Petro Incorporated and Sport Company reported summarized balance sheets as shown below, on December 31, 2019. Petro $1,050,000 Sport $525,000 1,075,000 Current assets Noncurrent assets 1,675,000 Current liabilities $575,000 875,000 $125,000 Long-term debt 375 000 On January 1, 2020, Petro purchased 80% of the outstanding capital stock of Sport for $980,000, of which $230,000 was paid in cash, and $750,000 was borrowed from their bank. The debt is to be repaid in 10 annual installments beginning on December 31, 2020, with each payment consisting of $75,000 principal, plus accrued interest. The excess fair value of Sport Company over the underlying book value is allocated to inventory (70 percent) and to goodwill (30 percent). Required: Calculate the balance in each of the following accounts, on the consolidated balance sheet, immediately following the acquisition. Current assets d Long term deht

Petro Incorporated and Sport Company reported summarized balance sheets as shown below, on December 31, 2019. Petro $1,050,000 Sport $525,000 1,075,000 Current assets Noncurrent assets 1,675,000 Current liabilities $575,000 875,000 $125,000 Long-term debt 375 000 On January 1, 2020, Petro purchased 80% of the outstanding capital stock of Sport for $980,000, of which $230,000 was paid in cash, and $750,000 was borrowed from their bank. The debt is to be repaid in 10 annual installments beginning on December 31, 2020, with each payment consisting of $75,000 principal, plus accrued interest. The excess fair value of Sport Company over the underlying book value is allocated to inventory (70 percent) and to goodwill (30 percent). Required: Calculate the balance in each of the following accounts, on the consolidated balance sheet, immediately following the acquisition. Current assets d Long term deht

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter16: Retained Earnings And Earnings Per Share

Section: Chapter Questions

Problem 26E: Tama Companys capital structure consists of common stock and convertible bonds. At the beginning of...

