ACG 4201 Chapter 4

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 ValueBuildings (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. In consolidation at December 31, 2020, what adjustment is necessary for Hogan's Land account?

$7,000 increase.

Which of the following identify where noncontrolling interest amounts appear in consolidated financial statements?

-In the consolidated income statement as as allocation of consolidated net income. -In the consolidated owners' equity section.

A parent company owns 80% of the voting stock of a subsidiary. What percentage of the subsidiary's net income (after excess acquisition-date fair value amortizations) is attributable to the noncontrolling interest?

20%

On October 6, 2021, Ronan Corp. sold land to Bane Co., its wholly owned subsidiary. The land cost $72,400 and was sold to Bane for $96,000. For consolidated financial statement reporting purposes, when must the gain on the sale of the land be recognized?

When Bane Co. sells the land to a third party.

Because it is an intra-entity transfer, the portion of a subsidiary dividend payable to its parent company is______ in consolidation.

eliminated

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 2021Net income$100,000 $120,000 $130,000 Dividends 40,000 50,000 60,000 Assume the partial equity method is applied. Compute the noncontrolling interest in Demers at December 31, 2019.

$135,600. Noncontrolling Interest at Acquisition$ 125,000Demers 2019 Net Income ($100,000 × 20%)20,000Demers 2019 Dividends ($40,000 × 20%)(8,000)2019 Amortization* ($7,000 × 20%)(1,400)Noncontrolling interest at December 31, 2019$ 135,600 *Amortization = ($30,000 Equipment undervalued + $40,000 Buildings undervalued) ÷ 10 years = $7,000 per year.

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.

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 the noncontrolling interest at the date of acquisition?

$75,000. Acquisition-date total fair value of Wallace = $1,800,000 ÷ 75% = $2,400,000 Noncontrolling interest acquisition-date FV of Wallace = $2,400,000 − $1,800,000 = $600,000

Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker on May 1, 2020, for $80,000. The land originally cost Stark $85,000. Stark reported net income of $200,000, $180,000, and $220,000 for 2020, 2021, and 2022, respectively. Parker sold the land purchased from Stark for $92,000 in 2022. Both companies use the equity method of accounting. Which of the following will be included in a consolidation entry for 2021?

Credit Retained Earnings for $5,000.

Consolidation Entry A2 focuses on valuation and allocation of which of the following accounts?

Goodwill only.

The noncontrolling interest represents an outside ownership in a subsidiary that is not attributable to the parent company. Where in the consolidated balance sheet is this outside ownership interest recognized?

In the owners' equity section.

When a parent uses the partial equity method throughout the year to account for its 80% investment in an acquired subsidiary, which of the following statements is true at the date immediately preceding the date on which adjustments are made on the consolidated worksheet?

Parent company dividends equal consolidated dividends.

Strickland Company sells inventory to its parent, Carter Company, at a profit during 2020. Carter sells one-third of the inventory in 2020. In the consolidation worksheet for 2021, assuming Carter uses the initial value method of accounting for its investment in Strickland, which of the following accounts would be debited to defer unrecognized intra-entity gross profit with regard to the 2020 intra-entity transfers?

Retained earnings.

Strickland Company sells inventory to its parent, Carter Company, at a profit during 2020. Carter sells one-third of the inventory in 2020. In the consolidation worksheet for 2020, which of the following accounts would be debited to eliminate the intra-entity transfer of inventory?

Sales.

When a business acquisition resulting in control takes place midyear, how is the consolidation process affected?

Subsidiary book value must be computed as of the acquisition date. Only post-acquisition subsidiary expenses are included in consolidated totals. Only post-acquisition subsidiary revenues are included in consolidated totals.

How does Consolidation Entry A1 allocate the unamortized excess acquisition-date fair over book value for the subsidiary's identifiable asset and liabilities to the noncontrolling interest?

The excess unamortized acquisition-date fair value is allocated to the noncontrolling interest using their percentage ownership in the subsidiary.

Company A obtains control over Company B in a step acquisition. Upon achieving control, how does a parent account for its previous noncontrolling interest in Company B?

The parent's previously held noncontrolling interest is adjusted to fair value and a gain or loss is recognized.

The combined credits to the noncontrolling interests in Consolidation Entries S and A equal the total balance of the noncontrolling interest as of the of the_____ period.

beginning

On the consolidated balance sheet, dividends paid to the noncontrolling interest

have no effect on the noncontrolling interest balance.

