Advanced Accounting Final

Green acquired 100% of Vega on January 1, 2019, by issuing 10,500 shares of its $10 par value common stock with a fair value of $95 per share. On January 1, 2019, Vega's land was undervalued by $40,000, its buildings were overvalued by $30,000, and equipment was undervalued by $80,000. The buildings have a 20-year life and the equipment has a 10-year life. $50,000 was attributed to an unrecorded trademark with a 16-year remaining life. There was no goodwill associated with this investment. Compute the December 31, 2023 consolidated retained earnings.

$1,645,375.

A necessary condition to use the equity method of reporting for an equity investment is that the investor company must

have the ability to exercise significant influence over the operating and financial policies of the investee.

White Company owns 60% of Cody Company. Separate tax returns are required. For 2020, White's operating income (excluding taxes and any income from Cody) was $300,000 while Cody reported a pretax income of $125,000. During the period, Cody declared total dividends of $25,000; $15,000 (60%) to White and $10,000 to the noncontrolling interest. White declared dividends of $180,000. The income tax rate for both companies is 30%. Compute Cody's undistributed earnings for 2021.

Undistributed Earnings = Pretax Income - Tax - Dividends distributed = $125000 - $37500 - $25000 = $62500

Assume the company expects to replace the units of beginning inventory sold in April at a cost of $101 per unit and expects inventory at year-end to be between 1,500 and 2,000 units. What amount of cost of goods sold should be recorded for the quarter ended March 31?

$670,650.

Chapman Co. acquired all of Klein Co. for $613,000 cash in a tax-free transaction. On that date, the subsidiary had net assets with a $590,000 fair value but a $460,000 book value and income tax basis. The income tax rate was 35%. What amount of goodwill should have been recognized on the date of the acquisition?

$68500. FV ($590,000) - Tax Basis ($460,000) = Temporary Tax Difference ($130,000) × .35 = Deferred Tax Liability ($45,500) + [Cash Paid ($613,000) - FV Assets ($590,000)] $23,000 = Goodwill ($68500)

What is the total for consolidated inventory?

173,000

Alpha Corporation owns 100% of Beta Company, and Beta owns 80% of Gamma, Inc., all of which are domestic corporations. There were no excess allocation values at the date of acquisition of the subsidiaries. Information for the three companies for the year ending December 31, 2021 follows: AlphaBetaGammaSeparate company net income$300,000 $200,000 $100,000 Gross profit from intra-entity transfers of inventory (included in operating income above). The goods have not yet been sold to outsiders or consumed within the consolidated entity. 12,000 0 4,000 What is the total net income attributable to the noncontrolling interests for 2021?

19200

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

22600

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 2021 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?

270 1200x90%x25%

On January 1, 2021, Corzine Inc. acquired 15% of Hammon Co.'s outstanding common stock for $62,400 and did not exercise significant influence. Hammon earned net income of $96,000 in 2021 and paid dividends of $36,000. The fair value of Corzine's investment was $80,000 at December 31, 2021. On January 3, 2022, Corzine bought an additional 10% of Hammon for $54,000. This second purchase gave Corzine the ability to significantly influence the decision making of Hammon. During 2022, Hammon earned $120,000 and paid $48,000 in dividends. As of December 31, 2022, Hammon reported a net book value of $468,000. At the date of the second purchase, Corzine concluded that Hammon Co.'s book values approximated fair values and attributed any excess cost to goodwill. What amount of equity income should Corzine have reported for 2022?

30,000 120,000*0.25

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 cost of goods sold for the 2022 consolidation worksheet with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2022 intra-entity transfer of merchandise?

3000 x .25 750

Garrison holds a controlling interest in Robertson's outstanding stock. For the current year, the following information has been gathered about these two companies: GarrisonRobertsonSeparate operating income $300,000 $200,000 (includes $50,000 intra-entity gross profit in ending inventory) Dividends paid 32,000 50,000 Tax rate 21% 21% Garrison uses the initial value method to account for the investment in Robertson. Garrison's separate operating income figure does not include dividend income for the current year. Assume that Garrison owns 80 percent of Robertson's voting stock. On a consolidated tax return, what amount of income tax is paid?

300000+200000-50000*21% 94500

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

$100

Angela, Inc., holds a 90 percent interest in Corby Company. During 2020, Corby sold inventory costing $87,100 to Angela for $134,000. Of this inventory, $57,200 worth was not sold to outsiders until 2021. During 2021, Corby sold inventory costing $115,500 to Angela for $210,000. A total of $63,000 of this inventory was not sold to outsiders until 2022. In 2021, Angela reported separate net income of $174,000 while Corby's net income was $132,000 after excess amortizations. What is the noncontrolling interest in the 2021 income of the subsidiary?

$12,367.

