On January 1, 2020, Doone Corporation acquired 60 percent of the outstanding voting stock of Rockne Company for $300,000 consideration. At the acquisition date, the fair value of the 40 percent noncontrolling interest was $200,000, and Rockne's assets and liabilities had a collective net fair value of $500,000. Doone uses the equity method in its internal records to account for its investment in Rockne. Rockne reports net income of $160,000 in 2021. Since being acquired, Rockne has regularly supplied inventory to Doone at 25 percent more than cost. Sales to Doone amounted to $250,000 in 2020 and $300,000 in 2021. Approximately 30 percent of the inventory purchased during any one year is not used until the following year. a. What is the noncontrolling interest's share of Rockne's 2021 income? b. Prepare Doone's 2021 consolidation entries required by the intra-entity inventory transfers.

On January 1, 2020, Doone Corporation acquired 60 percent of the outstanding voting stock of Rockne Company for $300,000 consideration. At the acquisition date, the fair value of the 40 percent noncontrolling interest was $200,000, and Rockne's assets and liabilities had a collective net fair value of $500,000. Doone uses the equity method in its internal records to account for its investment in Rockne. Rockne reports net income of $160,000 in 2021. Since being acquired, Rockne has regularly supplied inventory to Doone at 25 percent more than cost. Sales to Doone amounted to $250,000 in 2020 and $300,000 in 2021. Approximately 30 percent of the inventory purchased during any one year is not used until the following year. a. What is the noncontrolling interest's share of Rockne's 2021 income? b. Prepare Doone's 2021 consolidation entries required by the intra-entity inventory transfers.

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 January 1, 2023, Palka, Incorporated, acquired 70 percent of the outstanding shares of Sellinger Company for $1,328,600 in cash. The price paid was proportionate to Sellinger's total fair value, although at the acquisition date, Sellinger had a total book value of $1,660,000. All assets acquired and liabilities assumed had fair values equal to book values except for a patent (six-year remaining life) that was undervalued on Sellinger's accounting records by $228,000. On January 1, 2024, Palka acquired an additional 25 percent common stock equity interest in Sellinger Company for $510,000 in cash. On its internal records, Palka uses the equity method to account for its shares of Sellinger. During the two years following the acquisition, Sellinger reported the following net income and dividends: Items Net income Dividends declared. Required: a. Show Palka's journal entry to record its January 1, 2024, acquisition of an additional 25 percent ownership of Sellinger Company shares. b.…
On December 1, 2021, ABC Company acquired all the assets and liabilities of XYZ Inc. issuing 100,000 shares. The fair value of XYZ's assets and liabilities at this date are presented below (see image) The financial year for ABC Company is January to December. The fair value of each ABC share at acquisition date is P1.90. At the acquisition date, the acquirer could only determine a provisional fair value for the Plant. On March 9, 2022, ABC received the final value from the independent appraisal, the fair value of the Plant at acquisition date is P131,000 with a 5 year remaining useful life from date of acquisition. Determine the a) Fair value of the net assets acquired b) amount of goodwill or gain from acquisition
On January 1, 2021, Marshall Company acquired 100 percent of the outstanding common stock of Tucker Company. To acquire these shares, Marshall issued $200,000 in long-term liabilities and 20,000 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Marshall paid $30,000 to accountants, lawyers, and brokers for assistance in the acquisition and another $12,000 in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows: Marshall CompanyBook Value Tucker CompanyBook Value Cash $ 60,000 $ 20,000 Receivables 270,000 90,000 Inventory 360,000 140,000 Land 200,000 180,000 Buildings (net) 420,000 220,000 Equipment (net) 160,000 50,000 Accounts payable (150,000 ) (40,000 ) Long-term liabilities (430,000 ) (200,000 ) Common stock—$1 par value (110,000 ) Common stock—$20 par value…
The Holtz Corporation acquired 80 percent of the 100,000 outstanding voting shares of Devine, Inc., for $7.15 per share on January 1, 2020. The remaining 20 percent of Devine's shares also traded actively at $7.15 per share before and after Holtz's acquisition. An appraisal made on that date determined that all book values appropriately reflected the fair values of Devine's underlying accounts except that a building with a 5-year future life was undervalued by $75,500 and a fully amortized trademark with an estimated 10-year remaining life had a $63,000 fair value. At the acquisition date, Devine reported common stock of $100,000 and a retained earnings balance of $309,500. Following are the separate financial statements for the year ending December 31, 2021: Sales Cost of goods sold Operating expenses Dividend income Net income Retained earnings, 1/1/21 Net income (above) Dividends declared Retained earnings, 12/31/21 Current assets Investment in Devine, Inc. Buildings and equipment…
On July 1, 2024, Gupta Corporation bought 25% of the outstanding common stock of VB Company for $136 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 $494 million and a book value of $256 million. Of the $238 million difference, $56 million was attributable to the appreciated value of inventory that was sold during the last half of 2024, $80 million was attributable to buildings that had a remaining depreciable life of 10 years, and $102 million related to equipment that had a remaining depreciable life of five years. Between July 1, 2024, and December 31, 2024, VB earned net income of $72 million and declared and paid cash dividends of $42 million. Required: 1. Prepare all appropriate journal entries related to the investment during 2024, assuming Gupta accounts for this investment by the equity method. 2. Determine the amounts to be reported by Gupta.…
On January 3, 2023, Trycker, Incorporated acquired 40% of the outstanding common stock of Inkblot Company for $2,400,000. This investment gave Trycker the ability to exercise significant influence over Inkblot. Inkblot's assets on that date were recorded at $8,000,000 with liabilities of $2,000,000. There were no other differences between book and fair values. During 2023, Inkblot reported net income of $500,000 and paid dividends of $300,000. The fair value of Inkblot at December 31, 2023, is $7,000,000. Trycker elects the fair value option for its investment in Inkblot. How are dividends received from Inkblot reflected in Trycker's accounting records for 2023?
