Advanced Accounting Final

Emily Corporation purchased all of Ace Company's common stock on January 1, 2020, for $1,000,000 cash. The investee's stockholders' equity amounted to $400,000. The excess of $600,000 was due to an unrecorded patent with a five-year life. In 2020, Ace reported net income of $250,000 and paid dividends of $25,000. What is the Equity Investment balance at December 31, 2020?

1,105,000

Parent owns 70% of the voting common stock of Sub. During 2021, Sub had revenues of 2,400,000 and expenses of 1,900,000. The AAP amortization totaled 60,000 in 2021. What is the net effect of the inclusion of Sub on net income to the controlling interests for 2021?

100,500

On January 1, 2019, Everlasting, Inc. purchased Comet Corporation for $650,000. On that date the net assets of Comet had a book value of $320,000, and book values were equal to fair values with the following exceptions: FIFO Inv --------Undervalued, $30,000 Land ------------Undervalued, $10,000 Equipment (5yl)-Undervalued, $75,000 Patent (5yl) ----- Undervalued,$25,000 During 2019, Everlasting had income from its own operations of $220,000 and Comet had net income of $80,000. What amount of goodwill appeared on the consolidated balance sheet at December 31, 2019?

190,000

Assume the following facts relating to an 70% owned subsidiary company: BOY Stockholders' Equity, 1,000,000 BOY unamortized AAP, 150,000 Net income of the Sub (not including AAP amortization), 210,000 AAP amortization expense, 40,000 Dividends declared and paid, 12,500 What is the amount reported as noncontrolling equity at the end of the year?

371,250

Parent sells inventory to its sub, Sub, at at profit during 2020. Which of the following would be credited in the consolidated worksheet for 2021? a) Sales b) Cost of goods sold c) Inventory d) Equity Investment

b) Cost of goods sold

The best calculation for consolidated net income is:

consolidated revenues - consolidated expenses

Howard, Inc. paid $400,000 to acquire all of the common stock of Fischerman Corp. on January 1, 2020. Fiscerman's reported earnings for 2020 totaled $99,000, and it paid $33,000 in dividends during the year. The amortization of allocations related to undervalued assets was $9,000. Howard's net income, not including the investment, was $753,000, and it paid dividends of $48,000. What amount would appear as Equity Income on the consolidated income statement?

0

Johnson Corporation issues 50,000 shares of its common stock for all of the outstanding shares of Smithson, Inc. Johnson's shares have a par value of $4 and a market value of $20 per share. If Smithson's net assets have book values and fair value of $700,000 and $1,100,000, respectively, what is the resulting amount of goodwill recognized on the post-acquisition balance sheet?

0

On January 2, 2019, Moonshine, Inc. acquired Cambridge as a wholly-owned subsidiary, paying an excess of $400,000 over the book value of Hudson's net assets. One-half of excess was attributable to equipment with a 4 year life, leaving the remainder as goodwill. The parent uses the equity method of pre-consolidation Equity Investment bookkeeping. The 2020 financial statements for the two companies are presented below. Moonshine Cambridge Sales 2,500,000 600,000 COGS (1,800,000) (350,000) Gross Profit 700,000 250,000 Operating Ex (386,000) (82,000) Equity Inc 118,000 Net Income 432,000 168,000 RE 1/1/20 2,400,000 160,000 Net Income 432,000 168,000 Dividends (103,000) (19,500) RE 12/31/20 2,729,000 308,500 Cash & Rec 1,250,000 47,500 Inventory 1,540,000 98,000 Equity Inv 683,500 PPE (Net) 5,605,500 360,000 Total Assets 9,079,000 505,500 Acc Pay 450,000 39,000 Accrued Liab 870,000 48,000 Notes Pay 2,350,000 35,000 Common Stock 480,000 30,000 APIC 2,200,000 45,000 RE 12/31/20 2,729,000 308,500 Total Liabilities & Equities 9,079,000 505,500 At what amount will Equity Income appear on the consolidated financial statements for 2020?

0

On January 2, 2019, Moonshine, Inc. acquired Cambridge as a wholly-owned subsidiary, paying an excess of $400,000 over the book value of Hudson's net assets. One-half of excess was attributable to equipment with a 4 year life, leaving the remainder as goodwill. The parent uses the equity method of pre-consolidation Equity Investment bookkeeping. The 2020 financial statements for the two companies are presented below. Moonshine Cambridge Sales 2,500,000 600,000 COGS (1,800,000) (350,000) Gross Profit 700,000 250,000 Operating Ex (386,000) (82,000) Equity Inc 118,000 Net Income 432,000 168,000 RE 1/1/20 2,400,000 160,000 Net Income 432,000 168,000 Dividends (103,000) (19,500) RE 12/31/20 2,729,000 308,500 Cash & Rec 1,250,000 47,500 Inventory 1,540,000 98,000 Equity Inv 683,500 PPE (Net) 5,605,500 360,000 Total Assets 9,079,000 505,500 Acc Pay 450,000 39,000 Accrued Liab 870,000 48,000 Notes Pay 2,350,000 35,000 Common Stock 480,000 30,000 APIC 2,200,000 45,000 RE 12/31/20 2,729,000 308,500 Total Liabilities & Equities 9,079,000 505,500 At what amount will Equity Investment appear on the consolidated financial statements for 2020?

