Pentamedia owns 90 percent of Sesa. At the start of 2019, Sesa sold buildings carried at $4,000,000, net, to Pentamedia for $6,000,000. The buildings had a remaining life of 10 years and straight-line depreciation is used. Pentamedia uses the complete equity method to record its investment in Sesa. In 2024, Pentamedia sold the buildings to an outside company. Prepare the consolidated working paper at December 31, 2024:
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- In 2020, Gain Inc. purchased all of the assets of Cookie’sbusiness. As part of this purchase, Gain Inc. purchased thefollowing intangible assets:• $ 270,000 for a 5-year agreement in which Cookie cannotcompete with Gain.• $ 720,000 for Goodwill. Gain plans to be in business for30 years.How much will Gain Inc. deduct as amortization in 2020 if theycommence business on 4/15/20?a. $58,500b. $49,500c. $46,750d. $40,500e. $31,500Thomson 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 $446,000. Thomson depreciated the building on the straight-line basis assuming no salvage value. On January 1, 2021, Thomson sold this building to Stayer for $413,600. 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? Multiple Choice Net income is reduced by $49,700. Net income is reduced by $56,800. Net income is reduced by $63,900. Net income is reduced by $53,560.On April 1, 2020, Republic Company sold equipment to its wholly owned subsidiary, Barre Corporation, for $40,000. At the time of the transfer, the asset had an original cost (to Republic) of $60,000 and accumulated depreciation of $25,000. The equipment has a five year estimated remaining life.Barre reported net income of $250,000, $270,000 and $310,000 in 2020, 2021, and 2022, respectively. Republic received dividends from Barre of $90,000, $105,000 and $120,000 for 2020, 2021, and 2022, respectively. Assume that Republic uses the equity method to account for its investment in Barre. What is the balance in the pre-consolidation Income (loss) from Subsidiary account for 2021?
- On April 1, 2020, Republic Company sold equipment to its wholly owned subsidiary, Barre Corporation, for $40,000. At the time of the transfer, the asset had an original cost (to Republic) of $60,000 and accumulated depreciation of $25,000. The equipment has a five year estimated remaining life. Barre reported net income of $250,000, $270,000 and $310,000 in 2020, 2021, and 2022, respectively. Republic received dividends from Barre of $90,000, $105,000 and $120,000 for 2020, 2021, and 2022, respectively. Assume that Republic uses the cost method to account for its investment in Barre. Compute the [ADJ] consolidating entry necessary for 2021. Select one: a. $155,750 b. $205,000 c. $320,750 d. $165,000 e. $245,750 x Your answer is incorrect. The correct answer is: $155,750On January 1, 2020, Choco Co. pays $96,000 to acquire 30% of the voting common stock of Cake Inc. Choco uses the equity method to account for its investment. At the time of the investment, Cake had net assets with a book value of $240,000 and with one undervalued net asset building which is undervalued in book by $30,000 (remaining useful life 15 years on 1/1/20). During 2020, Cake reported net income of $100,000 and paid dividends of $60,000. Any excess cost over book value is attributable to goodwill with an indefinite life. 3) What is the balance in Choco’s investment account at December 31, 2020? Show your calculation (can show journal entries)Hope Company bought 30% of Faith Corporation in the beginning of 2024. Hope's purchase price of $3,000,000 equaled 30% of the book value of Faith's net identifiable assets, which also equaled 30% of the fair value of Faith. During 2024, Faith reported net income in the amount of $4,000,000 and declared and paid dividends in the amount of $300,000. At the end of 2024, Faith's fair value was $12,000,000. Hope mistakenly accounted for the investment using the fair value through net income method instead of using the equity method. What effect would this error have on the investment account and net income, respectively, for 2024? Multiple Choice Overstated by $510,000; overstated by $510,000 Understated by $600,000; understated by $510,000 Understated by $510,000; understated by $510,000 Understated by $1,010,000; understated by $1,010,000
