8.

On January 1, 2019, Palk Corp. and Spraz Corp. had condensed balance sheets as follows: Palk Corp. Spraz Corp. Current assets $99,000 $28,000 Noncurrent assets 125,000 56,000 Total assets 224,000 84,000 Current liabilities 42,000 14,000 Long-term debt 70,000 - Stockholders' equity 112,000 70,000 Total liabilities and stockholders' equity $224,000 $84,000 On January 2, 2019, Palk borrowed the entire $84,000 it needed to acquire 80% of the outstanding common shares of Spraz. Shares of Spraz are not actively traded on the market. The loan was to be paid in ten equal annual principal payments, plus interest, beginning December 31, 2019. The excess consideration transferred over the underlying book value of the acquired net assets was allocated 60% to inventory and 40% to goodwill. What is the amount attributable to consolidated noncurrent assets at January 2, 2019?

$195,000.

The financial statements for Campbell, Inc., and Newton Company for the year ended December 31, 2021, prior to the business combination whereby Campbell acquired Newton, are as follows (in thousands): Campbell Newton Revenues $2,600$ 700 Expenses1, 1880 400 Net income $720 $300 Retained earnings, 1/1 $2,400 $500 Net income 720 300 Dividends (270) 0 Retained earning,12/31 $2,850 $800 Cash $240 $230 Receivables and inventory 1,200 360 Buildings (net) 2,700 650 Equipment (net) 2,100 1,300 Total assets $6,240 $2,540 Liabilities $1,500 $720 Common stock 1,080 400 Additional paid-in capital 810 620 Retained earnings 2,850 800 Total liabilities & stockholders' equity $6,240 $2,540 On December 31, 2021, Campbell obtained a loan for $650 and used the proceeds, along with the transfer of 35 shares of its $10 par value common stock, in exchange for all of Newton's common stock. At the time of the transaction, Campbell's common stock had a fair value of $40 per share. In connection with the business combination, Campbell paid $25 to a broker for arranging the transaction and $30 in stock issuance costs. At the time of the transaction, Newton's equipment was actually worth $1,450 but its buildings were only valued at $590. Assuming that Newton retains a separate corporate existence after this acquisition, at what amount is the investment recorded on Campbell's books?

$2,050.

On January 3, 2020, Baxter, Inc. acquired 40% of the outstanding common stock of Anchor Co. for $2,800,000. This investment gave Baxter the ability to exercise significant influence over Anchor. Anchor's assets on that date were recorded at $11,700,000 with liabilities of $4,700,000. There were no other differences between book and fair values. During 2020, Anchor reported net income of $600,000. For 2021, Anchor reported net income of $900,000. Dividends of $350,000 were paid in each of these two years. How much income did Baxter report from Anchor for 2020?

$240,000.

McGuire Company acquired 90 percent of Hogan Company on January 1, 2019, for $234,000 cash. This amount is reflective of Hogan's total acquisition-date fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following: Book Value Fair Value Buildings (10-year life) $10,000 $8,000 Equipment (4-year life) 14,000 18,000 Land 5,000 12,000 Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years. The acquisition value attributable to the noncontrolling interest at January 1, 2019 is:

$26,000.

Clark Corp. owned 75% of the voting common stock of Andrew Co. On January 3, 2020, Andrew sold a parcel of land to Clark. The land had a book value of $36,000 and was sold to Clark for $52,000. Andrew's reported net income for 2020 was $123,000. Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, what is net income attributable to the noncontrolling interest?

$26,750.

Webb Company purchased 90% of Jones Company for $990,000 when the book value of Jones was $1,000,000. There was no premium paid by Webb. Jones currently has 100,000 shares outstanding and a book value of $1,200,000. Assume Jones issues 20,000 new shares of its common stock to outside parties for $15 per share. After acquiring the additional shares, what adjustment is needed for Webb's investment in Jones account?

$30,000 increase.

The Charlton Co. had three operating segments with the following information: Pens Pencils Erasers Sales to outsiders $11,450 $5,800 $8,900 Intersegment revenues 960 1,500 2,070 In addition, revenues generated at corporate headquarters are $1,500. Combined segment revenues are calculated to be

$30,680.

Dodd Co. acquired 75% of the common stock of Wallace Corp. for $1,800,000. The fair value of Wallace's net assets was $2,100,000, and the book value was $1,900,000. The noncontrolling interest shares of Wallace Corp. are not actively traded. What is the total amount of goodwill recognized at the date of acquisition?

$300,000.