0

On December 31, 2020, Lemon Company issued 21,000 shares of its common stock with a fair value of $50 per share for all of the outstanding common shares of May Company. Stock issuance costs of $4,000 and direct costs of $1,000 were paid. In addition, Lemmon promised to pay an additional $2,200 to the former owners if May's earnings exceeded a certain amount during the next year. The fair value of the potential obligation is estimated at $2,000. Compute the investment to be recorded at date of acquisition.

1,052,000

On December 30, 2020, Sherlock Co. acquired 100% of Barrett Corporation for $750,000 cash. The post-combination, but pre-consolidation, balance sheets of the two firms showed total assets of $1,500,000 for the parent and $440,000 for the subsidiary. The book values of the subsidiary's net assets approximated their values, and there are no unrecorded net assets. Total assets on the consolidated balance sheet would be:

1,190,000

Shannon Company had common stock of $160,000 and retained earnings of $234,000. Gus, Inc. had a common stock of $350,000 and retained earnings of $376,000. On January 1, 2021, Gus issued 35,000 shares of common stock with a $1 par value and a $15 fair value for all of Shannon Company's outstanding common stock. Immediately after the combination, what were the consolidated net assets?

1,251,000

On January 1, 2020, Coldspring Corp. paid $770,000 to acquire Whitt Co. Coldspring used the equity method to account for the investment. The following information is available for the assets, liabilities, and stockholders' equity accounts of Whitt: Book Fair Current Assets $95,000 $95,000 Land 95,000 120,000 Building (20 yl) 255,000 310,000 Equipment (5 yl) 185,000 190,000 Current Liabilities 40,000 40,000 Long-term liab 65,000 65,000 Common Stock 140,000 Additional PIC 300,000 RE 210,000 Whitt earned net income for 2020 of $125,000 and paid dividends of $18,000 during the year. The 2020 consolidation entry to reverse Coldspring's recognition of Whitt's income and dividends in the current year would include a net credit to Equity Investment for:

103,250

On January 1, 2021, Parent acquires 70% of the outstanding common stock of Sub, for a purchase price of 12,600,000. It was determined that the fair value of the noncontrolling interest in the subsidiary is 4,500,000. The book value of Sub's stockholders' equity on the date of acquisition is 10,000,000 and its fair value of net assets is 12,000,000. The acquisition-date acquisition accounting premium (AAP) is allocated 600,000 to equipment with a remaining useful life of 10 years, and 250,000 to a patent with a remaining useful life of 5 years. What is the ending balance in the pre-consolidation investment account?

12,523,000

On January 1, 2020, Coldspring Corp. paid $770,000 to acquire Whitt Co. Coldspring used the equity method to account for the investment. The following information is available for the assets, liabilities, and stockholders' equity accounts of Whitt: Book Fair Current Assets $95,000 $95,000 Land 95,000 120,000 Building (20 yl) 255,000 310,000 Equipment (5 yl) 185,000 190,000 Current Liabilities 40,000 40,000 Long-term liab 65,000 65,000 Common Stock 140,000 Additional PIC 300,000 RE 210,000 Whitt earned net income for 2020 of $125,000 and paid dividends of $18,000 during the year. For 2020, what is the balance in Equity Income on Coldspring's books?

121,250

Emily Corporation purchased all of Ace Company's common stock on January 1, 2020, for $1,000,000 cash. The investee's stockholders' equity amounted to $400,000. The excess of $600,000 was due to an unrecorded patent with a five-year life. In 2020, Ace reported net income of $250,000 and paid dividends of $25,000. For 2020, what amount of Equity Income will Emily record?

130,000

Parent owns 70% of the voting common stock of Sub. During 2021, Sub had revenues of 2,400,000 and expenses of 1,900,000. The AAP amortization totaled 60,000 in 2021. The non-controlling interest's share of the earnings of Sub is calculated to be

132,000

On January 1, 2019, Parent acquired a 60% interest in Sub for a purchase price that was 450,000 over the book value of Sub's Stockholders' Equity on the date of acquisition. The acquisition date AAP of 600,000 was assigned as 450,000 to a Patent (useful life 10 years) and 150,000 to Goodwill. Financial reports at December 31, 2025, indicate a beginning balance in Stockholders' Equity of 841,000 (Common Stock, 92,100; APIC, 308,900, and Retained Earnings, 440,000). Sub's net income for the period ending December 31, 2015 was 60,000. Sub paid dividends of 12,000 during that period. Sub regularly sells inventory to Parent, with sales of 305,000 in 2024 and 500,000 in 2025. Deferred gross profit was 25,000 and 26,075 in 2024 and 2025, respectively. At December 31, 2025, the consolidated balance sheet will show a balance in Patent of ____________.

135,000

Parent acquired 60% of the common stock of Sub for 1,800,000. The fair value of Sub identifiable net assets was 1,700,000 and the book value was 1,000,000. The non-controlling interest shares of Sub are not actively traded and there is no control premium. What was the total AAP?

