Kroger Corporation acquired a 60% interest in Food Lion Corporation in January 2016, when Food Lion's book values and fair values were equal. On July 1,216, Kroger sold a building with a book value of $300,000 to Food Lion for $375,000. The building has a remaining life of 15 years, no salvage value, and depreciated used the straight-line method. Food lion reports net income of $160,000 for 2016. Kroger's income from Food Lion for 2016 is: a. $18,500 b. $21,000 c. $23,500 d. $96,000 e. None of the above
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- On January 1, 2014, Klinefelter Company purchased a building for 520,000. The building had an estimated life of 20 years and an estimated residual value of 20,000. The company has been depreciating the building using straight-line depreciation. At the beginning of 2020, the following independent situations occur: a. The company estimates that the building has a remaining life of 10 years (for a total of 16 years). b. The company changes to the sum-of-the-years-digits method. c. The company discovers that it had ignored the estimated residual value in the computation of the annual depreciation each year. Required: For each of the independent situations, prepare all journal entries related to the building for 2020. Ignore income taxes.Bliss Company owns an asset with an estimated life of 15 years and an estimated residual value of zero. Bliss uses the straight -line method of depreciation. At the beginning of the sixth year, the assets book value is 200,000 and Bliss changes the estimate of the assets life to 25 years, so that 20 years now remain in the assets life. Explain how this change will be accounted for in Blisss financial statements, and compute the current and future annual depreciation expense.The Siri Company acquired equipment on January 1, 2015 at a cost of P400,000, depreciating it over 8 years with a nil residual value. On January 1, 2018. The Triss Company acquired 100% of Siri and estimated the fair value of the equipment at P230,000 with a remaining life of 5 years. This fair value was not incorporated into Siri’s books and the depreciation expense continued to be calculated by reference to original cost. What adjustments should be made to the depreciation expense for the year and the statement of financial position carrying amount in preparing the consolidated financial statements for the year ended December 31, 2019? DEPRECIATION EXPENSE -decrease by P4,000 ; CARRYING AMOUNT - decreased by P12,000 DEPRECIATION EXPENSE -decreased by P4,000 ; CARRYING AMOUNT - increased by P12,000 DEPRECIATION EXPENSE -increase by P4,000 ; CARRYING AMOUNT - decreased by P12,000 DEPRECIATION EXPENSE…
- The Siri Company acquired equipment on January 1, 2015 at a cost of P400,000, depreciating it over 8 years with a nil residual value. On January 1, 2018. The Triss Company acquired 100% of Siri and estimated the fair value of the equipment at P230,000 with a remaining life of 5 years. This fair value was not incorporated into Siri’s books and the depreciation expense continued to be calculated by reference to original cost. What adjustments should be made to the depreciation expense for the year and the statement of financial position carrying amount in preparing the consolidated financial statements for the year ended December 31, 2019? a. DEPRECIATION EXPENSE -decrease by P4,000 ; CARRYING AMOUNT - decreased by P12,000 b. DEPRECIATION EXPENSE -increase by P4,000 ; CARRYING AMOUNT - decreased by P12,000 c. DEPRECIATION EXPENSE -decreased by P4,000 ; CARRYING AMOUNT - increased by P12,000 d. DEPRECIATION EXPENSE -increase by P4,000 ; CARRYING AMOUNT - increased by P12,000The Siri Company acquired equipment on January 1, 2015 at a cost of P400,000, depreciating it over 8 years with a nil residual value. On January 1, 2018. The Triss Company acquired 100% of Siri and estimated the fair value of the equipment at P230,000 with a remaining life of 5 years. This fair value was not incorporated into Siri's books and the depreciation expense continued to be calculated by reference to original cost. What adjustments should be made to the depreciation expense for the year and the statement of financial position carrying amount in preparing the consolidated financial statements for the year ended December 31, 2019?On January 1, 2016, Jungle Company sold a machine to Safari Company for $30,000. The machine had an original cost of $24,000, and accumulated depreciation on the asset was $9,000 at the time of the sale. The machine has a 5-year remaining life and will be depreciated on a straight-line basis with no salvage value. Safari Company is an 80%-owned subsidiary of Jungle Company.1. Explain the adjustments that would have to be made to arrive at consolidated net income for the years 2016 through 2020 as a result of this sale.2. Prepare the elimination that would be required on the December 31, 2016, consolidated worksheet as a result of this sale. 3. Prepare the entry for the December 31, 2017, worksheet as a result of this sale.
