Cairns owns 70 percent of the voting stock of Hamilton, Inc. The parent’s interest was acquired several years ago on the date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the acquisition. Cairns uses the equity method in its internal records to account for its investment in Hamilton.   On January 1, 2014, Hamilton sold $2,300,000 in 10-year bonds to the public at 110. The bonds had a cash interest rate of 9 percent payable every December 31. Cairns acquired 35 percent of these bonds at 92 percent of face value on January 1, 2016. Both companies utilize the straight-line method of amortization. Prepare the consolidation worksheet entries to recognize the effects of the intra-entity bonds at each of the following dates. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) December 31, 2016 December 31, 2017 December 31, 2018

Miller Company acquired an 80 percent interest in Taylor Company on January 1, 2016. Miller paid $952,000 in cash to the owners of Taylor to acquire these shares. In addition, the remaining 20 percent of Taylor shares continued to trade at a total value of $238,000 both before and after Miller’s acquisition. On January 1, 2016, Taylor reported a book value of $546,000 (Common Stock = $273,000; Additional Paid-In Capital = $81,900; Retained Earnings = $191,100). Several of Taylor’s buildings that had a remaining life of 20 years were undervalued by a total of $72,800. During the next three years, Taylor reports income and declares dividends as follows: YearNet IncomeDividends2016$63,900 $9,200 2017 82,800  13,800 2018 92,000  18,400   Determine the appropriate answers for each of the following questions:aWhat amount of excess depreciation expense should be recognized in the consolidated financial statements for the initial years following this acquisition?bIf a consolidated balance…

Bloom Corporation purchased $1,750,000 of Taylor Company 5% bonds, at their face amount, with neither the intent nor the ability to hold the bonds until they matured in 2028, so Bloom classifies its investment as AFS. Unfortunately, a combination of problems at Taylor Company and in the debt securities market caused the fair value of the Taylor investment to decline to $1,200,000 during 2024. The following are the two alternative scenarios that should be analyzed independent of each other. Bloom now believes it is more likely than not that it will have to sell the Taylor bonds before the bonds have a chance to recover their fair value. Of the $550,000 decline in fair value, Bloom attributes $325,000 to credit losses, and $225,000 to noncredit losses. Bloom does not plan to sell the Taylor bonds prior to maturity, and does not believe it is more likely than not that it will have to sell the Taylor bonds before the bonds have a chance to recover their fair value. Of the $550,000 decline…

On January 1, 2018, Enron Company purchased for cash 40 percent of Walt Company’s 450,000 shares of common stock for $1,800,000 when 40 percent of the equity in Walt’s net assets was $2,610,000. The payment in excess of book value was assigned to depreciable assets with a remaining life of six years. As a result of this transaction, Enron has the ability to control Walt’s operating and financial policies. Walt’s net income for the year ended December 31, 2018, was $900,000. During 2018, Walt paid $487,500 in dividends to its shareholders. What is the method, why, for consolidation and how much would be the income reported by Enron for its investment in Walt.

Pablo Inc. owns 75% of Sammy Corp. and uses the Equity Method to account for its investment. Sammy purchased $120,000 face value of Pablo's 12% par value bonds on January 1, 2021, for $100,000, when Pablo's bond liability consisted of $240,000 par of 12% bonds maturing on January 1, 2031. There was an unamortized bond discount of $20,000 attached to the bonds on that date. Interest payment dates are June 30 and December 31 each year. Straight line amortization is used. Both companies have a December 31 year end. Intercompany bond gains and losses are to be allocated to each company. During 2021, Sammy earned a net income of $80,000 and paid dividends of $20,000. What was the pre-tax gain or loss to Sammy Inc. on the intercompany purchase of the bonds?   a. $20,000 loss   b. $40,000 loss   c. $20,000 gain   d. Nil

On July 1, 2021, Gupta Corporation bought 25% of the outstanding common stock of VB Company for $135 million cash, giving Gupta the ability to exercise significant influence over VB’s operations. At the date of acquisition of the stock, VB’s net assets had a total fair value of $440 million and a book value of $240 million. Of the $200 million difference, $28 million was attributable to the appreciated value of inventory that was sold during the last half of 2021, $132 million was attributable to buildings that had a remaining depreciable life of 15 years, and $40 million related to equipment that had a remaining depreciable life of 10 years. Between July 1, 2021, and December 31, 2021, VB earned net income of $36 million and declared and paid cash dividends of $28 million. Required:1. Prepare all appropriate journal entries related to the investment during 2021, assuming Gupta accounts for this investment by the equity method.2. Determine the amounts to be reported by Gupta.…

Pitino acquired 90 percent of Brey's outstanding shares on January 1, 2019, in exchange for $342,000 in cash. The subsidiary's stockholders' equity accounts totaled $326,000, and the noncontrolling interest had a fair value of $38,000 on that day. However, a building (with a nine-year remaining life) in Brey's accounting records was undervalued by $18,000. Pitino assigned the rest of the excess fair value over book value to Brey's patented technology (six-year remaining life).   Brey reported net income from its own operations of $64,000 in 2019 and $80,000 in 2020. Brey declared dividends of $19,000 in 2019 and $23,000 in 2020.   Brey sells inventory to Pitino as follows:   Year Cost to Brey Transfer Price to Pitino Inventory Remaining at Year-End (at transfer price) 2019 $ 69,000   $ 115,000   $ 25,000   2020   81,000     135,000     37,500   2021   92,800     160,000     50,000       At December 31, 2021, Pitino owes Brey $16,000 for inventory acquired during the…

On January 2, 2020, Megan, INC. acquired a 15% interest in Kiyosaki Corp. by paying P8, 000, 000 for 100,000 ordinary shares. On this date, the net assets of Kiyosaki Corp. totaled P40, 000, 000. The fair values of Kiyosaki Corp.'s identifiable assets and liabilities were equal to their book values. Megan did not have the ability to exercise significant influence over the operating and financial policies of Kiyosaki. Megan received dividends of P1.40 per share from Kiyosaki on October 1, 2020. Kiyosaki reported net income of P5, 000, 000 for the year ended December 31, 2020. Megan classified the investment as at fair value through other comprehensive income. Market price for the 100,000 shares was P9, 000, 000 on December 31, 2020.Megan paid P30, 000, 000 on January 1, 2021, for 300,000 additional Kiyosaki ordinary shares, which represents a 25% interest in Kiyosaki. The fair value of Kiyosaki Corp.'s identifiable assets, net of liabilities, was equal to their book values of P92, 000,…

Ramirez Company has a held-for-collection investment in the 6%, 20-year bonds of Soto Company. The investment was originally purchased for $1,200,000 in 2019. Early in 2020, Ramirez recorded an impairment of $300,000 on the Soto investment, due to Soto's financial distress. In 2021, Soto returned to profitability and the Soto investment was no longer impaired. What entry does Ramirez make in 2021 under (a) GAAP and (b) IFRS?

Cairns owns 75 percent of the voting stock of Hamilton, Inc. The parent’s interest was acquired several years ago on the date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the acquisition. Cairns uses the equity method in its internal records to account for its investment in Hamilton.   On January 1, 2017, Hamilton sold $2,000,000 in 10-year bonds to the public at 110. The bonds had a cash interest rate of 8 percent payable every December 31. Cairns acquired 40 percent of these bonds at 92 percent of face value on January 1, 2019. Both companies utilize the straight-line method of amortization.   Prepare the consolidation worksheet entries to recognize the effects of the intra-entity bonds at each of the following dates. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) December 31, 2019 December 31, 2020 December 31, 2021