2,000,000

On January 2, 2019, Moonshine, Inc. acquired Cambridge as a wholly-owned subsidiary, paying an excess of $400,000 over the book value of Hudson's net assets. One-half of excess was attributable to equipment with a 4 year life, leaving the remainder as goodwill. The parent uses the equity method of pre-consolidation Equity Investment bookkeeping. The 2020 financial statements for the two companies are presented below. Moonshine Cambridge Sales 2,500,000 600,000 COGS (1,800,000) (350,000) Gross Profit 700,000 250,000 Operating Ex (386,000) (82,000) Equity Inc 118,000 Net Income 432,000 168,000 RE 1/1/20 2,400,000 160,000 Net Income 432,000 168,000 Dividends (103,000) (19,500) RE 12/31/20 2,729,000 308,500 Cash & Rec 1,250,000 47,500 Inventory 1,540,000 98,000 Equity Inv 683,500 PPE (Net) 5,605,500 360,000 Total Assets 9,079,000 505,500 Acc Pay 450,000 39,000 Accrued Liab 870,000 48,000 Notes Pay 2,350,000 35,000 Common Stock 480,000 30,000 APIC 2,200,000 45,000 RE 12/31/20 2,729,000 308,500 Total Liabilities & Equities 9,079,000 505,500 At what amount will Additional Paid-in Capital appear on the consolidated financial statements for 2020?

2,200,000

On January 2, 2019, Moonshine, Inc. acquired Cambridge as a wholly-owned subsidiary, paying an excess of $400,000 over the book value of Hudson's net assets. One-half of excess was attributable to equipment with a 4 year life, leaving the remainder as goodwill. The parent uses the equity method of pre-consolidation Equity Investment bookkeeping. The 2020 financial statements for the two companies are presented below. Moonshine Cambridge Sales 2,500,000 600,000 COGS (1,800,000) (350,000) Gross Profit 700,000 250,000 Operating Ex (386,000) (82,000) Equity Inc 118,000 Net Income 432,000 168,000 RE 1/1/20 2,400,000 160,000 Net Income 432,000 168,000 Dividends (103,000) (19,500) RE 12/31/20 2,729,000 308,500 Cash & Rec 1,250,000 47,500 Inventory 1,540,000 98,000 Equity Inv 683,500 PPE (Net) 5,605,500 360,000 Total Assets 9,079,000 505,500 Acc Pay 450,000 39,000 Accrued Liab 870,000 48,000 Notes Pay 2,350,000 35,000 Common Stock 480,000 30,000 APIC 2,200,000 45,000 RE 12/31/20 2,729,000 308,500 Total Liabilities & Equities 9,079,000 505,500 At what amount will Retained Earnings appear on the consolidated financial statements for 2020?

2,729,000

On January 2, 2019, Moonshine, Inc. acquired Cambridge as a wholly-owned subsidiary, paying an excess of $400,000 over the book value of Hudson's net assets. One-half of excess was attributable to equipment with a 4 year life, leaving the remainder as goodwill. The parent uses the equity method of pre-consolidation Equity Investment bookkeeping. The 2020 financial statements for the two companies are presented below. Moonshine Cambridge Sales 2,500,000 600,000 COGS (1,800,000) (350,000) Gross Profit 700,000 250,000 Operating Ex (386,000) (82,000) Equity Inc 118,000 Net Income 432,000 168,000 RE 1/1/20 2,400,000 160,000 Net Income 432,000 168,000 Dividends (103,000) (19,500) RE 12/31/20 2,729,000 308,500 Cash & Rec 1,250,000 47,500 Inventory 1,540,000 98,000 Equity Inv 683,500 PPE (Net) 5,605,500 360,000 Total Assets 9,079,000 505,500 Acc Pay 450,000 39,000 Accrued Liab 870,000 48,000 Notes Pay 2,350,000 35,000 Common Stock 480,000 30,000 APIC 2,200,000 45,000 RE 12/31/20 2,729,000 308,500 Total Liabilities & Equities 9,079,000 505,500 At what amount will Goodwill appear on the consolidated financial statements for 2020?

200,000

On January 1, 2019, Everlasting, Inc. purchased Comet Corporation for $650,000. On that date the net assets of Comet had a book value of $320,000, and book values were equal to fair values with the following exceptions: FIFO Inv --------Undervalued, $30,000 Land ------------Undervalued, $10,000 Equipment (5yl)-Undervalued, $75,000 Patent (5yl) ----- Undervalued,$25,000 During 2019, Everlasting had income from its own operations of $220,000 and Comet had net income of $80,000. What is 2019 Consolidated net income?

250,000

On December 31, 2020, Park Inc. paid $600,000 for all of the common stock of Smith Corp. On that date, Smith had assets and liabilities with book values of $400,000 and $100,000; and fair values of $450,000 and $125,000, respectively. What amount of goodwill will be reported on the December 31, 2020 balance sheet?

275,000

Midlothian acquired 100 percent of the outstanding voting shares of Cedar Company on January 1, 2020. To obtain these shares, Midlothian ays $400,000 cash and issues 20,000 shares of $1 par value common stock on this date. Midlothian's stock had a fair value of $15 per share. Midlothian also pays an additional $3,00 in stock issuance costs. At date of acquisition, the book values and fair values of Cedar's net assets amounted to $450,000 and $520,000, respectively. How much additional paid-in capital was recorded as a result of the combination?

277,000

On January 1, 2019, Parent acquired a 60% interest in Sub for a purchase price that was 450,000 over the book value of Sub's Stockholders' Equity on the date of acquisition. The acquisition date AAP of 600,000 was assigned as 450,000 to a Patent (useful life 10 years) and 150,000 to Goodwill. Financial reports at December 31, 2025, indicate a beginning balance in Stockholders' Equity of 841,000 (Common Stock, 92,100; APIC, 308,900, and Retained Earnings, 440,000). Sub's net income for the period ending December 31, 2015 was 60,000. Sub paid dividends of 12,000 during that period. Sub regularly sells inventory to Parent, with sales of 305,000 in 2024 and 500,000 in 2025. Deferred gross profit was 25,000 and 26,075 in 2024 and 2025, respectively. What is the amount of unamortized AAP at December 31, 2025?

