FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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($8,250)
о
О
$7,125
$9,500
о
$27,500
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Transcribed Image Text:Multiple Choice о ($8,250) о О $7,125 $9,500 о $27,500
On January 1, 2022, Pop Co. acquired 75% of the outstanding common shares of Soda Inc. for $161,250 cash. On that date, Soda had common shares of
$156,250 and retained earnings of $31,250. At acquisition, the identifiable assets and liabilities of Soda had fair values that were equal to carrying
amounts except for inventory, which had fair value $8,000 greater than carrying amount and plant and equipment, which had fair values $10,000 greater
than carrying amounts. The plant and equipment had a remaining useful life of 5 years on January 1, 2022.Any goodwill will be tested yearly for
impairment.
Balance sheets as of December 31, 2022 are presented below:
Cash
Accounts receivable
Inventory
Land
Plant & Equipment, net
Investment in Soda Inc. - equity
Current liabilities
Bonds payable
Common shares
Retained earnings
Pop Co.
$ 10,000
Soda Inc.
$ 5,000
38,750
42,250
75,250
62,500
50,000
100,000
150,000
175,000
168,500
$384,750
$492,500
$ 45,500
-
338,000
109,000
$492,500
$ 47,125
128,125
156,250
53,250
$384,750
For 2022, Soda Inc. reported net income of $37,000 and paid dividends of $15,000. Pop Co. reported net income for 2022 of $50,000 and paid
dividends of $25,000.
An impairment test on goodwill conducted on December 31, 2022, indicated that a $500 loss had occurred.
What was the amount of goodwill that arose on the acquisition of Soda's common shares on January 1, 2022?
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Transcribed Image Text:On January 1, 2022, Pop Co. acquired 75% of the outstanding common shares of Soda Inc. for $161,250 cash. On that date, Soda had common shares of $156,250 and retained earnings of $31,250. At acquisition, the identifiable assets and liabilities of Soda had fair values that were equal to carrying amounts except for inventory, which had fair value $8,000 greater than carrying amount and plant and equipment, which had fair values $10,000 greater than carrying amounts. The plant and equipment had a remaining useful life of 5 years on January 1, 2022.Any goodwill will be tested yearly for impairment. Balance sheets as of December 31, 2022 are presented below: Cash Accounts receivable Inventory Land Plant & Equipment, net Investment in Soda Inc. - equity Current liabilities Bonds payable Common shares Retained earnings Pop Co. $ 10,000 Soda Inc. $ 5,000 38,750 42,250 75,250 62,500 50,000 100,000 150,000 175,000 168,500 $384,750 $492,500 $ 45,500 - 338,000 109,000 $492,500 $ 47,125 128,125 156,250 53,250 $384,750 For 2022, Soda Inc. reported net income of $37,000 and paid dividends of $15,000. Pop Co. reported net income for 2022 of $50,000 and paid dividends of $25,000. An impairment test on goodwill conducted on December 31, 2022, indicated that a $500 loss had occurred. What was the amount of goodwill that arose on the acquisition of Soda's common shares on January 1, 2022?
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