On July 1, 2024, Gupta Corporation bought 25% of the outstanding common stock of VB Company for $104 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 $366 million and a book value of $224 million. Of the $142 million difference, $24 million was attributable to the appreciated value of inventory that was sold during the last half of 2024, $80 million was attributable to buildings that had a remaining depreciable life of 10 years, and $38 million related to equipment that had a remaining depreciable life of five years. Between July 1, 2024, and December 31, 2024, VB earned net income of $32 million and declared and paid cash dividends of $26 million. Required: Prepare all appropriate journal entries related to the investment during 2024, assuming Gupta accounts for this investment by the equity method. Determine the amounts to be reported by Gupta.
BuyCo, Inc., holds 28 percent of the outstanding shares of Marqueen Company and appropriately applies the equity method of accounting. Excess cost amortization (related to a patent) associated with this investment amounts to $12,000 per year. For 2020, Marqueen reported earnings of $119,000 and declares cash dividends of $34,000. During that year, Marqueen acquired inventory for $60,000, which it then sold to BuyCo for $75,000. At the end of 2020, BuyCo continued to hold merchandise with a transfer price of $27,000. What Equity in Investee Income should BuyCo report for 2020? How will the intra-entity transfer affect BuyCo’s reporting in 2021? If BuyCo had sold the inventory to Marqueen, would the answers to (a) and (b) have changed? Equity in investee income $19,052selected answer incorrect b. Equity accrual for 2021 will be increasedselected answer correct by $2,117selected answer incorrect c. If BuyCo had sold the inventory to Marqueen, would your answers above…
Please help me
Carla Vista Company purchased 200 of the 1000 outstanding shares of Metlock Company's common stock for $550000 on January 2, 2021. During 2021, Metlock Company declared dividends of $75000 and reported earnings for the year of $350000.If Carla Vista Company used the fair value method of accounting for its investment in Metlock Company, its Equity Investments (Metlock) account on December 31, 2021 should be $605000. $620000. $550000. $535000.
The individual financial statements for Gibson Company and Keller Company for the year ending December 31, 2021, follow. Gibson acquired a 60 percent interest in Keller on January 1, 2020, in exchange for various considerations totaling $1,050,000. At the acquisition date, the fair value of the noncontrolling interest was $700,000 and Keller’s book value was $1,400,000. Keller had developed internally a customer list that was not recorded on its books but had an acquisition-date fair value of $350,000. This intangible asset is being amortized over 20 years. Gibson uses the partial equity method to account for its investment in Keller. Gibson sold Keller land with a book value of $80,000 on January 2, 2020, for $180,000. Keller still holds this land at the end of the current year. Keller regularly transfers inventory to Gibson. In 2020, it shipped inventory costing $280,000 to Gibson at a price of $400,000. During 2021, intra-entity shipments totaled $450,000, although the original cost…
On 1 July 2019, Canola Ltd acquired 100% of the share capital to gain control of Palm Ltd. The following intra-group transactions occurred during the financial year ending 30 June 2020. (i) During the 2019 - 2010 financial year, Canola Ltd sold inventory to Palm Ltd for $1,000,000. Canola Ltd purchased this inventory at $700,000. By 30 June 2020, Palm Ltd has sold 70% of that inventory to an outside third party. (ii) Palm Ltd sold a vehicle to Canola Ltd for $100000. The vehicle had been fully depreciated by Palm Ltd at 30 June 2020 and valued at $0 on Palm’s books. Required: Prepare the journal entries required to eliminate the intra-group transactions above. Ignore any tax effects. When are consolidated profits recorded for inventory transfers within the group?