285,000

On January 2, 2019, Moonshine, Inc. acquired Cambridge as a wholly-owned subsidiary, paying an excess of $400,000 over the book value of Hudson's net assets. One-half of excess was attributable to equipment with a 4 year life, leaving the remainder as goodwill. The parent uses the equity method of pre-consolidation Equity Investment bookkeeping. The 2020 financial statements for the two companies are presented below. Moonshine Cambridge Sales 2,500,000 600,000 COGS (1,800,000) (350,000) Gross Profit 700,000 250,000 Operating Ex (386,000) (82,000) Equity Inc 118,000 Net Income 432,000 168,000 RE 1/1/20 2,400,000 160,000 Net Income 432,000 168,000 Dividends (103,000) (19,500) RE 12/31/20 2,729,000 308,500 Cash & Rec 1,250,000 47,500 Inventory 1,540,000 98,000 Equity Inv 683,500 PPE (Net) 5,605,500 360,000 Total Assets 9,079,000 505,500 Acc Pay 450,000 39,000 Accrued Liab 870,000 48,000 Notes Pay 2,350,000 35,000 Common Stock 480,000 30,000 APIC 2,200,000 45,000 RE 12/31/20 2,729,000 308,500 Total Liabilties & Equities 9,079,000 505,500 At what amount will Sales appear on the consolidated financial statements for 2020?

3,100,000

On January 1, 2019, Everlasting, Inc. purchased Comet Corporation for $650,000. On that date the net assets of Comet had a book value of $320,000, and book values were equal to fair values with the following exceptions: FIFO Inv --------Undervalued, $30,000 Land ------------Undervalued, $10,000 Equipment (5yl)-Undervalued, $75,000 Patent (5yl) ----- Undervalued,$25,000 During 2019, Everlasting had income from its own operations of $220,000 and Comet had net income of $80,000. What amount of 2019 Equity Income was recognized by Everlasting?

30,000

Morningside Co. acquires, at book value, Glacier Industries on January 2, 2019, by issuing 40,000 common shares, $1 par, with a market value on the acquisition date of $10 per share. The book values of Glacier's individual net assets approximate their fair values. The separate financial statements of the parent and subsidiary, for the year ended December 31, 2019, are presented below. Morningside Glacier Revenue 850,000 400,000 COGS (635,000) (268,000) Gross Profit 215,000 132,000 Operating Ex (156,400) 90,500 Equity Inc 41,500 Net Income 100,100 41,500 RE, 1/1/19 550,000 219,600 Net Income 100,100 41,500 Dividends (41,000) (13,650) RE 12/31/19 609,100 247,450 Cash & Rec 450,000 25,000 Inventory 355,000 12,570 Equity Inv 427,850 PPE (Net) 751,950 412,390 Total Assets 1,984,800 449,960 Acc Pay 371,200 54,000 Accrued Liab 487,500 68,110 Notes Pay 20,000 Common Stock 30,000 21,900 APIC 487,000 38,500 RE 12/31/19 609,100 247,450 Total Liabilities & Equities 1,984,800 449,960 The journal entry on Morningshide's books to record the acquisition will include a credit to common stock for ____________.

40,000

Morningside Co. acquires, at book value, Glacier Industries on January 2, 2019, by issuing 40,000 common shares, $1 par, with a market value on the acquisition date of $10 per share. The book values of Glacier's individual net assets approximate their fair values. The separate financial statements of the parent and subsidiary, for the year ended December 31, 2019, are presented below. Morningside Glacier Revenue 850,000 400,000 COGS (635,000) (268,000) Gross Profit 215,000 132,000 Operating Ex (156,400) 90,500 Equity Inc 41,500 Net Income 100,100 41,500 RE, 1/1/19 550,000 219,600 Net Income 100,100 41,500 Dividends (41,000) (13,650) RE 12/31/19 609,100 247,450 Cash & Rec 450,000 25,000 Inventory 355,000 12,570 Equity Inv 427,850 PPE (Net) 751,950 412,390 Total Assets 1,984,800 449,960 Acc Pay 371,200 54,000 Accrued Liab 487,500 68,110 Notes Pay 20,000 Common Stock 30,000 21,900 APIC 487,000 38,500 RE 12/31/19 609,100 247,450 Total Liabilities & Equities 1,984,800 449,960 The eliminating entry to eliminate changes in the Equity Investment account includes a debit to Equity Income of ________________.

41,500

Morningside Co. acquires, at book value, Glacier Industries on January 2, 2019, by issuing 40,000 common shares, $1 par, with a market value on the acquisition date of $10 per share. The book values of Glacier's individual net assets approximate their fair values. The separate financial statements of the parent and subsidiary, for the year ended December 31, 2019, are presented below. Morningside Glacier Revenue 850,000 400,000 COGS (635,000) (268,000) Gross Profit 215,000 132,000 Operating Ex (156,400) 90,500 Equity Inc 41,500 Net Income 100,100 41,500 RE, 1/1/19 550,000 219,600 Net Income 100,100 41,500 Dividends (41,000) (13,650) RE 12/31/19 609,100 247,450 Cash & Rec 450,000 25,000 Inventory 355,000 12,570 Equity Inv 427,850 PPE (Net) 751,950 412,390 Total Assets 1,984,800 449,960 Acc Pay 371,200 54,000 Accrued Liab 487,500 68,110 Notes Pay 20,000 Common Stock 30,000 21,900 APIC 487,000 38,500 RE 12/31/19 609,100 247,450 Total Liabilities & Equities 1,984,800 449,960 The ending balance in the equity investment account is ___________________.