On January 1, 2021, Nichols Company acquired 80% of Smith Company's common stock and 40% of its non-voting, cumulative preferred stock. The consideration transferred by Nichols was $1,200,000 for the common and $124,000 for the preferred. There was no premium in the value of consideration transferred. Any excess acquisition-date fair value over book value is considered goodwill. The capital structure of Smith immediately prior to the acquisition is: Common stock, $10 par value (50,000 shares outstanding) $500,000 Preferred stock, 6% cumulative, $100 par value, 3,000 shares outstanding 300,000 Additional paid in capital 200,000 Retained earnings 500,000 Total stockholders' equity $1,500,000 Compute the goodwill recognized in consolidation.

$310,000.

Vaughn Inc. acquired all of the outstanding common stock of Roberts Co. on January 1, 2020, for $276,000. Annual amortization of $21,000 resulted from this acquisition. Vaughn reported net income of $80,000 in 2020 and $60,000 in 2021 and paid $24,000 in dividends each year. Roberts reported net income of $50,000 in 2020 and $57,000 in 2021 and paid $12,000 in dividends each year. What is the Investment in Roberts Co. balance on Vaughn's books as of December 31, 2021, if the equity method has been applied?

$317,000.

On January 1, 2021, Rhodes Co. owned 75% of the common stock of Brock Co. On that date, Brock's stockholders' equity accounts had the following balances: Common stock ($6 par value) $300,000 Additional paid-in capital 120,000 Retained earnings 340,000 Total stockholders' equity $760,000 The balance in Rhodes's Investment in Brock Co. account was $570,000, and the noncontrolling interest was $190,000. On January 1, 2021, Brock Co. sold 10,000 shares of previously unissued common stock for $12 per share. Rhodes did not acquire any of these shares. What amount should be attributed to the Noncontrolling Interest in Brock Co. following the sale of the 10,000 shares of common stock?

$330,000.

LaFevor Co. acquired 70% of the common stock of Dean Corp. on August 1, 2022. For 2022, Dean reported revenues of $960,000 and expenses of $780,000, all reflected evenly throughout the year. The annual amount of amortization related to this acquisition was $21,000. In consolidation, the total amount of expenses related to Dean, and to LaFevor's acquisition of Dean, for 2022 is determined to be

$333,750.

Will Co. owned 80% of the voting common stock of Carlton Co. During 2020, Carlton made frequent sales of inventory to Will. There was deferred intra-entity gross profit of $50,000 in the beginning inventory and $30,000 of intra-entity gross profit at the end of the year. Carlton reported net income of $173,000 for 2020. Will decided to use the equity method to account for the investment. Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, what is the net income attributable to the noncontrolling interest for 2020?

$38,600.

Kaye Company acquired 100% of Fiore Company on January 1, 2021. Kaye paid $1,000 excess consideration over book value, which is being amortized at $20 per year. There was no goodwill in the combination. Fiore reported net income of $400 in 2021 and paid dividends of $100. Assume the equity method is applied. How much equity income will Kaye report on its internal accounting records as a result of Fiore's operations?

$380

Thompson Corp. was engaged solely in manufacturing operations. The following data pertain to the operating segments for 2020: Operating Total Profit Assets at 12/31/20 Segment Revenue A $14,500,000 $2,475,000 $29,000,000 B 11,300,000 1,980,000 24,700,000 C 8,450,000 1,690,000 17,600,000 D 4,300,000 780,000 10,450,000 E 6,000,000 963,000 9,900,000 F 2,150,000 314,000 4,300,000 Totals 46,700,000 $8,202,000 $95,950,000 What is the minimum amount of revenue that each of these segments must earn to be considered separately reportable?

$4,670,000.

When Valley Co. acquired 80% of the common stock of Coleman Corp., Coleman owned land with a book value of $75,000 and a fair value of $125,000. What is the amount of excess land allocation attributed to the controlling interest at the acquisition date?

$40,000.

On January 1, 2021, Nichols Company acquired 80% of Smith Company's common stock and 40% of its non-voting, cumulative preferred stock. The consideration transferred by Nichols was $1,200,000 for the common and $124,000 for the preferred. There was no premium in the value of consideration transferred. Any excess acquisition-date fair value over book value is considered goodwill. The capital structure of Smith immediately prior to the acquisition is: Common stock, $10 par value (50,000 shares outstanding) $500,000 Preferred stock, 6% cumulative, $100 par value, 3,000 shares outstanding 300,000 Additional paid in capital 200,000 Retained earnings 500,000 Total stockholders' equity $1,500,000 Compute the noncontrolling interest in Smith at date of acquisition.