- Procter Company owns 80% of the outstanding stock of Silex Company. On January 1, 2019, Silex Company sold land to Procter Company for $350,000 and a building for $500,000. Silex had originally purchased the land on June 30, 2010, for $200,000. Silex Company originally purchased a building for 600,000 in January of 2009. The estimated useful life of the building and the new machinery is 15 years. Required: A. Prepare the entries on the books of Procter related to the intercompany sale of land for the years ended December 31, 2019 and December 31, 2020. B. Prepare in general journal form the workpaper entries necessary because of the intercompany sale of land in: 1. The consolidated financial statements workpaper for the year ended December 31, 2019. 2. The consolidated financial statements workpaper for the year ended December 31, 2020.On January 2, 2020, Kent Corp. paid 1,600,000 for the purchase of 40% of the ordinary shares of Kara Company. The statement of financial position of Kara at the date of acquisition shows the following information:Assets subject to depreciation (remaining useful life is 8 years) 2,400,000Assets not subject to depreciation 800,000Liabilties 400,000Both book value and fair value are the same for assets not subject to depreciation and liabilities. The fair market value of Karas assets subject to depreciation is 2,720,000. Kara depreciates its assets using the straight-line method. Karas intangibles are amortized over a 20-year period. Net income for the year ended December 31, 2020, is 640,000. It declares and pays dividends of 500,000 in 2020.What amount of the investment cost is attributable to goodwill? a. 480,000 b. 352,000 c. 608,000 d. 128,000Paar 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 $362,500 but a fair value of $499,000. Kimmel has equipment (10-year remaining life) with a book value of $284,000 but a fair value of $419,000. Paar uses the equity method to record its investment in Kimmel. On December 31, 2020, Paar has equipment with a book value of $253,750 but a fair value of $411,250. Kimmel has equipment with a book value of $198,800 but a fair value of $366,300. What is the consolidated balance for the Equipment account as of December 31, 2020? Multiple Choice $452,550. $587,550. $777,550. $547,050.
- Panda Corporation purchased 75% of Saratoga Industries' common stock on January 2, 2019. On January 1, 2020, Saratoga sold equipment to Panda that had a net book value of $40,000 and an original cost of $60,000 for $50,000. On January 1, 2020, Panda sold a building to Saratoga that had a net book value of $500,000 and an original cost of $625,000 for $750,000. The equipment had a remaining useful life of 8 years, and the building had a remaining useful life of 20 years. Neither asset had salvage value. Both companies use straight-line depreciation. Selected account balances are shown below for Panda and Saratoga for the year ended December 31, 2020: Panda Saratoga Sales $700,000 $690,000 Cost of Goods Sold 450,000 250,000 Other Expenses 150,000 75,000 Building - net 1,400,000 712,500 Equipment - net…Par Corporation bought 100 percent of Kimmel, Incorporated, on January 1, 2021. On that date, Paar's equipment (10-year remaining life) has a book value of $427,000 but a fair value of $593,000. Kimmel has equipment (10-year remaining life) with a book value of $297,000 but a fair value of $463,000. Paar uses the equity method to record its investment in Kimmel. On December 31, 2023, Paar has equipment with a book value of $298,900 but a fair value of $497,900. Kimmel has equipment with a book value of $207,900 but a fair value of $417,000. What is the consolidated balance for the Equipment account as of December 31, 2023? Multiple Choice О $914,900 $506,800 $672,800 $623,000On January 2, 2021, Marzelle Corp. purchased 30% of the voting common stock of Hoffman Co., paying $3,000,000. Marzelle decided to use the equity method to account for this investment. At the time of the investment, Hoffman's total stockholders’ equity was $8,000,000. Marzelle gathered the following information about Hoffman's assets and liabilities: Book Value Fair Value Buildings (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. For 2021, what is the total amount of excess amortization for Marzelle’s 30% investment in Hoffman? Group of answer choices 1-$20,000. 2-$120,000. 3-$60,000. 4-$36,000. 5-$40,000.