427,850

Johnson Corporation issues 50,000 shares of its common stock for all of the outstanding shares of Smithson, Inc. Johnson's shares have a par value of $4 and a market value of $20 per share. If Smithson's net assets have book values and fair values of $440,000 and $560,000, respectively, what is the resulting amount of goodwill recognized on the post-acquisition balance sheet?

440,000

Howard, Inc. paid $400,000 to acquire all of the common stock of Fischerman Corp. on January 1, 2020. Fiscerman's reported earnings for 2020 totaled $99,000, and it paid $33,000 in dividends during the year. The amortization of allocations related to undervalued assets was $9,000. Howard's net income, not including the investment, was $753,000, and it paid dividends of $48,000. What are consolidated dividends for 2020?

48,000

On January 2, 2019, Moonshine, Inc. acquired Cambridge as a wholly-owned subsidiary, paying an excess of $400,000 over the book value of Hudson's net assets. One-half of excess was attributable to equipment with a 4 year life, leaving the remainder as goodwill. The parent uses the equity method of pre-consolidation Equity Investment bookkeeping. The 2020 financial statements for the two companies are presented below. Moonshine Cambridge Sales 2,500,000 600,000 COGS (1,800,000) (350,000) Gross Profit 700,000 250,000 Operating Ex (386,000) (82,000) Equity Inc 118,000 Net Income 432,000 168,000 RE 1/1/20 2,400,000 160,000 Net Income 432,000 168,000 Dividends (103,000) (19,500) RE 12/31/20 2,729,000 308,500 Cash & Rec 1,250,000 47,500 Inventory 1,540,000 98,000 Equity Inv 683,500 PPE (Net) 5,605,500 360,000 Total Assets 9,079,000 505,500 Acc Pay 450,000 39,000 Accrued Liab 870,000 48,000 Notes Pay 2,350,000 35,000 Common Stock 480,000 30,000 APIC 2,200,000 45,000 RE 12/31/20 2,729,000 308,500 Total Liabilities & Equities 9,079,000 505,500 At what amount will Accounts Payable appear on the consolidated financial statements for 2020?

489,000

On January 1, 2021, Parent acquires 70% of the outstanding common stock of Sub, for a purchase price of 12,600,000. It was determined that the fair value of the noncontrolling interest in the subsidiary is 4,500,000. The book value of Sub's stockholders' equity on the date of acquisition is 10,000,000 and its fair value of net assets is 12,000,000. The acquisition-date acquisition accounting premium (AAP) is allocated 600,000 to equipment with a remaining useful life of 10 years, and 250,000 to a patent with a remaining useful life of 5 years. Determine the amount of Goodwill to be recognized.

5,100,000

Assume the following facts relating to an 70% owned subsidiary company: BOY Stockholders' Equity, 1,000,000 BOY unamortized AAP, 150,000 Net income of the Sub (not including AAP amortization), 210,000 AAP amortization expense, 40,000 Dividends declared and paid, 12,500 What is net income attributable to NCI for the year?

51,000

On January 2, 2019, Moonshine, Inc. acquired Cambridge as a wholly-owned subsidiary, paying an excess of $400,000 over the book value of Hudson's net assets. One-half of excess was attributable to equipment with a 4 year life, leaving the remainder as goodwill. The parent uses the equity method of pre-consolidation Equity Investment bookkeeping. The 2020 financial statements for the two companies are presented below. Moonshine Cambridge Sales 2,500,000 600,000 COGS (1,800,000) (350,000) Gross Profit 700,000 250,000 Operating Ex (386,000) (82,000) Equity Inc 118,000 Net Income 432,000 168,000 RE 1/1/20 2,400,000 160,000 Net Income 432,000 168,000 Dividends (103,000) (19,500) RE 12/31/20 2,729,000 308,500 Cash & Rec 1,250,000 47,500 Inventory 1,540,000 98,000 Equity Inv 683,500 PPE (Net) 5,605,500 360,000 Total Assets 9,079,000 505,500 Acc Pay 450,000 39,000 Accrued Liab 870,000 48,000 Notes Pay 2,350,000 35,000 Common Stock 480,000 30,000 APIC 2,200,000 45,000 RE 12/31/20 2,729,000 308,500 Total Liabilities & Equities 9,079,000 505,500 At what amount will Operating Expenses appear on the consolidated financial statements for 2020?

518,000

On January 1, 2020, Coldspring Corp. paid $770,000 to acquire Whitt Co. Coldspring used the equity method to account for the investment. The following information is available for the assets, liabilities, and stockholders' equity accounts of Whitt: Book Fair Current Assets $95,000 $95,000 Land 95,000 120,000 Building (20 yl) 255,000 310,000 Equipment (5 yl) 185,000 190,000 Current Liabilities 40,000 40,000 Long-term liab 65,000 65,000 Common Stock 140,000 Additional PIC 300,000 RE 210,000 Whitt earned net income for 2020 of $125,000 and paid dividends of $18,000 during the year. If Coldspring had income from its own operations, excluding any investment income, of $425,500 in 2020, what would be consolidated net income?