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 2021Net income$100,000 $120,000 $130,000 Dividends 40,000 50,000 60,000 Assume the partial equity method is applied. How much does Pell record as Income from Demers for the year ended December 31, 2020?

$96,000.

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 noncontrolling interest at the acquisition date?

$10,000.

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 2021Net income$100,000 $120,000 $130,000 Dividends 40,000 50,000 60,000 Assume the initial value method is applied. Compute the noncontrolling interest in the net income of Demers at December 31, 2019.

$18,600.

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 2021Net income$100,000 $120,000 $130,000 Dividends 40,000 50,000 60,000 Assume the partial equity method is applied. Compute the noncontrolling interest in the net income of Demers at December 31, 2019.

$18,600.

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 2021Net income$100,000 $120,000 $130,000 Dividends 40,000 50,000 60,000 Assume the partial equity method is applied. Compute the noncontrolling interest in Demers at December 31, 2020.

$148,200.

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 dollar amount of fair value over book value differences for identifiable net assets attributed to Dodd at the date of acquisition?

$150,000.

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.

On April 1, Pujols, Inc., exchanges $571,750 for 70 percent of the outstanding stock of Ramirez Corporation. The remaining 30 percent of the outstanding shares continued to trade at a collective fair value of $219,350. Ramirez's identifiable assets and liabilities each had book values that equaled their fair values on April 1 for a net total of $652,500. During the remainder of the year, Ramirez generates revenues of $687,000 and expenses of $445,000 and declared no dividends. On a December 31 consolidated balance sheet, what amount should be reported as noncontrolling interest?

$291,950. Correct

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.

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 2021Net 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.

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 ValueBuildings (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. In consolidation at December 31, 2020, what net adjustment is necessary for Hogan's Patent account?

$6,600.

Daniels Inc. acquired 85% of the outstanding common stock of Noyce Corp.in 2021. Noyce currently owes Daniels $400,000 for inventory acquired during 2022. In preparing consolidated financial statements for 2022, what amount of Noyce's liability should be eliminated?

$400,000. All intra-entity debt must be eliminated in preparing consolidated financial statements $400,000

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 ValueBuildings (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. In consolidation at December 31, 2019, what net adjustment is necessary for Hogan's Patent account?

$8,800.

Patti Company owns 80% of the common stock of Shannon, Inc. In the current year, Patti reports sales of $10,000,000 and cost of goods sold of $7,500,000. For the same period, Shannon has sales of $200,000 and cost of goods sold of $160,000. During the year, Patti sold merchandise to Shannon for $60,000 at a price based on the normal markup. At the end of the year, Shannon still possesses 30 percent of this inventory. Compute consolidated cost of goods sold.

$7,604,500.

A parent company owns 80% of the voting stock of a subsidiary. What percentage of the total excess fair value net adjustment should Consolidation Entry A allocate to the noncontrolling interest?

20%

Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 25% gross profit rate. The following data are available pertaining specifically to Philbin's intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020. 202020212022Purchases by Philbin$8,000 $12,000 $15,000 Ending inventory on Philbin's books 1,200 4,000 3,000 Assume the equity method is used. The following data are available pertaining to Anderson's income and dividends. 202020212022Anderson's net income$70,000 $85,000 $94,000 Dividends paid by Anderson 10,000 10,000 15,000 For consolidation purposes, what amount would be debited to January 1 retained earnings for the 2022 consolidation worksheet entry with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2021 intra-entity transfer of merchandise?

$1,000.

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. What amount would Renz Co. report as consolidated net income for 2022?

$1,735,000.

Patti Company owns 80% of the common stock of Shannon, Inc. In the current year, Patti reports sales of $10,000,000 and cost of goods sold of $7,500,000. For the same period, Shannon has sales of $200,000 and cost of goods sold of $160,000. During the year, Patti sold merchandise to Shannon for $60,000 at a price based on the normal markup. At the end of the year, Shannon still possesses 30 percent of this inventory. Assume the same information, except Shannon sold inventory to Patti. Compute consolidated sales.

$10,140,000.

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 2021Net income$100,000 $120,000 $130,000 Dividends 40,000 50,000 60,000 Assume the initial value method is applied. Compute the noncontrolling interest in Demers at December 31, 2019.

$135,600.