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

$144,375. Sales Price $125,000 - BV ($150,000 − $70,000) = $45,000 Gain on Sale ÷ 8yrs = $5,625 Annual Amortization of Unrealized Gain over Expected Useful Life of the AssetParent's Depreciation $86,000 + Subsidiary's Depreciation $64,000 − Annual amortization $5,625 = $144,375

Assume the partial equity 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

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 Intra profit to be defferred in 2021 - Sale price of goods = $ 700,000 Less - cost = $ 520,000 Profit = $ 180,000 Profit to be defferred = Goods in stock at year end 2021 × Profit $ 180,000 × 15% = $ 27,000

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

$3,068.

On January 1, 2020, French Company acquired 60 percent of K-Tech Company for $300,000 when K-Tech's book value was $400,000. The fair value of the newly comprised 40 percent noncontrolling interest was assessed at $200,000. At the acquisition date, K-Tech's trademark (10-year remaining life) was undervalued in its financial records by $60,000. Also, patented technology (5-year remaining life) was undervalued by $40,000. In 2020, K-Tech reports $30,000 net income and declares no dividends. At the end of 2021, the two companies report the following figures (stockholders' equity accounts have been omitted): French Company Carrying Amounts K-Tech Company Carrying Amounts K-Tech Company Fair Values Current assets $ 620,000 $ 300,000 $ 320,000 Trademarks 260,000 200,000 280,000 Patented technology 410,000 150,000 190,000 Liabilities (390,000 ) (120,000 ) (120,000 ) Revenues (900,000 ) (400,000 ) Expenses 500,000 300,000 Investment income Not given Note: Parentheses indicate a credit balance. In 2021, assuming K-Tech has declared no dividends, what are the noncontrolling interest's share of the subsidiary's income and the ending balance of the noncontrolling interest in the subsidiary?

$34,400 and $240,800

Harrison, Inc. acquires 100% of the voting stock of Rhine Company on January 1, 2020 for $400,000 cash. A contingent payment of $16,500 will be paid on April 15, 2021 if Rhine generates cash flows from operations of $27,000 or more in the next year. Harrison estimates that there is a 20% probability that Rhine will generate at least $27,000 next year, and uses an interest rate of 5% to incorporate the time value of money. The fair value of $16,500 at 5%, using a probability-weighted approach, is $3,142. What will Harrison record as its Investment in Rhine on January 1, 2020?

$403,142.

Macklin Co. owned 70% of Holland Corp. During 2021, Macklin sold to Holland land with a book value of $51,000. The selling price was $75,000. For purposes of the December 31, 2021 consolidated financial statements, at what amount should the land be reported?

$51,000.

Scott Co. paid $2,800,000 to acquire all of the common stock of Dawn Corp. on January 1, 2020. Dawn's reported earnings for 2020 totaled $512,000, and it paid $160,000 in dividends during the year. The amortization of allocations related to the investment was $28,000. Scott's net income, not including the investment, was $3,310,000, and it paid dividends of $950,000. On the consolidated financial statements for 2020, what amount should have been shown for Equity in Subsidiary Earnings?

$512,000.

Tristan, Inc., uses the LIFO cost-flow assumption to value inventory. It began the current year with 1,950 units of inventory carried at LIFO cost of $69 per unit. During the first quarter, it purchased 5,550 units at an average cost of $99 per unit and sold 6,750 units at $195 per unit. rev: 03_09_2021_QC_CS-256652 Assume the company does not expect to replace the units of beginning inventory sold; it plans to reduce inventory by year-end to 500 units. What amount of cost of goods sold should be recorded for the quarter ended March 31?

$632,250.

Alpha Company owns 80 percent of the voting stock of Beta Company. Alpha and Beta reported the following account information from their year-end separate financial records: AlphaBetaInventory$95,000$88,000Sales Revenue800,000300,000Cost of Goods Sold600,000180,000 During the current year, Alpha sold inventory to Beta for $100,000. As of year end, Beta had resold only 60 percent of these intra-entity purchases. Alpha sells inventory to Beta at the same markup it uses for all of its customers. What is the total for consolidated sales revenue?

1,000,000

During January 2020, Nelson, Inc. acquired 30% of the outstanding common stock of Fuel Co. for $1,600,000. This investment gave Nelson the ability to exercise significant influence over Fuel. Fuel's assets on that date were recorded at $7,200,000 with liabilities of $3,400,000. Any excess of cost over book value of Nelson's investment was attributed to unrecorded patents having a remaining useful life of ten years. In 2020, Fuel reported net income of $650,000. For 2021, Fuel reported net income of $800,000. Dividends of $250,000 were paid in each of these two years. What was the reported balance of Nelson's Investment in Fuel Co. at December 31, 2021?

1,793,000

On a consolidated balance sheet as of January 2, what should be the amount for noncurrent liabilities?

104000

Baker Company owns 15% of the common stock of Charlie Corporation and used the fair-value method to account for this investment. Charlie reported net income of $120,000 for 2021 and paid dividends of $70,000 on October 1, 2021. How much income should Baker recognize on this investment in 2021?

