On January 1, 2022, Monica Company acquired 70 percent of Young Company's outstanding common stock for $714,000. The fair value of the noncontrolling interest at the acquisition date was 306,000. Young reported stockholders' equity accounts on that date as follows: Common stock-$10 par value $ 300,000 Additional paid-in capital 50,000 Retained earnings 540,000 In establi acquisition value, Monica appraised Young's assets and ascertained that the accounting records undervalued a building (with a five-year remaining life) by $60,000. Any remaining excess acquis fair value was allocated to a franchise agreement to be amortized over 10 years. During the subsequent years, Young sold Monica inventory at a 20 percent gross profit rate. Monica consistently r merchandise in the year of acquisition or in the period immediately following. Transfers for the three years after this business combination was created amounted to the following: Year Transfer Pr Inventory Remaining at Year - End (at transfer price) 2022 $ 80,000 $ 23,000 2023 100,000 25,000 2024 110,000 31,000 In addition, Monica sold Young several pieces of fully depreciated equip January 1, 2023, for $49,000. The equipment had originally cost Monica $76,000. Young plans to depreciate these assets over a five-year period. In 2024, Young earns a net income of $270,0 declares and pays $90,000 in cash dividends. These figures increase the subsidiary's Retained Earnings to a $870,000 balance at the end of 2024. During this same year, Monica reported divider of $63,000 and an investment account containing the initial value balance of $714,000. No changes in Young's common stock accounts have occurred since Monica's acquisition. Required: Prepa
On January 1, 2022, Monica Company acquired 70 percent of Young Company's outstanding common stock for $714,000. The fair value of the noncontrolling interest at the acquisition date was 306,000. Young reported stockholders' equity accounts on that date as follows: Common stock-$10 par value $ 300,000 Additional paid-in capital 50,000 Retained earnings 540,000 In establi acquisition value, Monica appraised Young's assets and ascertained that the accounting records undervalued a building (with a five-year remaining life) by $60,000. Any remaining excess acquis fair value was allocated to a franchise agreement to be amortized over 10 years. During the subsequent years, Young sold Monica inventory at a 20 percent gross profit rate. Monica consistently r merchandise in the year of acquisition or in the period immediately following. Transfers for the three years after this business combination was created amounted to the following: Year Transfer Pr Inventory Remaining at Year - End (at transfer price) 2022 $ 80,000 $ 23,000 2023 100,000 25,000 2024 110,000 31,000 In addition, Monica sold Young several pieces of fully depreciated equip January 1, 2023, for $49,000. The equipment had originally cost Monica $76,000. Young plans to depreciate these assets over a five-year period. In 2024, Young earns a net income of $270,0 declares and pays $90,000 in cash dividends. These figures increase the subsidiary's Retained Earnings to a $870,000 balance at the end of 2024. During this same year, Monica reported divider of $63,000 and an investment account containing the initial value balance of $714,000. No changes in Young's common stock accounts have occurred since Monica's acquisition. Required: Prepa
Chapter20: Corporations: Distributions In Complete Liquidation And An Overview Of Reorganizations
Section: Chapter Questions
Problem 35P
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Transcribed Image Text:On January 1, 2022, Monica Company acquired 70 percent of Young Company's outstanding common stock for $714,000. The fair value of the noncontrolling interest at the acquisition date was $
306,000. Young reported stockholders' equity accounts on that date as follows: Common stock-$10 par value $ 300,000 Additional paid-in capital 50,000 Retained earnings 540,000 In establishing the
acquisition value, Monica appraised Young's assets and ascertained that the accounting records undervalued a building (with a five-year remaining life) by $60,000. Any remaining excess acquisition-date
fair value was allocated to a franchise agreement to be amortized over 10 years. During the subsequent years, Young sold Monica inventory at a 20 percent gross profit rate. Monica consistently resold this
merchandise in the year of acquisition or in the period immediately following. Transfers for the three years after this business combination was created amounted to the following: Year Transfer Price
Inventory Remaining at Year-End (at transfer price) 2022 $ 80,000 $ 23,000 2023 100,000 25,000 2024 110,000 31,000 In addition, Monica sold Young several pieces of fully depreciated equipment on
January 1, 2023, for $49,000. The equipment had originally cost Monica $76,000. Young plans to depreciate these assets over a five-year period. In 2024, Young earns a net income of $270,000 and
declares and pays $90,000 in cash dividends. These figures increase the subsidiary's Retained Earnings to a $870,000 balance at the end of 2024. During this same year, Monica reported dividend income
of $63,000 and an investment account containing the initial value balance of $714,000. No changes in Young's common stock accounts have occurred since Monica's acquisition. Required: Prepare the
2024 consolidation worksheet entries for Monica and Young. Compute the net income attributable to the noncontrolling interest for 2024.
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