546,750?

On January 2, 2019, Moonshine, Inc. acquired Cambridge as a wholly-owned subsidiary, paying an excess of $400,000 over the book value of Hudson's net assets. One-half of excess was attributable to equipment with a 4 year life, leaving the remainder as goodwill. The parent uses the equity method of pre-consolidation Equity Investment bookkeeping. The 2020 financial statements for the two companies are presented below. Moonshine Cambridge Sales 2,500,000 600,000 COGS (1,800,000) (350,000) Gross Profit 700,000 250,000 Operating Ex (386,000) (82,000) Equity Inc 118,000 Net Income 432,000 168,000 RE 1/1/20 2,400,000 160,000 Net Income 432,000 168,000 Dividends (103,000) (19,500) RE 12/31/20 2,729,000 308,500 Cash & Rec 1,250,000 47,500 Inventory 1,540,000 98,000 Equity Inv 683,500 PPE (Net) 5,605,500 360,000 Total Assets 9,079,000 505,500 Acc Pay 450,000 39,000 Accrued Liab 870,000 48,000 Notes Pay 2,350,000 35,000 Common Stock 480,000 30,000 APIC 2,200,000 45,000 RE 12/31/20 2,729,000 308,500 Total Liabilties & Equities 9,079,000 505,500 At what amount will PP&E appear on the consolidated financial statements for 2020?

6,065,000

On January 1, 2021, Parent acquires 70% of the outstanding common stock of Sub, for a purchase price of 12,600,000. It was determined that the fair value of the noncontrolling interest in the subsidiary is 4,500,000. The book value of Sub's stockholders' equity on the date of acquisition is 10,000,000 and its fair value of net assets is 12,000,000. The acquisition-date acquisition accounting premium (AAP) is allocated 600,000 to equipment with a remaining useful life of 10 years, and 250,000 to a patent with a remaining useful life of 5 years. What is the AAP?

7,100,000

Parent acquired 60% of the common stock of Sub for 1,800,000. The fair value of Sub identifiable net assets was 1,700,000 and the book value was 1,000,000. The non-controlling interest shares of Sub are not actively traded and there is no control premium. What was the increase in net assets as a result of adjusting net assets to fair value?

700,000

Johnson Corporation issues 50,000 shares of its common stock for all of the outstanding shares of Smithson, Inc. Johnson's shares have a par value of $4 and a market value of $20 per share. What is the increase in consolidated additional paid-in capital resulting from the combination?

800,000

Parent owns 75% of the voting common stock of Sub. During 2020, Sub had revenues of 450,000 and expenses of 80,000. The amortization of the acquisition accounting premium totaled 44,000 in 2020. What amount should be reported in the consolidated income statement for income from controlling interests?

81,500

Howard, Inc. paid $400,000 to acquire all of the common stock of Fischerman Corp. on January 1, 2020. Fiscerman's reported earnings for 2020 totaled $99,000, and it paid $33,000 in dividends during the year. The amortization of allocations related to undervalued assets was $9,000. Howard's net income, not including the investment, was $753,000, and it paid dividends of $48,000. What is consolidated net income for 2020?

843,000

On January 1, 2020, Coldspring Corp. paid $770,000 to acquire Whitt Co. Coldspring used the equity method to account for the investment. The following information is available for the assets, liabilities, and stockholders' equity accounts of Whitt: Book Fair Current Assets $95,000 $95,000 Land 95,000 120,000 Building (20 yl) 255,000 310,000 Equipment (5 yl) 185,000 190,000 Current Liabilities 40,000 40,000 Long-term liab 65,000 65,000 Common Stock 140,000 Additional PIC 300,000 RE 210,000 Whitt earned net income for 2020 of $125,000 and paid dividends of $18,000 during the year. What is the balance in Equity Investment at the end of 2020?

873,250

Cleaverland purchased 100% on Omaha on January 1, 2019 for $650,000. On that date, Omaha's stockholders' equity was $650,000, and the recognized book values of Ottowa's individual net assets approximated their fair values. Omaha had net incomes of $150,000 and $190,000 for 2019 and 2020, respectively. The subsidiary paid dividends amounting to $30,000 in both years. Cleaverland uses the equity method to account for its pre-consolidation investment in Omaha. What was the balance in Equity Investment at December 31, 2020?

930,000

Arlington, Inc. purchases all of the common stock of Frisco Company for $450,000 cash. At the acquisition date, Frisco's stockholders' equity consisted of Common Stock, $300,000, and Retained Earnings, $20,000. It was determined that the investee's balance sheet included land undervalued by $30,000 and equipment undervalued by $5,000. Arlington estimates a 10 year life for any goodwill. What is the amount of goodwill recorded at date of acquisition?

95,000

Assume on July 1, 2019, a parent company paid 1,504,800 to purchase a 75% interest in a subsidiary's voting common stock. On that date, the fair value of the 25% interest not purchased by the parent company is 500,000. The acquisition-date fair value of the identifiable net assets of the subsidiary is 1,920,000. What is the amount of goodwill assigned to the controlling and noncontrolling interests?