10500

On January 1, Park Corporation and Strand Corporation had condensed balance sheets as follows: Park Strand Current assets $ 70,000 $ 20,000 Noncurrent assets 90,000 40,000 Total assets $ 160,000 $ 60,000 Current liabilities $ 30,000 $ 10,000 Long-term debt 50,000 0 Stockholders' equity 80,000 50,000 Total liabilities and equities $ 160,000 $ 60,000 On January 2, Park borrowed $60,000 and used the proceeds to obtain 80 percent of the outstanding common shares of Strand. The acquisition price was considered proportionate to Strand's total fair value. The $60,000 debt is payable in 10 equal annual principal payments, plus interest, beginning December 31. The excess fair value of the investment over the underlying book value of the acquired net assets is allocated to inventory (60 percent) and to goodwill (40 percent).

105000

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

326000

On January 1, 2021, Pride, Inc. acquired 80% of the outstanding voting common stock of Strong Corp. for $364,000. There is no active market for Strong's stock. Of this payment, $28,000 was allocated to equipment (with a five-year life) that had been undervalued on Strong's books by $35,000. Any remaining excess was attributable to goodwill, which has not been impaired. As of December 31, 2021, before preparing the consolidated worksheet, the financial statements appeared as follows: Pride, Inc. Strong Corp.Revenues$420,000 $280,000 Cost of goods sold (196,000) (112,000)Operating expenses (28,000) (14,000)Net income$196,000 $154,000 Retained earnings, 1/1/21$420,000 $210,000 Net income (above) 196,000 154,000 Dividends paid 0 0 Retained earnings, 12/31/21$616,000 $364,000 Cash and receivables$294,000 $126,000 Inventory 210,000 154,000 Investment in Strong Corp 364,000 0 Equipment (net) 616,000 420,000 Total assets$1,484,000 $700,000 Liabilities$588,000 $196,000 Common stock 280,000 140,000 Retained earnings, 12/31/21 (above) 616,000 364,000 Total liabilities and stockholders' equity$1,484,000 $700,000 During 2021, Pride bought inventory for $112,000 and sold it to Strong for $140,000. Only half of the inventory purchase price had been remitted to Pride by Strong at year-end. As of December 31, 2021, 60% of these goods remained in the company's possession. What is the consolidated total for equipment (net) at December 31, 2021?

1064000 Equipment Net Pride: 616000 Equipment Net Strong: 420000 Add amount allocated: 28000

Anderson, Inc. acquires all of the voting stock of Kenneth, Inc. on January 4, 2020, at an amount in excess of Kenneth's fair value. On that date, Kenneth has equipment with a book value of $90,000 and a fair value of $120,000 (10-year remaining life). Anderson has equipment with a book value of $800,000 and a fair value of $1,200,000 (10-year remaining life). On December 31, 2021, Anderson has equipment with a book value of $975,000 but a fair value of $1,350,000 and Kenneth has equipment with a book value of $105,000 but a fair value of $125,000. If Anderson applies the equity method in accounting for Kenneth, what is the consolidated balance for the Equipment account as of December 31, 2021?

1104000

On January 1, 2019, Pride Corporation purchased 90 percent of the outstanding voting shares of Star, Inc., for $486,000 cash. The acquisition-date fair value of the noncontrolling interest was $54,000. At January 1, 2019, Star's net assets had a total carrying amount of $376,000. Equipment (eight-year remaining life) was undervalued on Star's financial records by $49,600. Any remaining excess fair value over book value was attributed to a customer list developed by Star (four-year remaining life), but not recorded on its books. Star recorded net income of $43,400 in 2019 and $49,600 in 2020. Each year since the acquisition, Star has declared a $12,400 dividend. At January 1, 2021, Pride's retained earnings show a $155,000 balance. Selected account balances for the two companies from their separate operations were as follows: Pride Star 2021 Revenues $ 308,800 $ 176,700 2021 Expenses 217,000 120,900

112800

For consolidation purposes, what amount would be debited to January 1 retained earnings for the 2021 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?

1200 x 25% 300

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

133000

On a consolidated balance sheet as of January 2, what should be the amount for noncurrent assets?

140000

On January 1, 2020, Mehan, Incorporated purchased 15,000 shares of Cook Company for $150,000 giving Mehan a 15% ownership of Cook. The fair value of the 15% investment was the same as the carrying value of the investment when, on January 1, 2021, Mehan purchased an additional 25,000 shares (25%) of Cook for $300,000. This last purchase gave Mehan the ability to apply significant influence over Cook. The book value of Cook on January 1, 2020 was $1,000,000. The book value of Cook on January 1, 2021, was $1,100,000. Any excess of cost over book value for this second transaction is assigned to a database and amortized over four years. Cook reports net income and dividends as follows. These amounts are assumed to have occurred evenly throughout the years: Net Income Dividends2020$200,000 $50,000 2021 225,000 50,000 2022 250,000 60,000 On April 1, 2022, just after its first dividend receipt, Mehan sells 10,000 shares of its investment. What is the balance in the investment account for the 15% ownership interest, at January 1, 2021?