- Parrot Company owns all the outstanding voting stock of Southern Manufacturing. On January 1, 2014, Parrot sold machinery to Southern at its book value of $24,000. Parrot had the machinery three years before selling it and used an eight-year straight-line depreciation method, with zero salvage value. Southern will use the straight-line depreciation method, and assumes the machine has five years remaining and no salvage value. In the 2014 consolidating working papers, the depreciation expense A. Decreased by $4,800. B. Increased by $4,800. C. Increased by $8,000. D. Required no adjustment.Bell Corporation purchases all of the outstanding stock of Stockdon Corporation for $220,000 in cash on January 1, 2017. On the purchase date, Stockdon Corporation has the following condensed balance sheet: (attached)Any excess of book value over cost is attributable to the building, which is currently overstated on Stockdon’s books. All other assets and liabilities have book values equal to fair values. The building has an estimated 10-year life with no salvage value.The trial balances of the two companies on December 31, 2017, appear as follows: Bell StockdonCash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,000 143,000Inventory . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 60,000 30,000Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,000 120,000Building (net) . . . . . . . . . . . . . . . . . .…Tomato co. Purchased 40% of MU corp. On april 1,2017, for 500,000 when MU's book value was 1,260,000. On the date of acquisition, the market value of MU's net asset equaled their book values, except for the following: •MU's equipment has a fair value of 50,000 less than it's books value. The equip. Has a remaining useful life of 10 years. •MU's building has a fair value of 40,000 more than it's book value. The building has a remaining useful life of 20 years. MU's results of operation for 2017 and 2018 are as follows: •2017 net income 150,000 •2018 net loss 30,000 MU's cash dividends of 20,000 and 10,000 respectively for 2017 and 2018. Required: journal entries and balances for the following 1. Investment income 2017 2. Investment loss 2018 3. Investment Carrying value for 2017 and 2018
- Hilton Corporation sold a press to its 80%-owned subsidiary, Agri Fab Inc., for $5,000 on January 1, 2016. The press originally was purchased by Hilton on January 1, 2015, for $20,000, and $6,000 of depreciation for 2015 had been recorded. The fair value of the press on January 1, 2016, was $10,000. Agri Fab proceeded to depreciate the press on a straight-line basis, using a 5-year life and no salvage value. On December 31, 2017, Agri Fab, having no further need for the machine, sold it for $2,000 and recorded a loss on the sale. Explain the adjustments that would have to be made to the separate income statements of the two companies to arrive at the consolidated income statements for 2016 and 2017.Thomson Corporation owns 70 percent of the outstanding stock of Stayer, Incorporated. On January 1, 2016, Thomson acquired a building with a 10-year life for $460,000. Thomson depreciated the building on the straight-line basis assuming no salvage value. On January 1, 2018, Thomson sold this building to Stayer for $430,400. At that time, the building had a remaining life of eight years but still no expected salvage value. In preparing financial statements for 2018, how does this transfer affect the computation of consolidated net income?a. Net income is reduced by $62,400.b. Net income is reduced by $59,440.c. Net income is reduced by $70,200.d. Net income is reduced by $54,600.At the beginning of 2016, Metatec Inc. acquired Ellison Technology Corporation for $600 million. In addition tocash, receivables, and inventory, the following assets and their fair values were also acquired:Plant and equipment (depreciable assets) $150 millionPatent 40 millionGoodwill 100 millionThe plant and equipment are depreciated over a 10-year useful life on a straight-line basis. There is no estimated residual value. The patent is estimated to have a 5-year useful life, no residual value, and is amortizedusing the straight-line method.At the end of 2018, a change in business climate indicated to management that the assets of Ellison might beimpaired. The following amounts have been determined:Plant and equipment:Undiscounted sum of future cash flows $ 80 millionFair value 60 millionPatent:Undiscounted sum of future cash flows $ 20 millionFair value 13 millionGoodwill:Fair value of Ellison Technology Corporation $450 millionFair value of Ellison’s net assets (excluding goodwill)…