Goodwill- 84,800

On January 1, 2020, Coldspring Corp. paid $770,000 to acquire Whitt Co. Coldspring used the equity method to account for the investment. The following information is available for the assets, liabilities, and stockholders' equity accounts of Whitt: Book Fair Current Assets $95,000 $95,000 Land 95,000 120,000 Building (20 yl) 255,000 310,000 Equipment (5 yl) 185,000 190,000 Current Liabilities 40,000 40,000 Long-term liab 65,000 65,000 Common Stock 140,000 Additional PIC 300,000 RE 210,000 Whitt earned net income for 2020 of $125,000 and paid dividends of $18,000 during the year. What is the AAP Amortization expense for 2020? a) $3,750 Credit b) $3,750 Debit c) $1,750 Credit d) $1,750 Debit

b) $3,750 Debit

If a parent uses the equity method in years subsequent to the acquisition year, the amount debited to Retained Earnings in the consolidation entries is the subsidiary's Retained Earnings balance: a) At beginning of the preceding year b) At beginning of the current year c) At end of the current year d) At date of acquisition

b) At beginning of the current year

If a 30% acquisition is made at book value and the investor has a significant influence over the investee, what will be the relationship between the Equity Investment account and the investee's stockholders' equity? a) There is no particular relationship b) The Equity Investment account balance will equal 30% of investee's stockholders' equity throughout the life of the investment c) The Equity Investment account will remain at original cost even as the invetee's stockholders' equity increases d) The Equity Investment account balance will equal 30% of investee's stockholders' equity at date of acquisition, but the relationship will change as the investee reports income and dividends

b) The Equity Investment account balance will equal 30% of investee's stockholders' equity throughout the life of the investment

Which of the following statements best describes how goodwill is measured? a) acquisition price - fair value of net tangible assets = goodwill b) acquisition price - fair value of net tangible assets - fair value of identifiable intangible assets = goodwill c) acquisition price - book value of net assets = goodwill d) acquisition price - goodwill = fair value of net tangible asssets

b) acquisition price - fair value of net tangible assets - fair value of identifiable intangible assets = goodwill

An investor uses the equity method to account for an investment in common stock. After the date of acquisition, the equity investment account of the investor is: a) not affected by its share of the earnings of the investee but is decreased by its share of the losses of the investee. b) increased by its share of the earnings of the investee and is decreased by its share of the investee's losses. c) not affected by its share of the earnings or losses of the investee. d) increased by its share of the earnings of the investee but is not affected by its share of the investee's losses.

b) increased by its share of the earnings of the investee and is decreased by its share of the investee's losses.

Parent sells inventory to its sub, at a profit during 2020. Which of the following would be a credit entry in the consolidated worksheet for 2020? a) Retained Earnings b) Sales c) Inventory d) Additional paid-in capital

c) Inventory

Assume a parent company owns less than 100% of a long-controlled subsidiary. Which of the following statements is false? a) Noncontrolling interest is classified as an owners' equity account. b) Balance sheet presentation of noncontrolling interest is necessary because consolidated balances always reflect 100% of the net assets of the subsidiary. c) Noncontrolling interest represents the portion of the subsidiary's net assets that is not owned by the parent. d) Goodwill is always assigned to the controlling and noncontrolling interests in the relative proportion of their ownership interests.

c) Noncontrolling interest represents the portion of the subsidiary's net assets that is not owned by the parent.

On January 1, 2021, Consolidated Company purchased 100% of the common stock Avergy Industries for $720,000. On that date, Avergy had common stock of $100,000 and retained earnings of $420,000. Equipment and land were each undervalued by $50,000 on Avergy's books. There was a $40,000 overvaluation of Bonds Payable, as well as a $60,000 undervaluation of inventory. The consolidation entries necessary for a date of acquisition balance sheet include all of the following, except: a) Land debit, $50,000 b) Inventory debit, $60,000 c) Equipment debit, $50,000 d) Bonds Payable credit, $40,000

d) Bonds Payable credit, $40,000

Angelo uses the equity method to account for its investment in Fischer on January 1. On the date of acquisition, Fischer's land and buildings were undervalued on its balance sheet. During the year following the acquisition, how do these excess of fair values over book values affect Angelo's Equity Income from Fischer? a) Building, Increase; Land, Increase b) Building, Increase; Land, No Effect c) Building, Decrease; Land, Decrease d) Building, Decrease; Land, No Effect

d) Building, Decrease; Land, No Effect

In years subsequent to acquisition of a subsidiary, the Equity Investment account, when investor uses the equity method, includes the following components except: a) Dividends paid by the investee b) Investee's reported income c) Amortization d) Dividends paid by the investor

d) Dividends paid by the investor

In-process research and development acquired in a business combination is: a) credited to The Equity Investment account b) recorded as indefinite-lived intangible assets, subject to amortization c) expensed, consistent with the accounting treatment of a firm's own R & D expenditures d) recorded as an indefinite-lived intangible asset, and annually tested for impairment

d) recorded as an indefinite-lived intangible asset, and annually tested for impairment

On a consolidated balance sheet, the noncontrolling interest is presented as a _______(increase, decrease) in consolidated _______ (assets, liabilities, stockholders' equity, retained earnings).

increase; stockholders' equity

Parent acquired 60% of the common stock of Sub for 1,800,000. The fair value of Sub identifiable net assets was 1,700,000 and the book value was 1,000,000. The non-controlling interest shares of Sub are not actively traded and there is no control premium. Determine the total amount of goodwill to be recognized.

1,300,000

On September 3, 2020, Parent sold land with an original cost of 122,000 to its 100% owned subsidiary, Sub, for 197,000. Can the gain be recognized on the consolidated income statement and, if so, when will the gain on the sale be realized by the consolidated entities?

Yes, but the gain can only be recognized when the land is sold.