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 2021Net income$100,000 $120,000 $130,000 Dividends 40,000 50,000 60,000 Assume the equity method is applied. Compute the noncontrolling interest in the net income of Demers at December 31, 2020.

$22,600.

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 2021Net income$100,000 $120,000 $130,000 Dividends 40,000 50,000 60,000 Assume the initial value method is applied. Compute the noncontrolling interest in the net income of Demers at December 31, 2020.

$22,600.

Charleston Inc. acquired 75% of Savannah Manufacturing on January 4, 2020. During 2020, Charleston sold Savannah $460,000 of goods, which had cost $380,000. Savannah still owned 20% of the goods at the end of the year. In 2021, Charleston sold goods with a cost of $520,000 to Savannah for $700,000, and Savannah still owned 15% of the goods at year-end. What amount of intra-entity gross profit should be recognized through the consolidation process in 2021?

$16,000.

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 ValueBuildings (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. In consolidation at December 31, 2020, what adjustment is necessary for Hogan's Equipment account?

$2,000 increase. Fair Value Differential ($18,000 − $14,000) $4,000 − 2019 Amortization of $1,000 − 2020 Amortization of $1,000 = $2,000 Increase Excess amortization = $4,000 ÷ 4 years = $1,000 per year

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 ValueBuildings (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. In consolidation at January 1, 2019, what adjustment is necessary for Hogan's Equipment account?

$4,000 increase. Equipment FV $18,000 − Equipment BV $14,000 = $4,000 Differential on January 1, 2019

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 2021Net income$100,000 $120,000 $130,000 Dividends 40,000 50,000 60,000 Assume the equity method is applied. Compute Pell's equity income from Demers for the year ended December 31, 2019.

$74,400.

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 2021Net income$100,000 $120,000 $130,000 Dividends 40,000 50,000 60,000 Assume the partial equity method is applied. Compute the noncontrolling interest in the net income of Demers at December 31, 2020.

$22,600.

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 initial value method is applied. Compute the noncontrolling interest in the net income of Demers at December 31, 2021.

$24,600. Noncontrolling Interest Share of [Net Income for 2021 ($130,000 × 20%) − Excess FV Annual Amortization* ($7,000 × 20%)] = $24,600 *Amortization = ($30,000 Equipment undervalued + $40,000 Buildings undervalued) ÷ 10 years = $7,000 per year.

Charleston Inc. acquired 75% of Savannah Manufacturing on January 4, 2020. During 2020, Charleston sold Savannah $460,000 of goods, which had cost $380,000. Savannah still owned 20% of the goods at the end of the year. In 2021, Charleston sold goods with a cost of $520,000 to Savannah for $700,000, and Savannah still owned 15% of the goods at year-end. What amount of intra-entity gross profit should be deferred in 2021?

$27,000.

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 ValueBuildings (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. In consolidation at December 31, 2019, what adjustment is necessary for Hogan's Equipment account?

$3,000 increase. Fair Value Differential ($18,000 − $14,000) $4,000 − 2019 Amortization of $1,000 = $3,000 Increase Excess amortization = $4,000 ÷ 4 years = $1,000 per year

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. ($125,000 FV − $75,000 BV) × 80% = $50,000 Excess × 80% = $40,000

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 2021Net income$100,000 $120,000 $130,000 Dividends 40,000 50,000 60,000 Assume the partial equity method is applied. What is the consolidated balance of the Investment in Demers account at December 31, 2021.

$0.

Patti Company owns 80% of the common stock of Shannon, Inc. In the current year, Patti reports sales of $10,000,000 and cost of goods sold of $7,500,000. For the same period, Shannon has sales of $200,000 and cost of goods sold of $160,000. During the year, Patti sold merchandise to Shannon for $60,000 at a price based on the normal markup. At the end of the year, Shannon still possesses 30 percent of this inventory. Compute consolidated sales.

$10,140,000.

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 2021Net income$100,000 $120,000 $130,000 Dividends 40,000 50,000 60,000 Assume the partial equity method is applied. What is the consolidated balance of the Equity in Demers Earnings account at December 31, 2021.

$0.

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 2021Net income$100,000 $120,000 $130,000 Dividends 40,000 50,000 60,000 Assume the equity method is applied. What is the consolidated balance of the Equity in Demers Earnings account at December 31, 2021.

$0. The balance reported by the parent is eliminated through the consolidation process.