150,000

On January 1, 2019, Pride Corporation purchased 90 percent of the outstanding voting shares of Star, Inc., for $486,000 cash. The acquisition-date fair value of the noncontrolling interest was $54,000. At January 1, 2019, Star's net assets had a total carrying amount of $376,000. Equipment (eight-year remaining life) was undervalued on Star's financial records by $49,600. Any remaining excess fair value over book value was attributed to a customer list developed by Star (four-year remaining life), but not recorded on its books. Star recorded net income of $43,400 in 2019 and $49,600 in 2020. Each year since the acquisition, Star has declared a $12,400 dividend. At January 1, 2021, Pride's retained earnings show a $155,000 balance. Selected account balances for the two companies from their separate operations were as follows: Pride Star 2021 Revenues $ 308,800 $ 176,700 2021 Expenses 217,000 120,900

155000

On January 3, 2021, Madison Corp. purchased 30% of the voting common stock of Huntsville Co., paying $3,000,000. Madison decided to use the equity method to account for this investment. At the time of the investment, Huntsville's total stockholders' equity was $8,000,000. Madison gathered the following information about Huntsville's assets and liabilities: Book ValueFair ValueBuildings (10-year life)$400,000 $600,000 Equipment (5-year life) 1,200,000 1,400,000 Franchises (8-year life)$0 $480,000 For all other assets and liabilities, book value and fair value were equal. Any excess of cost over fair value was attributed to goodwill, which has not been impaired. What is the amount of goodwill associated with the investment?

336000

On January 1, 2020, Grand Haven, Inc., reports net assets of $760,000 although equipment (with a four-year remaining life) having a book value of $440,000 is worth $500,000 and an unrecorded patent is valued at $45,000. Van Buren Corporation pays $692,000 on that date to acquire an 80 percent equity ownership in Grand Haven. If the patent has a remaining life of nine years, at what amount should the patent be reported on Van Buren's consolidated balance sheet at December 31, 2021?

35000

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

380

Acker Inc. bought 40% of Howell Co. on January 1, 2020 for $576,000. The equity method of accounting was used. The book value and fair value of the net assets of Howell on that date were $1,440,000. Acker began supplying inventory to Howell as follows: YearCost to AckerTransfer PriceAmount Held by Howell at Year-End2020$55,000$75,000$15,0002021$70,000$110,000$55,000 Howell reported net income of $100,000 in 2020 and $120,000 in 2021 while paying $40,000 in dividends each year. What is the Equity in Howell Income that should be reported by Acker in 2020?

38400

James Corporation owns 80 percent of Carl Corporation's common stock. During October, Carl sold merchandise to James for $240,000. At December 31, 40 percent of this merchandise remains in James's inventory. Gross profit percentages were 30 percent for James and 40 percent for Carl. The amount of intra-entity gross profit in inventory at December 31 that should be eliminated in the consolidation process is

38400

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

400000

Renfroe, Inc. acquired 10% of Stanley Corporation on January 4, 2020, for $90,000 when the book value of Stanley was $1,000,000. During 2020, Stanley reported net income of $215,000 and paid dividends of $50,000. The book value of the 10% investment was the same as the fair value of that investment when, on January 1, 2021, Renfroe purchased an additional 30% of Stanley for $325,000. Any excess of cost over book value is attributable to goodwill with an indefinite life. During 2021, Stanley reported net income of $320,000 and paid dividends of $50,000. What is the balance in the Investment in Stanley Corporation on December 31, 2021?

415000

Following are selected accounts for Green Corporation and Vega Company as of December 31, 2023. Several of Green's accounts have been omitted. Green VegaRevenues$900,000 $500,000 Cost of goods sold 360,000 200,000 Depreciation expense 140,000 40,000 Other expenses 100,000 60,000 Equity in Vega's income ? Retained earnings, 1/1/2023 1,350,000 1,200,000 Dividends 195,000 80,000 Current assets 300,000 1,380,000 Land 450,000 180,000 Building (net) 750,000 280,000 Equipment (net) 300,000 500,000 Liabilities 600,000 620,000 Common stock 450,000 80,000 Additional paid-in capital 75,000 320,000 Green acquired 100% of Vega on January 1, 2019, by issuing 10,500 shares of its $10 par value common stock with a fair value of $95 per share. On January 1, 2019, Vega's land was undervalued by $40,000, its buildings were overvalued by $30,000, and equipment was undervalued by $80,000. The buildings have a 20-year life and the equipment has a 10-year life. $50,000 was attributed to an unrecorded trademark with a 16-year remaining life. There was no goodwill associated with this investment. Compute the December 31, 2023, consolidated common stock.