If the accountant fails to record, on the consolidation worksheet, amortization related to an undervalued truck: a) Consolidated net income will be overstated b) Consolidated net income will be understated c) The subsidiary's net income will be overstated d) The parent's net income will be unaffected

a) Consolidated net income will be overstated

Which of the following does not indicate an investor company's ability to significantly influence an investee? a) The investor owns 30% while another investor owns 70% b) Material inter-company transactions c) Interchange of personnel d) technological dependency

a) The investor owns 30% while another investor owns 70%

A bargain purchase occurs when: a) The purchase price of a subsidiary is less than the fair value of the investee's net assets. b) The assets of the investee are undervalued on the balance sheet. c) The purchase price of a subsidiary is greater than the fair value of the investee's net assets. d) The purchase price of a subsidiary is less than the book value of the investee's net assets.

a) The purchase price of a subsidiary is less than the fair value of the investee's net assets.

If the fair value of a reporting unit with goodwill falls below its book value, which of the following statements is true? a) There is a potential impairment loss for the amount that the book value of the goodwill exceeds its implied fair value. b) Goodwill is removed from the consolidated balance sheet. c) A goodwill impairment loss is recognized for the excess of book value over fair value of the reporting unit. d) No additional impairment testing is required.

a) There is a potential impairment loss for the amount that the book value of the goodwill exceeds its implied fair value.

Acquisition-related costs incurred by the investor for services provided by outside accountants, as well as the investor's employees, are: a) expensed immediately b) capitalized, subject to both amortization and impairment testing c) expensed if indirect, but capitalized if direct d) capitalized, subject to impairment testing, but not amortization

a) expensed immediately

If Diane Company acquires all of the common stock of Balcony, Inc. where will the entries necessary to arrive at consolidated balances appear? a) on a worksheet only b) on the books of both the parents and the subsidiary c) on Balcony's books only d) on Diane's books only

a) on a worksheet only

Acquisition agreements sometimes include a provision requiring an increase in the cash price contingent upon investee's profits exceeding a specified level within a certain time period. Regarding the contingent consideration, acquisition accounting requires at acquisition date: a) recognition of a liability at its fair value, resulting in an increase in goodwill b) recognition of a liability in the amount expected to be ultimately paid c) recognition of a liability at its fair value, but with no effect on the purchase price d) no disclosure of the contingent consideration because of the high degree of uncertainty.

a) recognition of a liability at its fair value, resulting in an increase in goodwill

On January 1, 2021, Consolidated Company purchased 100% of the common stock Avergy Industries for $720,000. On that date, Avergy had common stock of $100,000 and retained earnings of $420,000. Equipment and land were each undervalued by $50,000 on Avergy's books. There was a $40,000 overvaluation of Bonds Payable, as well as a $60,000 undervaluation of inventory. What is the amount of goodwill recorded in connection with this combination? a) $200,000 b) $0 c) $50,000 d) $80,000

b) $0

Midlothian acquired 100 percent of the outstanding voting shares of Cedar Company on January 1, 2020. To obtain these shares, Midlothian ays $400,000 cash and issues 20,000 shares of $1 par value common stock on this date. Midlothian's stock had a fair value of $15 per share. Midlothian also pays an additional $3,00 in stock issuance costs. At date of acquisition, the book values and fair values of Cedar's net assets amounted to $450,000 and $520,000, respectively. What amount was reported for goodwill as a result of this acquisition? a) $-0- b) $180,000 c) $77,000 d) $80,000

b) $180,000

Which of the following statements is incorrect regarding the recognition of intangible assets in a business combination? a) intangible assets arising from contractual or legal rights are recognized separately from goodwill. b) separately recognized intangibles are identified as either limited life or indefinite life intangibles c) the acquirer in a business combination does not recognize intangible assets unless they appear on the investee company's balance sheet d) intangibles that can be separated from the business and sold, rented or licensed are recognized separately from goodwill

c) the acquirer in a business combination does not recognize intangible assets unless they appear on the investee company's balance sheet

Stock issuance costs are: a) debited to the Equity Investment accounts b) credited to the Common Stock account c) treated as a reduction in additional paid-in-capital d) treated the same as acquisition-related costs

c) treated as a reduction in additional paid-in-capital

Parent sells inventory to its sub, Sub, at a profit during 2020. Which of the following choices would be a debit entry in the consolidated worksheet for 2021? a) Sales b) Cost of goods sold c) Inventory d) Equity Investment

d) Equity Investment

Which of the following is the correct entry, on a parent's pre-consolidation books, to recognize amortization of a previously unrecorded patent acquired in a business combination? a) Equity Income xx Equity Investment xx b) Amortization Expense xx Equity Investment xx c) Amortization Expense xx Patent xx d) Equity Investment xx Equity Income xx

d) Equity Investment xx Equity Income xx

On January 1, 2021, Consolidated Company purchased 100% of the common stock Avergy Industries for $720,000. On that date, Avergy had common stock of $100,000 and retained earnings of $420,000. Equipment and land were each undervalued by $50,000 on Avergy's books. There was a $40,000 overvaluation of Bonds Payable, as well as a $60,000 undervaluation of inventory. The combined consolidation entries necessary for a date of acquisition balance sheet include all of the following, except: a) Common Stock debit, $100,000 b) No debits or credits to goodwill c) Equity Investment credit, $720,000 d) Retained Earnings credit, $420,000

d) Retained Earnings credit, $420,000