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 2021Net income$100,000 $120,000 $130,000 Dividends 40,000 50,000 60,000 Assume the equity method is applied. Compute the noncontrolling interest in Demers at December 31, 2020.

$148,200.

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. BookValueBookValueFairValueCurrent assets$912,000 $430,000 $458,000 Equipment371,000 290,000 450,000 Buildings584,000 210,000 210,000 Liabilities(564,000)(238,000)(238,000) Revenues(1,320,000)(570,000) Expenses740,000 410,000 Investment income Not Given What is the consolidated balance of the Equipment account at December 31, 2020?

$814,000. [Parent's Equipment BV $371,000] + [Sub's Equipment BV $290,000] + [Fair value allocation less one year of amortization $170,000 − $17,000] = $814,000

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. Revenue $2,700,000 − Expenses $2,100,000 = $600,000 − $65,000 = $535,000 × 20% = $107,000

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 is the total amount of goodwill recognized at the date of acquisition?

$300,000. Acquisition-date fair value of Wallace Corp. ($1,800,000 ÷ 75%) $2,400,000 − Fair value of Wallace's identifiable net assets $2,100,000 = $300,000 Goodwill

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.

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 2021Net income$100,000 $120,000 $130,000 Dividends 40,000 50,000 60,000 Assume the initial value method is applied. How much does Pell record as Income from Demers for the year ended December 31, 2020?

$40,000.

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 2021Net 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.

Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 25% gross profit rate. The following data are available pertaining specifically to Philbin's intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020. 202020212022Purchases by Philbin$8,000 $12,000 $15,000 Ending inventory on Philbin's books 1,200 4,000 3,000 Assume the equity method is used. The following data are available pertaining to Anderson's income and dividends. 202020212022Anderson's net income$70,000 $85,000 $94,000 Dividends paid by Anderson 10,000 10,000 15,000 Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, compute the net income attributable to the noncontrolling interest of Anderson for 2020.

$6,970.

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 2021Net income$100,000 $120,000 $130,000 Dividends 40,000 50,000 60,000 Assume the partial equity method is applied. How much does Pell record as Income from Demers for the year ended December 31, 2021?

$104,000. Controlling Interest Share of Net Income for 2021 ($130,000 × 80%) = $104,000

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 2021Net income$100,000 $120,000 $130,000 Dividends 40,000 50,000 60,000 Assume the initial value method is applied. How much does Pell record as Income from Demers for the year ended December 31, 2019?

$32,000.

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. BookValueBookValueFairValueCurrent assets$912,000 $430,000 $458,000 Equipment371,000 290,000 450,000 Buildings584,000 210,000 210,000 Liabilities(564,000)(238,000)(238,000)Revenues(1,320,000)(570,000) Expenses740,000 410,000 Investment incomeNot Given What amount of consolidated net income for 2020 is attributable to Scott's controlling interest?

$680,100.

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 ValueBuildings (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. In consolidation at January 1, 2019, what adjustment is necessary for Hogan's Patent account?

$11,000.

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 ValueBuildings (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. In consolidation at January 1, 2019, what adjustment is necessary for Hogan's Buildings account?

$2,000 decrease. Building FV $8,000 − Building BV $10,000 = ($2,000) Differential

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. BookValueBookValueFairValueCurrent assets$912,000 $430,000 $458,000 Equipment371,000 290,000 450,000 Buildings584,000 210,000 210,000 Liabilities(564,000)(238,000)(238,000)Revenues(1,320,000)(570,000) Expenses740,000 410,000 Investment incomeNot Given What is the noncontrolling interest's share of the subsidiary's net income for the year ended December 31, 2020 and what is the ending balance of the noncontrolling interest in the subsidiary at December 31, 2020?

$42,900 and $267,900. [Sub's Income ($570,000 − $410,000) × 30% = $48,000] − [Excess Equipment Amortization for 2020 ($170,000 ÷ 10) × 30% = $5,100] = $42,900 [Noncontrolling Interest at Acquisition (FV $750,000 × 30%) = $225,000] + [Noncontrolling Interest 2020 Income $42,900] = $267,900

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 2021Net 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, 2021.

$660,000. Initial Investment$ 500,000Demers 2019 Net Income ($100,000 × 80%)80,000Demers 2019 Dividends ($40,000 × 80%)(32,000)Demers 2020 Net Income ($120,000 × 80%)96,000Demers 2020 Dividends ($50,000 × 80%)(40,000)Demers 2021 Net Income (130,000 × 80%)104,000Demers 2021 Dividends ($60,000 × 80%)(48,000)Investment in Demers, December 31, 2021$ 660,000

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 ValueBuildings (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. In consolidation at December 31, 2019, what adjustment is necessary for Hogan's Land account?

