JLB Enterprises acquired 15% of REB Corporation on January 1, 2018, for $63,000 when the book value of REB's net assets was $360,000. During 2018, REB reported net income of $90,000 and paid dividends of $30,000. On January 1, 2019, JLB purchased an additional 25% of REB for $120,000. Any excess of cost over book value was attributable to goodwill (No amortization) On that same date, JLB changed to the equity method. During 2019, REB reported net income of $120,000 and paid dividends of $45,000. a. What investment income did JLB record from REB in 2018? b. What investment income did JLB record from REB in 2019? c. What journal entry was made on Jan 1 2019 as switch equity method? d. What was the balance in Equity Investment at December 31, 2019? (Hint: use the amount paid for 25% of REB from JLB to calculate the implied fair value of the original 15% of the investment)

JLB Enterprises acquired 15% of REB Corporation on January 1, 2018, for $63,000 when the book value of REB's net assets was $360,000. During 2018, REB reported net income of $90,000 and paid dividends of $30,000. On January 1, 2019, JLB purchased an additional 25% of REB for $120,000. Any excess of cost over book value was attributable to goodwill (No amortization) On that same date, JLB changed to the equity method. During 2019, REB reported net income of $120,000 and paid dividends of $45,000. a. What investment income did JLB record from REB in 2018? b. What investment income did JLB record from REB in 2019? c. What journal entry was made on Jan 1 2019 as switch equity method? d. What was the balance in Equity Investment at December 31, 2019? (Hint: use the amount paid for 25% of REB from JLB to calculate the implied fair value of the original 15% of the investment)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

On September 1, 2018, Vernon Corporation acquired Barlow Enterprises for a cash payment of $820.000. At the time of purchases. Barlow's balance sheet showed assets of $610.000. liabilities of $240.000, and owner's equity of $420.000. The fair value of Barlow's assets is estimated to be 5970.000.The liabilities are all estimated to be at fair value. a) Compute the amount of goodwill acquired by Vernon. 120000 b) On December 31, 2020, the fair value of Barlow as a reporting unit is estimated to be $720.000. The carrying value of Vernon's investment in Barlow at year-end is $750.000. The fair value of Barlow's identifiable net asset, excluding the goodwill, is determined to be 655.000 Prepare Vernon's journal entry, if necessary, to record impairment of goodwill. Please use the new standard (Hint: The FASB's new goodwill Impairment testing guidance- ASU 2017-04 is required for public SEC filers for periods beginning after December 15. 2019) Note: Please use integer only. Do not use a S.…
On January 1, 2017, Lund Corporation purchases a 30% interest in Aluma-Boat Company for $200,000. At the time of the purchase, Aluma-Boat has total stockholders’ equity of $400,000. Any excess of cost over the equity purchased is attributed in part to machinery worth $50,000 more than book value with a remaining useful life of five years. Any remaining excess would be allocated to goodwill. Aluma-Boat reports the following income and dividend distributions in 2017 and 2018: 2017 2018 Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $50,000 $45,000 Dividends declared and paid . . . . . . . . . . . . . 10,000 10,000 Lund sells its investment in Aluma-Boat Company on January 2, 2019, for $230,000. Record the sale of the investments assuming the use of the equity method. You may ignore income taxes. Carefully schedule the investment account balance at the time…
On May 1, Freeman Company agreed to sell the assets of its Footwear Division to Albanese Incorporated for $97 million. The sale was completed on December 31, 2024. The following additional facts pertain to the transaction: • The Footwear Division qualifies as a component of the entity according to GAAP regarding discontinued operations. • The book value of Footwear's assets totaled $65 million on the date of the sale. • Footwear's operating income was a pre-tax loss of $14 million in 2024. . Freeman's income tax rate is 25%. In the income statement for the year ended December 31, 2024, Freeman Company would report income from discontinued operations of:
On January 1, 2018, Panorama Company acquired 80% of Scann Corporation for $6,400,000.At the time of the acquisition, the book value of Scann's assets and liabilities was equal to the fair value except for equipment that was undervalued $80,000 with a four-year remaining useful life and inventories that were undervalued $20,000 and sold in 2018. Panorama separate net income in 2018 and 2019 was $1,100,000 and $1,150,000, respectively. Scann separate net income in 2018 and 2019 was $300,000 and $360,000, respectively. Dividend payments by Scann in 2018 and 2019 were $60,000 and $60,000, respectively Required: Using equity method, Calculate Investment in Scann shown on Panorama's ledger at December 31, 2018 and 2019. Calculate Investment in Scann shown on the consolidated statements at December 31, 2018 and 2019. Calculate consolidated net income for 2018 and 2019. Calculate Noncontrolling interest balance on Panorama's ledger at December 31, 2018 and 2019. Calculate Noncontrolling…
On January 1, 2022, P Company acquired 80% of S Company forP2,000,000. The fair value of identifiable net assets is P1,800,000. NCI ismeasured at fair value. During 2022, P Company ships merchandise to SCompany costing P1,000, 000 at 20% above cost. Additional data are asfollows:P Company S CompanySales 5,500,000 2,500,000Cost of Sales 3,200,000 1,600,000Operating Expense 650,000 300,000The ending inventories of S Company includes merchandise from PCompany amounting to P60,000. Impairment of goodwill is P20,000.How much is the consolidated gross profit?