$486,000.

Knight Co. owned 80% of the common stock of Stoop Co. Stoop had 50,000 shares of $5 par value common stock and 2,000 shares of preferred stock outstanding. Each preferred share received an annual per share dividend of $2 and is convertible into four shares of common stock. Knight did not own any of Stoop's preferred stock. Stoop also had 600 bonds outstanding, each of which is convertible into ten shares of common stock. Stoop's annual after-tax interest expense for the bonds was $2,000. Knight did not own any of Stoop's bonds. There are no excess amortizations or intra-entity transactions associated with this consolidation. Stoop reported net income of $300,000 for 2021. Knight has 100,000 shares of common stock outstanding and reported net income of $400,000 for 2021. What would Knight Co. report as consolidated diluted earnings per share (rounded)?

$5.89.

Reeder Corp. acquired one hundred percent of O'Neill Inc. on January 1, 2019, at a price in excess of the subsidiary's fair value. On that date, Reeder's equipment (ten-year life) had a book value of $380,000 but a fair value of $460,000. O'Neill had equipment (ten-year life) with a book value of $240,000 and a fair value of $370,000. Reeder used the partial equity method to record its investment in O'Neill. On December 31, 2021, Reeder had equipment with a book value of $270,000 and a fair value of $400,000. O'Neill had equipment with a book value of $180,000 and a fair value of $300,000. What is the consolidated balance for the Equipment account as of December 31, 2021?

$541.000.

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2019. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired. Demers earns income and pays dividends as follows: 2019 2020 2021 Net income $100,000 $120,000 $130,000 Dividends 40,000 50,000 60,000 Assume the equity method is applied. Compute Pell's Investment in Demers account balance at December 31, 2019.

$542,400.

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2019. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired. Demers earns income and pays dividends as follows: 2019 2020 2021 Net income $100,000 $120,000 $130,000 Dividends 40,000 50,000 60,000 Assume the partial equity method is applied. Compute Pell's Investment in Demers at December 31, 2019.

$548,000.

On January 1, 2021, Rhodes Co. owned 75% of the common stock of Brock Co. On that date, Brock's stockholders' equity accounts had the following balances: Common stock ($6 par value) $300,000 Additional paid-in capital 120,000 Retained earnings 340,000 Total stockholders' equity $760,000 The balance in Rhodes's Investment in Brock Co. account was $570,000, and the noncontrolling interest was $190,000. On January 1, 2021, Brock Co. sold 10,000 shares of previously unissued common stock for $12 per share. Rhodes did not acquire any of these shares. What is the balance in Rhodes's Investment in Brock Co. account following the sale of the 10,000 shares of common stock?

$550,000.

Prescott Inc. owned 80% of the voting common stock of Hutchins Corp. During 2021, Hutchins made several sales of inventory to Prescott. The total selling price was $190,000 and the cost was $105,000. At the end of the year, 30% of the goods were still in Prescott's inventory. Hutchins's reported net income was $320,000. Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, what was the net income attributable to the noncontrolling interest in Hutchins?

$58,900.

Knight Co. owned 80% of the common stock of Stoop Co. Stoop had 50,000 shares of $5 par value common stock and 2,000 shares of preferred stock outstanding. Each preferred share received an annual per share dividend of $2 and is convertible into four shares of common stock. Knight did not own any of Stoop's preferred stock. Stoop also had 600 bonds outstanding, each of which is convertible into ten shares of common stock. Stoop's annual after-tax interest expense for the bonds was $2,000. Knight did not own any of Stoop's bonds. There are no excess amortizations or intra-entity transactions associated with this consolidation. Stoop reported net income of $300,000 for 2021. Knight has 100,000 shares of common stock outstanding and reported net income of $400,000 for 2021. What would Knight Co. report as consolidated basic earnings per share (rounded)?

$6.37

On January 4, 2021, Mason Co. purchased 40,000 shares (40%) of the common stock of Hefly Corp., paying $560,000. At that time, the book value and fair value of Hefly's net assets was $1,400,000. The investment gave Mason the ability to exercise significant influence over the operations of Hefly. During 2021, Hefly reported income of $150,000 and paid dividends of $40,000. On January 2, 2022, Mason sold 10,000 shares for $150,000. What was the balance in the investment account before the shares were sold?

$604,000.