$7,000 increase. Fair Value Differential ($12,000 − $5,000) $7,000 − No Amortization for 2019 = $7,000 Increase Land has an indefinite life so no amortization.

Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 25% gross profit rate. The following data are available pertaining specifically to Philbin's intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020. 202020212022Purchases by Philbin$8,000 $12,000 $15,000 Ending inventory on Philbin's books 1,200 4,000 3,000 Assume the equity method is used. The following data are available pertaining to Anderson's income and dividends. 202020212022Anderson's net income$70,000 $85,000 $94,000 Dividends paid by Anderson 10,000 10,000 15,000 Compute the equity in earnings of Anderson reported on Philbin's books for 2021.

$75,870.

Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 25% gross profit rate. The following data are available pertaining specifically to Philbin's intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020. 202020212022Purchases by Philbin$8,000 $12,000 $15,000 Ending inventory on Philbin's books 1,200 4,000 3,000 Assume the equity method is used. The following data are available pertaining to Anderson's income and dividends. 202020212022Anderson's net income$70,000 $85,000 $94,000 Dividends paid by Anderson 10,000 10,000 15,000 Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, compute the net income attributable to the noncontrolling interest of Anderson for 2021.

$8,430.

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 2021Net income$100,000 $120,000 $130,000 Dividends 40,000 50,000 60,000 Assume the equity method is applied. What is the consolidated balance of the Investment in Demers account at December 31, 2021.

$0.

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 2021Net income $100,000 $120,000 $130,000 Dividends 40,000 50,000 60,000 Assume the equity method is applied. What is the consolidated balance of the Equity in Demers Earnings account at December 31, 2021.

$0. The balance reported by the parent is eliminated through the consolidation process.

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 ValueBuildings (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. In consolidation at December 31, 2019, what adjustment is necessary for Hogan's Buildings account?

$1,800 decrease.

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 initial value method is applied. Compute the noncontrolling interest in Demers at December 31, 2020.

$148,200. Noncontrolling Interest at Acquisition$ 125,000 Demers 2019 Net Income ($100,000 × 20%)20,000 Demers 2019 Dividends ($40,000 × 20%)(8,000)2019 Amortization* ($7,000 × 20%)(1,400)Demers 2020 Net Income ($120,000 × 20%)24,000Demers 2020 Dividends ($50,000 × 20%)(10,000)2020 Amortization* ($7,000 × 20%)(1,400)Noncontrolling interest at December 31, 2020$ 148,200

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 2021Net income$100,000 $120,000 $130,000 Dividends 40,000 50,000 60,000 Assume the equity method is applied. Compute the noncontrolling interest in Demers at December 31, 2021.

$160,800.

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 the noncontrolling interest in the net income of Demers at December 31, 2019.

$18,600.

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 the noncontrolling interest in the net income of Demers at December 31, 2019.

$18,600. Noncontrolling Interest Share of [Net Income for 2019 ($100,000 × 20%) − Excess FV Annual Amortization ($7,000 × 20%)] = $18,600

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 2021Net income$100,000 $120,000 $130,000 Dividends 40,000 50,000 60,000 Assume the initial value method is applied. How much does Pell record as Income from Demers for the year ended December 31, 2021?

$48,000.

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 2021Net income$100,000 $120,000 $130,000 Dividends 40,000 50,000 60,000 Assume the initial value method is applied. Compute Pell's Investment in Demers at December 31, 2019.

$500,000.

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 2021Net income $100,000 $120,000 $130,000 Dividends 40,000 50,000 60,000 Assume the initial value method is applied. Compute Pell's Investment in Demers at December 31, 2021.

$500,000. Under the initial value method, the investment account remains at initial investment of $500,000.

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 2021Net income$100,000 $120,000 $130,000 Dividends 40,000 50,000 60,000 Assume the equity method is applied. Compute Pell's investment account balance in Demers at December 31, 2020.

$592,800.

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 2021Net income$100,000 $120,000 $130,000 Dividends 40,000 50,000 60,000 Assume the equity method is applied. Compute Pell's investment account balance in Demers at December 31, 2021.

$643,200.