450000

On a consolidated balance sheet as of January 2, what should be the amount for current liabilities?

46000

Cayman Inc. bought 30% of Maya Company on January 1, 2021 for $450,000. The equity method of accounting was used. The book value and fair value of the net assets of Maya on that date were $1,500,000. Maya began supplying inventory to Cayman as follows: YearCost to MayaTransfer PriceAmount Held by Cayman at Year-End2021$30,000$45,000$9,0002022$48,000$80,000$20,000 Maya reported net income of $100,000 in 2021 and $120,000 in 2022 while paying $40,000 in dividends each year. What is the balance in Cayman's Investment in Maya account at December 31, 2021?

467100

On January 1, 2020, French Company acquired 60 percent of K-Tech Company for $300,000 when K-Tech's book value was $400,000. The fair value of the newly comprised 40 percent noncontrolling interest was assessed at $200,000. At the acquisition date, K-Tech's trademark (10-year remaining life) was undervalued in its financial records by $60,000. Also, patented technology (5-year remaining life) was undervalued by $40,000. In 2020, K-Tech reports $30,000 net income and declares no dividends. At the end of 2021, the two companies report the following figures (stockholders' equity accounts have been omitted): French Company Carrying Amounts K-Tech Company Carrying Amounts K-Tech Company Fair Values Current assets $ 620,000 $ 300,000 $ 320,000 Trademarks 260,000 200,000 280,000 Patented technology 410,000 150,000 190,000 Liabilities (390,000 ) (120,000 ) (120,000 ) Revenues (900,000 ) (400,000 ) Expenses 500,000 300,000 Investment income Not given Note: Parentheses indicate a credit balance. What is the 2021 consolidated net income before allocation to the controlling and noncontrolling interests?

486000

What amount is reported for trademarks in the 2021 consolidated balance sheet?

508000

Macklin Co. owned 70% of Holland Corp. During 2021, Macklin sold to Holland land with a book value of $51,000. The selling price was $75,000. For purposes of the December 31, 2021 consolidated financial statements, at what amount should the land be reported?

51000 original book value

Assume that Martin owns 65 percent of Rowen's voting stock, but the companies elect to file separate tax returns. What is the total amount of income taxes that these two companies pay for the current period?

565000 * 21% + 300000 * 21% 118650

Amie, Inc., has 100,000 shares of $2 par value stock outstanding. Prairie Corporation acquired 30,000 of Amie's shares on January 1, 2018, for $120,000 when Amie's net assets had a total fair value of $350,000. On July 1, 2021, Prairie bought an additional 60,000 shares of Amie from a single stockholder for $6 per share. Although Amie's shares were selling in the $5 range around July 1, 2021, Prairie forecasted that obtaining control of Amie would produce significant revenue synergies to justify the premium price paid. If Amie's identifiable net assets had a fair value of $500,000 at July 1, 2021, how much goodwill should Prairie report in its postcombination consolidated balance sheet?

60000

Gardner Corp. owns 80% of the voting common stock of Lockhart Co. Lockhart owns 70% of Canning Co. Gardner and Lockhart both use the initial value method to account for their investments. The following information is available from the financial statements and records of the three companies: GardnerCorp.LockhartCo.CanningCo.Separate company net income before investment income$900,000$650,000$150,000Dividend income from investment in subsidiary250,000120,000 Deferral of intra-entity gains110,00080,00020,000Amortization expense related to excess fair value over book value of investment 40,00025,000 Separate company net income includes intra-entity gains before the consolidating deferral but does not include dividend income from investment in subsidiary. The accrual-based net income of Lockhart Co. is calculated to be

603500

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 cost of goods sold for the 2022 consolidation worksheet with regard to the unrecognized intra-entity gross profit remaining in ending inventory with respect to the 2022 intra-entity transfer of merchandise?

675 Closing inventory 3000 Gross profit 25% total profit 250 Holding portion 90% Unrealized profit 675

What is the total for consolidated cost of goods sold?

690,000

Assume the partial equity method is applied. How much does Pell record as Income from Demers for the year ended December 31, 2019?

74400

On January 1, 2020, Barber Corp. paid $1,160,000 to acquire Thompson Co. Thompson maintained separate incorporation. Barber used the equity method to account for the investment. The following information is available for Thompson's assets, liabilities, and stockholders' equity accounts on January 1, 2020: BookValueFairValueCurrent assets$130,000 $130,000 Land 75,000 193,000 Building (twenty year life) 250,000 276,000 Equipment (ten year life) 540,000 518,000 Current liabilities 26,000 26,000 Long-term liabilities 124,000 124,000 Common stock 233,000 Additional paid-in capital 389,000 Retained earnings 223,000 Thompson earned net income for 2020 of $134,000 and paid dividends of $51,000 during the year. The 2020 total excess amortization of fair-value allocations is calculated to be Multiple Choice

900

On a consolidated balance sheet as of January 2, what should be the amount for stockholders' equity?