Scott Co. acquired 70% of Gregg Co. for $525,000 on December 31, 2019 when Gregg's book value was $580,000. The Gregg stock was not actively traded. On the date of acquisition, Gregg had equipment (with a ten-year life) that was undervalued in the financial records by $170,000. One year later, the two companies provided the selected amounts shown below. Additionally, no dividends have been paid. Scott Co. Gregg Co . Book Value Book Value FairValue Current Assets $912,000 $430,000 $458,000 Equipment 371,000 290,000 450,000 Buildings 584,000 210,000 210,000 Liabilities (564,000) (238,000) (238,000) Revenues (1,320,000) (570,000) Expenses 740,000 410,000 Investment income Not Given What amount of consolidated net income for 2020 is attributable to Scott's controlling interest?

$680,100.

Beesly Co. owned all of the voting common stock of Halpert Corp. The corporations' balance sheets dated December 31, 2020, include the following balances for land: —Beesly - $461,000, and —Halpert - $265,000. On the original date of acquisition, the book value of Halpert's land was equal to its fair value. On May 2, 2021, Beesly sold to Halpert a parcel of land with a book value of $75,000. The selling price was $88,000. There were no other transfers, which affected the companies' land accounts during 2020. What is the consolidated balance for land on the 2021 balance sheet?

$726,000.

Acker Inc. bought 40% of Howell Co. on January 1, 2020 for $576,000. The equity method of accounting was used. The book value and fair value of the net assets of Howell on that date were $1,440,000. Acker began supplying inventory to Howell as follows: Year Cost to Acker Transfer Price Amount Held by Howell at Year End 2020 $55,000 $75,000 $15,000 2021 $70,000 $110,000 $55,000 Howell reported net income of $100,000 in 2020 and $120,000 in 2021 while paying $40,000 in dividends each year. What is Acker's share of the intra-entity inventory gross profit that should be deferred on December 31, 2021?

$8,000.

Thompson Corp. was engaged solely in manufacturing operations. The following data pertain to the operating segments for 2020: Operating Total Profit Assets at 12/31/20 Segment Revenue A $14,500,000 $2,475,000 $29,000,000 B 11,300,000 1,980,000 24,700,000 C 8,450,000 1,690,000 17,600,000 D 4,300,000 780,000 10,450,000 E 6,000,000 963,000 9,900,000 F 2,150,000 314,000 4,300,000 Totals 46,700,000 $8,202,000 $95,950,000 What is the minimum amount of profit or loss that each of these segments must earn to be considered separately reportable?

$820,200.

Bassett Inc. acquired all of the outstanding common stock of Brinkman Corp. on January 1, 2019, for $422,000. Equipment with a ten-year life was undervalued on Brinkman's financial records by $48,000. Brinkman also owned an unrecorded customer list with an assessed fair value of $71,000 and an estimated remaining life of five years. Brinkman earned reported net income of $185,000 in 2019 and $226,000 in 2020. Dividends of $75,000 were paid in each of these two years. Selected account balances as of December 31, 2021, for the two companies follow. Bassett Brinkman Revenues $1,120,000 $860,000 Expenses 500,000 600,000 Investment income Not given 0 Retained earnings, 1/1/21 850,000 650,000 Dividends paid 132,000 80,000 If the partial equity method had been applied, what was 2021 consolidated net income?

$861,000.

Black Co. acquired 100% of Blue, Inc. on January 1, 2020. On that date, Blue had land with a book value of $38,000 and a fair value of $49,000. Also, on the date of acquisition, Blue had a building with a book value of $250,000 and a fair value of $460,000. Blue had equipment with a book value of $340,000 and a fair value of $280,000. The building had a 10-year remaining useful life and the equipment had a 5-year remaining useful life. How much total expense will be in the consolidated financial statements for the year ended December 31, 2020 related to the acquisition allocations of Blue?

$9,000.

McCoy has the following account balances as of December 31, 2020 before an acquisition transaction takes place. Inventory $125,000 Land 450,000 Buildings (net) 575,000 Common stock ($10 par) 600,000 Additional paid-in capital 300,000 Retained earnings 250,000 The fair value of McCoy's Land and Buildings are $650,000 and $600,000, respectively. On December 31, 2020, Ferguson Company issues 30,000 shares of its $10 par value ($30 fair value) common stock in exchange for all of the shares of McCoy's common stock. Ferguson paid $12,000 for costs to issue the new shares of stock. Before the acquisition, Ferguson has $800,000 in its common stock account and $350,000 in its additional paid-in capital account. On December 31, 2020, assuming that McCoy will retain its separate corporate existence, what value is assigned to Ferguson's investment account?

$900,000.