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 2021Net income$100,000 $120,000 $130,000 Dividends 40,000 50,000 60,000 Assume the partial equity method is applied. How much does Pell record as Income from Demers for the year ended December 31, 2019?

$80,000.

Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 25% gross profit rate. The following data are available pertaining specifically to Philbin's intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020. 202020212022Purchases by Philbin$8,000 $12,000 $15,000 Ending inventory on Philbin's books 1,200 4,000 3,000 Assume the equity method is used. The following data are available pertaining to Anderson's income and dividends. 202020212022Anderson's net income$70,000 $85,000 $94,000 Dividends paid by Anderson 10,000 10,000 15,000 Assuming there are no excess amortizations associated with the consolidation, and no other intra-entity asset transfers, compute the net income attributable to the noncontrolling interest of Anderson for 2022.

$9,425.

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 equity income from Demers for the year ended December 31, 2021.

$98,400. Controlling Interest Share of [Net Income for 2021 ($130,000 × 80%) − Excess FV Annual Amortization* ($7,000 × 80%)] = $98,400 *Amortization = ($30,000 Equipment undervalued + $40,000 Buildings undervalued) ÷ 10 years = $7,000 per year.

Anderson Company, a 90% owned subsidiary of Philbin Corporation, transfers inventory to Philbin at a 25% gross profit rate. The following data are available pertaining specifically to Philbin's intra-entity purchases from Anderson. Anderson was acquired on January 1, 2020. 202020212022Purchases by Philbin$8,000 $12,000 $15,000 Ending inventory on Philbin's books 1,200 4,000 3,000 Assume the equity method is used. The following data are available pertaining to Anderson's income and dividends. 202020212022Anderson's net income$70,000 $85,000 $94,000 Dividends paid by Anderson 10,000 10,000 15,000 For consolidation purposes, what amount would be debited to January 1 retained earnings for the 2020 consolidation worksheet entry with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2020 intra-entity transfer of merchandise?

$0.

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 2021Net 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, 2020.

$604,000.

When the parent company employs the initial value method for its Investment in Subsidiary account, Entry_____ is unnecessary.

D

True or false: During the current year Company A acquires additional shares of Company B stock increasing its 20% equity method investment to a 90% controlling interest. In its consolidated financial statements for the current year, Company A will report equity method income for its preacquisition ownership of Company B.

True

A parent company owns 80% of the voting stock of a subsidiary. What percentage of the subsidiary's revenues and expenses are consolidated?

100%

Why are two separate consolidation entries (A1 and A2) useful when the parent has paid a control premium for its controlling, but partial interest in a subsidiary?

Because the presence of a control premium affects primarily the parent shares. Because the unamortized acquisition-date excess fair values are allocated proportionately across ownership interests. Because goodwill is not allocated proportionately across the ownership interests.

A Company establishes control with its most recent of a series of purchases of Company B's voting stock. What are the valuation implications for Company A's investment in Company B as of the date control is obtained?

Company B will be valued in total at its control-date fair value.

A parent company owns 80% of the voting stock of a subsidiary. In Consolidation Entry D, what percentage of the subsidiary's balance in its Dividends Declared account should be eliminated?

80%

Parent sold land to its subsidiary resulting in a gain in 2019, the year of transfer. The subsidiary sold the land to an unrelated third party for a gain in 2022. Which of the following statements is true?

A gain will be recognized in the consolidated income statement in 2022.

When a parent applies the initial value method to account for its Investment in Subsidiary account, Consolidation Entry asterisk C provides which of the following adjustments to accrual accounting?

An adjustment to the parent's RE for its share of the change in subsidiary RE from acquisition date to the beginning of the current period. An adjustment to the parent's RE for its share of excess fair value amortizations from acquisition date to the beginning of the current period.

Strickland Company sells inventory to its parent, Carter Company, at a profit during 2020. Carter sells one-third of the inventory in 2020. In the consolidation worksheet for 2020, which of the following accounts would be credited to eliminate the intra-entity transfer of inventory?

Cost of goods sold.

Consolidation Entry A adjusts subsidiary assets and liabilities for any excess acquisition-date excess fair over book values. The Consolidation Entry A adjustment to the subsidiary's assets and liabilities is net of

previous period's excess fair over book value amortizations.

On a consolidation worksheet, the noncontrolling interest's share of subsidiary dividends declared

serve to increase the noncontrolling interest balance.