95000

On January 1, 2021, Bangle Company purchased 30% of the voting common stock of Sleat Corp. for $1,000,000. Any excess of cost over book value was assigned to goodwill. During 2021, Sleat paid dividends of $24,000 and reported a net loss of $140,000. What is the balance in the investment account on December 31, 2021?

950800

Assume the partial equity method is applied. How much does Pell record as Income from Demers for the year ended December 31, 2021?

98400

Thompson Corp. was engaged solely in manufacturing operations. The following data pertain to the operating segments for 2020: Operating SegmentTotalRevenue Profit Assets at12/31/20A$14,500,000 $2,475,000 $29,000,000 B 11,300,000 1,980,000 24,700,000 C 8,450,000 1,690,000 17,600,000 D 4,300,000 780,000 10,450,000 E 6,000,000 963,000 9,900,000 F 2,150,000 314,000 4,300,000 $46,700,000 $8,202,000 $95,950,000 What is the minimum amount of profit or loss that each of these segments must earn to be considered separately reportable?

= Total Assets * 10% = $95,950,000 * 10% = $9,595,000

Schilling, Inc. has three operating segments with the following information: China Crystal SilverSales to outsiders$40,000 $50,000 $60,000 Intersegment transfer$2,000 None $10,000 What is the minimum amount of revenue an operating segment must have to be considered a reportable segment?

= Total Assets * 10% = (40,000+50,000+60,000+2000+10,000) x 10% = $16,200

Item 14 Which of the following statements is true regarding an intra-entity transfer of land?

A loss and a gain are deferred until the land is sold to an outside party.

Which of the following statements is true regarding an intra-entity transfer of land?

A loss and a gain are deferred until the land is sold to an outside party.

Martin has a controlling interest in Rowen's outstanding stock. At the current year-end, the following information has been accumulated for these two companies: Separate Operating IncomeDividends PaidMartin$565,000$105,000 (includes a $162,000 net gross profit in intra-entity ending inventory) Rowen300,00075,000 Martin uses the initial value method to account for the investment in Rowen. The separate operating income figures just presented include neither dividend nor other investment income. The effective tax rate for both companies is 21 percent. Assume that Martin owns 100 percent of Rowen's voting stock and is filing a consolidated tax return. What income tax amount does this affiliated group pay for the current period? Assume that Martin owns 92 percent of Rowen's voting stock and is filing a consolidated tax return. What amount of income taxes does this affiliated group pay for the current period?

BOTH 565,000 + 300,000 -$162,000 net gross profit in intra-entity ending inventory x 21% = 147630

Which of the following is not an example of an intangible asset?

Broken equipment

Tower Company owns 85% of Hill Company. The two companies engaged in several intra-entity transactions. There were no excess fair-value amortization amounts to account for. Each company's income before income tax and dividend income for the current time period follow, as well as the effects of intra-entity gross profits on remaining inventory which are included in the separate net income amounts. No income tax accruals have been recognized within these totals. The tax rate for each company is 30%. Tower CompanyHill CompanySeparate income before income tax (excluding equity or dividend income from Hill)$200,000$80,000Intra-entity gross profit on remaining inventory (included in income above)25,00010,000Dividend income from Hill10,200 Dividends declared15,00012,000 What is the income tax liability for the current year if consolidated tax returns are prepared?

Combined Income ($200,000 + $80,000) $280,000 - Combined I/E Gains (25,000 + $10,000) = Taxable Income ($245,000) × .30 = Tax Liability ($73,500)

On January 1, 2021, a subsidiary buys 12% of the outstanding voting stock of its parent corporation. The payment of $400,000 exceeded book value of the acquired shares by $80,000, attributable to a copyright with a 10-year useful life. During the year, the parent reported separate company income of $1,000,000 (excluding investment income from the subsidiary), and paid $120,000 in dividends. If the treasury stock approach is used, how is the Investment in Parent Stock reported in the consolidated balance sheet at December 31, 2021?

Consolidated stockholders' equity is reduced by $400,000.

On January 1, 2021, Harley Company bought 15% of Buttercup Company. Harley paid $200,000 for these shares, an amount that exactly equaled the proportionate book value of Buttercup. On January 1, 2022, Buttercup acquired 80% ownership of Harley. The following data are available concerning Buttercup's acquisition of Harley: Consideration transferred for 80% interest, January 1, 2022: $1,000,000 Harley's reported book value, January 1, 2022: 1,200,000 Excess fair value over book value (assigned to trademarks) is amortized over 20 years. The initial value method is used by both companies. The following information is available regarding Harley and Buttercup: Harley Company Buttercup CompanyYearReported Separate IncomeDividendIncomeDividendsDeclared Reported Separate IncomeDividendIncomeDividendsDeclared2021$50,000$7,500$12,000 $150,000$0$50,000202260,00010,50016,000 180,00012,80070,000 What would be included in a consolidation worksheet entry for 2022?