Cayman Inc. bought 30% of Maya Company on January 1, 2021 for $450,000. The equity method of accounting was used. The book value and fair value of the net assets of Maya on that date were $1,500,000. Maya began supplying inventory to Cayman as follows: Year Cost to Maya Transfer Price Amount Held by Cayman at Year-End 2021 $30,000 $45,000 $9,000 2022 $48,000 $80,000 $20,000 Maya reported net income of $100,000 in 2021 and $120,000 in 2022 while paying $40,000 in dividends each year. What is the investor's share of gross profit on intra-entity inventory sales that should be deferred on December 31, 2021?

$900.

Jackson Company acquires 100% of the stock of Clark Corporation on January 1, 2020, for $4,100 cash. As of that date Clark has the following trial balance: Debit Credit Cash $500 Accounts receivable 600 Inventory 900 Buildings (net) (5 year life) 1,600 Equipment (net) (2 year life) 1,000 Land 900 Accounts payable $400 Long-term liabilities (due 12/31/22) 1,900 Common stock 1,000 Additional paid-in capital 700 Retained earnings 1,500 Total $5,500 $5,500 Net income and dividends reported by Clark for 2020 and 2021 follow: 2020 2021 Net income $120 $140 Dividends 40 50 The fair value of Clark's net assets that differ from their book values are listed below: Fair Value Buildings $1,200 Equipment 1,350 Land1, 300 Long-term liabilities1, 750 Any excess of consideration transferred over fair value of net assets acquired is considered goodwill with an indefinite life. Compute the consideration transferred in excess of book value acquired at January 1, 2020.

$900.

Milton Co. owned all of the voting common stock of Walker Co. On January 3, 2020, Milton sold equipment to Walker for $140,000. The equipment cost Clemente $165,000. At the time of the transfer, the balance in accumulated depreciation was $45,000. The equipment had a remaining useful life of five years and a $0 salvage value. Both entities use the straight-line method of depreciation. At what amount should the equipment (net of depreciation) be included in the consolidated balance sheet dated December 31, 2020?

$96,000.

On January 1, 2020, Barber Corp. paid $1,160,000 to acquire Thompson Co. Thompson maintained separate incorporation. Barber used the equity method to account for the investment. The following information is available for Thompson's assets, liabilities, and stockholders' equity accounts on January 1, 2020: Book Fair Current assets $130,000 $130,000 Land75,000193,000 Building (twenty year life) 250,000 276,000 Equipment (ten year life) 540,000 518,000 Current liabilities 26,000 26,000 Long-term liabilities 124,000 124,000 Common stock 233,000 Additional paid-in capital 389,000 Retained earnings 223,000 Thompson earned net income for 2020 of $134,000 and paid dividends of $51,000 during the year. The 2020 total excess amortization of fair-value allocations is calculated to be

($900).

On January 1, 2021, Nichols Company acquired 80% of Smith Company's common stock and 40% of its non-voting, cumulative preferred stock. The consideration transferred by Nichols was $1,200,000 for the common and $124,000 for the preferred. There was no premium in the value of consideration transferred. Any excess acquisition-date fair value over book value is considered goodwill. The capital structure of Smith immediately prior to the acquisition is: Common stock, $10 par value (50,000 shares outstanding) $500,000 Preferred stock, 6% cumulative, $100 par value, 3,000 shares outstanding 300,000 Additional paid in capital 200,000 Retained earnings 500,000 Total stockholders' equity $1,500,000 The consolidation entry at date of acquisition will include (referring to Smith):

Debit Common stock $500,000 and debit Preferred stock $300,000.

Popper Co. acquired 80% of the common stock of Cocker Co. on January 1, 2019, when Cocker had the following stockholders' equity accounts. Common stock — 40,000 shares outstanding $140,000 Additional paid-in capital 105,000 Retained earnings 476,000 Total stockholders' equity $721,000 To acquire this interest in Cocker, Popper paid a total of $682,000 with any excess acquisition date fair value over book value being allocated to goodwill, which has been measured for impairment annually and has not been determined to be impaired as of January 1, 2022. Popper did not pay any premium when it acquired its original interest in Cocker. On January 1, 2022, Cocker reported a net book value of $1,113,000 before the following transactions were conducted. Popper uses the equity method to account for its investment in Cocker, thereby reflecting the change in book value of Cocker. On January 1, 2022, Cocker issued 10,000 additional shares of common stock for $21 per share. Popper did not acquire any of this newly issued stock. How would this transaction affect the additional paid-in capital of the parent company?

Decrease it by $64,720.

Which of the following forms is used in connection with registration of securities of a small reporting company with $25 million of annual revenues and of $25 million of voting securities held by non-affiliates?

S-1.