P Company acquired 90% of S Corporation on January 1, 2014 for $2,250,000. S had net assets at that time with a fair value of $2,500,000. At the time of the acquisition, Patterson computed the annual excess fair-value amortization to be $20,000, based on the difference between S's net book value and net fair value. Assume the fair value exceeds the book value, and $20,000 pertains to the whole company. Separate from any earnings from S, P reported net income in 2014 and 2015 of $550,000 and $575,000, respectively. Calculate the Investment in S shown on P's ledger at December 31, 2015. S reported the following net income and dividend payments: 2014 2015 Net income $150,000 $180,000 Dividends $30,000 $30,000
Fleming Corporation acquired Out-of-Sight Products on January 1, 2025 for $4,000,000, and recorded goodwill of $750,000 as a result of that purchase. At December 31, 2025, the Out-of- Sight Products Division had a fair value of $3,400,000. The net identifiable assets of the Division (excluding goodwill) had a fair value of $2,900,000 at that time. What amount of loss on impairment of goodwill should Fleming record in 2025? O $-0- O $250,000 O $350,000 O $600,000
The following are several figures reported for Allister and Barone as of December 31, 2021: Allister Barone $ 410,000 $ 210,000 820,000 620,000 not given Inventory Sales Investment income Cost of goods sold Operating expenses 410,000 185,000 310,000 255,000 Allister acquired 80 percent of Barone in January 2020. In allocating the newly acquired subsidiary's fair value at the acquisition date, Allister noted that Barone had developed a customer list worth $60,000 that was unrecorded on its accounting records and had a four-year remaining life. Any remaining excess fair value over Barone's book value was attributed to goodwill. During 2021, Barone sells inventory costing $121,000 to Allister for $162,000. Of this amount, 10 percent remains unsold in Allister's warehouse at year-end. Determine balances for the following items that would appear on Allister's consolidated financial statements for 2021: Inventory Sales Cost of goods sold Operating expenses Net income attributable to…
Nidal Corp. acquired 90% of Wail Corp for $270,000 on Jan.1,2019, on that date Jazzy fair value of net assets equal book value. Following intercompany transactions occurred: * During 2019 Aziz sold Jazzy inventory by $60,000 at end of 2019, the original cost is $45,000 only $5,000 of inventory is still on hand at Jazzy book while remaining was sold during 2020. * On Jan.1, 2019 Jazzy Sold inventory to Aziz by $100,000, the original cost of them is $80,000, at end of 2019 $10,000 of inventory is still on hand and they were sold in 2020. Jazzy determined income and paid dividends as following: Income Dividends 2019 $80,000 $20,000 2020 $100,000 $20,000 In 2020 Aziz determined net income of $200,000 Required: 1. Prepare required entries in Aziz Books using fully adjusted equity method in 2019 and 2020. 2. Prepare all required…
On January 2, 2019, Peace Co. acquired 80% of the outstanding common stock of Shade Co. for ₱1,344,000 with no goodwill resulting from the acquisition. The following selected account balances were taken from the accounting records of Shade Co. BV FV Building 12,000,000 12,400,000 Machinery 620,000 500,000 The building has an estimated useful life of 10 years and the equipment is expected to last for 5 years. For the year 2019, Peace Co. reported net income from own operations of ₱2,240,000 and Shade Co. reported ₱600,000 net income from own operations. Peace Co. accounts its investment in Shade Co. using the cost method. What is the consolidated income statement for the year 2019.
On January 2, 2019, Peace Co. acquired 80% of the outstanding common stock of Shade Co. for ₱1,344,000 with no goodwill resulting from the acquisition. The following selected account balances were taken from the accounting records of Shade Co. BV FV Building 12,000,000 12,400,000 Machinery 620,000 500,000 The building has an estimated useful life of 10 years and the equipment is expected to last for 5 years. For the year 2019, Peace Co. reported net income from own operations of ₱2,240,000 and Shade Co. reported ₱600,000 net income from own operations. Peace Co. accounts its investment in Shade Co. using the cost method. Journal Entry at acquisition date
Grand Champion Inc. purchased America’s Sweethearts Corporation on January 1, 2019. At the time, America’s Sweethearts had the following assets and liabilities (stated at fair value): Cash $62,000 Accounts receivable 138,000 Inventory 185,000 Property, plant, and equipment 300,000 Patent 65,000 Accounts payable 200,000 Notes payable 325,000 Grand Champion paid $900,000 for America’s Sweethearts. Assume that America’s Sweethearts is a reporting unit of Grand Champion. At the end of 2020, America’s Sweethearts has a fair value of $720,000 and a book value of $850,000, which includes any goodwill recorded. Of this fair value, $350,000 is attributable to identifiable assets net of (or identifiable net assets) liabilities. Required: Calculate the impairment loss of goodwill (if any) and record the appropriate journal entry.