Debit treasury stock, $187,500.Acquisition-date fair value $1,000,000 ÷ 80% = $1,250,000 FV Harley × 15% = $187,500 Debit to Treasury Stock Account

Assume that Martin owns 70 percent of Rowen's voting stock so that separate tax returns are required. What amount of income taxes does Martin have to pay for the current year?

Dividend Received =75000*70%*35% = 18375 Income Tax payable 565,000+ 18375 * 21% = 122509

After allocating cost in excess of book value, which asset or liability would not be amortized over a useful life?

Goodwill

According to GAAP regarding amortization of goodwill, which of the following statements is true?

Goodwill recognized in consolidation will not be amortized but subject to an annual test for impairment.

The benefits of filing a consolidated tax return include all of the following except

Gross profits on intra-entity transfers are taxed before they are recognized for financial statement reporting purposes in the year of the transfer, but any such losses are deferred.

With respect to identifiable intangible assets other than goodwill, which of the following is true?

If a qualitative assessment of the asset performed by an entity indicates impairment is likely, a quantitative assessment must be performed to determine whether there has been a loss in fair value.

Throughout 2021, Flenderson Co. sold inventory to Bertram Co., its subsidiary. From a consolidated financial statement point of view, when will the gross profit on this transfer be recognized?

In consideration with consolidation, gross profit on transfers are recognized in the period that the items are sold to outside parties.

Assume that Garrison owns 80 percent of Robertson's voting stock. On separate tax returns, what total amount of income tax is paid?

Income tax payable= 200000 * 21% = 42000 Income tax payable = 300000 * 21% = 63000 Total income tax: 63000 + 42000 = 105000

On January 3, 2020, Trycker, Inc. acquired 40% of the outstanding common stock of Inkblot Co. for $2,400,000. This investment gave Trycker the ability to exercise significant influence over Inkblot. Inkblot's assets on that date were recorded at $8,000,000 with liabilities of $2,000,000. There were no other differences between book and fair values. During 2020, Inkblot reported net income of $500,000 and paid dividends of $300,000. The fair value of Inkblot at December 31, 2020 is $7,000,000. Trycker elects the fair value option for its investment in Inkblot. How are dividends received from Inkblot reflected in Trycker's accounting records for 2020?

Increase Dividend Income by $120,000.

On January 4, 2021, Snow Co. purchased 40,000 shares (40%) of the common stock of Walker Corp., paying $900,000. There was no goodwill or other cost allocation associated with the investment. Snow has significant influence over Walker. During 2021, Walker reported income of $240,000 and paid dividends of $75,000. On January 2, 2022, Snow sold 5,000 shares for $125,000. What was the balance in the investment account after the shares had been sold?

Investment Cost: 900,000 Share in net income (240,000x40%) 96,000 Share in dividend (75,000x40%) (30,000) Investment before sale: 966,000 Sale of shares (5000x(966000/40000))= (120750) Investment acc Balance: 845,250

Pepe, Incorporated acquired 60% of Devin Company on January 1, 2020. On that date Devin sold equipment to Pepe for $45,000. The equipment had a cost of $120,000 and accumulated depreciation of $66,000 with a remaining life of 9 years. Devin reported net income of $300,000 and $325,000 for 2020 and 2021, respectively. Pepe uses the equity method to account for its investment in Devin. Assuming there are no excess amortizations or other intra-entity transactions, Compute the net income attributable to the noncontrolling interest of Devin for 2020.

Net Income reported by Devin for 2010 300000 Add: Loss on Sale of Equipmen (120000-66000-45000)9000 Less: Difference in Dep.(54000/9)-(45000/9)1000 Total Income from Devin for 2010 308000 40%*308000= 123200

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

Net income attributable to the noncontrolling interest = Bressant reported net income x % Attributable = $ 215,000 x ( 100% (-) 75% ) = $ 215,000 x 25% = $ 53,750

Thomson Corporation owns 70 percent of the outstanding stock of Stayer, Incorporated. On January 1, 2019, Thomson acquired a building with a 10-year life for $405,000. Thomson depreciated the building on the straight-line basis assuming no salvage value. On January 1, 2021, Thomson sold this building to Stayer for $367,200. At that time, the building had a remaining life of eight years but still no expected salvage value. In preparing financial statements for 2021, how does this transfer affect the computation of consolidated net income?

Net income is reduced by $37,800.

Paar Corporation bought 100 percent of Kimmel, Inc., on January 1, 2018. On that date, Paar's equipment (10-year remaining life) has a book value of $420,000 but a fair value of $520,000. Kimmel has equipment (10-year remaining life) with a book value of $272,000 but a fair value of $400,000. Paar uses the equity method to record its investment in Kimmel. On December 31, 2020, Paar has equipment with a book value of $294,000 but a fair value of $445,200. Kimmel has equipment with a book value of $190,400 but a fair value of $357,000. What would be the impact on consolidated balance for the Equipment account as of December 31, 2020 if the parent had applied the initial value method rather than the equity method?

No effect: The method the parent uses is for internal reporting purposes only and has no impact on consolidated totals.

Hardford Corp. held 80% of Inglestone Inc., which, in turn, owned 80% of Jade Co. Excess amortization expense was not required by any of these acquisitions. Separate net income figures (without investment income) as well as upstream intra-entity gross profits (before deferral) included in the income for the current year follow: Hardford Corp.Inglestone Inc.Jade Co.Separate net income$560,000$420,000$280,000Intra-entity gross profits70,00042,00084,000 The accrual-based net income of Jade Co. is calculated to be

Operating Inc ($280,000) - Unrealized I/E Trans ($84,000) = Accrual Income ($196,000)

Assume that Garrison holds 60 percent of Robertson's voting stock. On a separate income tax return, what amount of income tax does Garrison have to pay?

Operating income tax: 300000 x 21% = 63000 Dividends Recognized: (50000 * 60%) *35% ) *21% = 2205 Total Income Tax: 63000+2205 = 65205

Assume that Garrison owns 70 percent of Robertson's voting stock. What total amount of income tax expense does a consolidated income statement recognize? (Round your intermediate calculations and final answer to nearest whole dollar amount.)

Robertson Income tax expense: 200000*21% = 42000 Garrison Income tax expense: 300000-50000 *21% = 52500 Equity Income: 200000 - (tax) 42000 = 158000 * (ownership) 70% = 110600 * (partial dividend tax) 35% * (tax rate) 21% = 8130 Total Income Tax Expense: 42000+52500+8192 = 102630

Assume that Martin owns 70 percent of Rowen's voting stock, requiring separate tax returns. What is the total amount of income tax expense to be recognized in the consolidated income statement for the current period? (Round your intermediate calculations and final answer to nearest whole dollar amount.)

Rowen Tax 63000 Martin Tax Tax on Operating income 84630 Equity income from rowen 165900 65% dividend reduction 107835 Income subject taxation 58065 Tax rate 0.21 Income tax expense - equity income 12194 Income tax espense - op income 84630 Total tax liability for martin 96824 Tax rowen 63000 Total income tax payable 159824

Florrick Co. owns 85% of Bishop Inc. The two companies file a consolidated income tax return and Florrick uses the initial value method to account for the investment. The following information is available from the two companies' financial statements: Florrick Co.Bishop Inc.Separate operating income (excludes equity or dividend income from subsidiary)$500,000$125,000Net intra-entity gains on assets remaining in the consolidated entity in current year income (included in separate operating income above)60,00020,000Dividends received from Bishop Inc. (not included in separate operating income above)28,000-0-Dividends paid120,00050,000 The income tax rate was 40%. The amount of income tax expense that should be assigned to Bishop using the separate return method is approximately:

Taxable income = Combined income - combined i/e gains = (500000+125000) - (60000+20000) =545000 x 40% =218000 Parent Op Income: 500000*40%= 200000 Sub Op Income: 125000*40%= 50000 Total from separate returns= 250000 50000/250000= 20% 218000*20% = 43600

Which of the following methods is not used to value a noncontrolling interest under circumstances where a control premium is applied to determine the appropriate value for such interest?

The application of a safe harbor discount rate

Which one of the following varies between the equity, initial value, and partial equity methods of accounting for an investment?

The balance in the investment account on the parent's books.

An impairment model is used

To assess whether asset write-downs are appropriate for indefinite-lived assets.

Which of the following statements is true regarding the subsidiary's investment in its parent's common stock?

The consolidation worksheet entry to eliminate the subsidiary's investment in parent's common stock is debited to treasury stock.

Which of the following is not a factor to be considered when determining the useful life of an intangible asset?

The fair value of the asset.

Camille, Inc., bought all outstanding shares of Jordan Corporation on January 1, 2019, for $700,000 in cash. This portion of the consideration transferred results in a fair-value allocation of $35,000 to equipment and goodwill of $88,000. At the acquisition date, Camille also agrees to pay Jordan's previous owners an additional $110,000 on January 1, 2021, if Jordan earns a 10 percent return on the fair value of its assets in 2019 and 2020. Jordan's profits exceed this threshold in both years. Which of the following is true?

The fair value of the expected contingent payment increases goodwill at the acquisition date.

During 2020, Odyssey Co. sold inventory to its wholly-owned subsidiary, Civic Co. The inventory cost $40,000 and was sold to Lord for $58,000. For consolidation reporting purposes, when is the $18,000 intra-entity gross profit recognized?

When goods are transferred to a third party by Civic.

Buckette Co. owned 60% of Shuvelle Corp. and 40% of Tayle Corp., and Shuvelle owned 35% of Tayle. What is this pattern of ownership called?

connecting affiliation