See similar textbooks

Similar questions

Comprehensive The following are Farrell Corporations balance sheets as of December 31, 2019, and 2018, and the statement of income and retained earnings for the year ended December 31, 2019: Additional information: a. On January 2, 2019, Farrell sold equipment costing 45,000, with a book value of 24,000, for 19,000 cash. b. On April 2, 2019, Farrell issued 1, 000 shares of common stock for 23,000 cash. c. On May 14, 2019, Farrell sold all of its treasury stock for 25,000 cash. d. On June 1, 2019, Farrell paid 50, 000 to retire bonds with a face value (and book value) of 50, 000. e. On July 2, 2019, Farrell purchased equipment for 63, 000 cash. f. On December 31, 2019, land with a fair market value of 150,000 was purchased through the issuance of a long-term note in the amount of 150,000. The note bears interest at the rate of 15% and is due on December 31, 2021. g. Deferred taxes payable represent temporary differences relating to the use of accelerated depreciation methods for income tax reporting and the straight-line method for financial statement reporting. Required: 1. Prepare a spreadsheet to support a statement of cash flows for Farrell for the year ended December 31, 2019, based on the preceding information. 2. Prepare the statement of cash flows. (Appendix 21.1) Spreadsheet and Statement Refer to the information for Farrell Corporation in P21-13. Required: 1. Using the direct method for operating cash flows, prepare a spreadsheet to support a 2019 statement of cash flows. (Hint: Combine the income statement and December 31, 2019, balance sheet items for the adjusted trial balance. Use a retained earnings balance of 291,000 in this adjusted trial balance.) 2. Prepare the statement of cash flows. (A separate schedule reconciling net income to cash provided by operating activities is not necessary.)
Comprehensive The following are Farrell Corporations balance sheets as of December 31, 2019, and 2018, and the statement of income and retained earnings for the year ended December 31, 2019: Additional information: a. On January 2, 2019, Farrell sold equipment costing 45,000, with a book value of 24,000, for 19,000 cash. b. On April 2, 2019, Farrell issued 1,000 shares of common stock for 23,000 cash. c. On May 14, 2019, Farrell sold all of its treasury stock for 25,000 cash. d. On June 1, 2019, Farrell paid 50,000 to retire bonds with a face value (and book value) of 50,000. e. On July 2, 2019, Farrell purchased equipment for 63,000 cash. f. On December 31, 2019. land with a fair market value of 150,000 was purchased through the issuance of a long-term note in the amount of 150,000. The note bears interest at the rate of 15% and is due on December 31, 2021. g. Deferred taxes payable represent temporary differences relating to the use of accelerated depreciation methods for income tax reporting and the straight-line method for financial statement reporting. Required: 1. Prepare a spreadsheet to support a statement of cash flows for Farrell for the year ended December 31, 2019, based on the preceding information. 2. Prepare the statement of cash flows.
Tama Companys capital structure consists of common stock and convertible bonds. At the beginning of 2019, Tama had 15,000 shares of common stock outstanding; an additional 4,500 shares were issued on May 4. The 7% convertible bonds have a face value of 80,000 and were issued in 2016 at par. Each 1,000 bond is convertible into 25 shares of common stock; to date, none of the bonds have been converted. During 2019, the company earned net income of 79,200 and was subject to an income tax rate of 30%. Required: Compute the 2019 diluted earnings per share.
PART C Petro Incorporated and Sport Company reported summarized balance sheets as shown below, on December 31, 2019. Petro $1,050,000 1,675,000 $575,000 875,000 Sport $525,000 1,075,000 $125,000 375 000 Current assets Noncurrent assets Current liabilities Long-term debt On January 1, 2020, Petro purchased 80% of the outstanding capital stock of Sport for $980,000, of which $230,000 was paid in cash, and $750,000 was borrowed from their bank. The debt is to be repaid in 10 annual installments beginning on December 31, 2020, with each payment consisting of $75,000 principal, plus accrued interest. The excess fair value of Sport Company over the underlying book value is allocated to inventory (70 percent) and to goodwill (30 percent). Required: Calculate the balance in each of the following accounts, on the consolidated balance sheet, immediately following the acquisition. a. Current assets b. Noncurrent assets c. Current liabilities. d. Long-term debt e. Stockholders' equity. [END OF…
On January 1, 2020, Soledad Company purchased 10% bonds with face amount of P3,000,000. The bonds mature on January 1, 2030 and were purchased for P3,405,000 to yield 8%. The entity used the effective interest method of amortization and interest is payable annually every December 31. The business model for this investment is to collect contractual cash flows composed of interest and principal. On December 31, 2021, the entity changed the business model for this investment to realize fair value changes. On January 1, 2022, the fair value of the bonds was P2,845,000 at an effective rate of 11%. Required: . 2. Compute the loss on reclassification.
On January 1, 2019, Lasagna Company purchased 3,000, P1,000 face value term bonds with a stated rate of 10% as at amortized cost. The bonds pay interest annually on December 31 and will be redeemed entirely by the issuer on December 31, 2022. The bond investment was purchased for P2,819,100 at an effective rate of 12%. On January 1, 2020, the entity changed business model for managing its financial assets and this investment was reclassified as debt investments at fair value through profit or loss. On this date, the bonds are quoted at 101. 1.1 What is the amount taken to profit or loss as a result of the reclassification?A. P129,721B. P172,608C. P30,000D. P109,721 1.2 What is the amount at which the debt investments at fair value through profit or loss shall be recorded upon reclassification? (no need solution) A. at market value of P3,030,000 and the difference between market value and amortized cost is taken to equityB . at market value of P3,030,000 and the difference between…
On January 1, 2020, Acker Inc. had the following balance sheet. Acker Inc.Balance SheetAs of January 1, 2020 Assets Equity Cash $ 50,000 Common stock $260,000 Debt investments (available-for-sale) 240,000 Accumulated other comprehensive income 30,000 Total $290,000 Total $290,000 The accumulated other comprehensive income related to unrealized holding gains on available-for-sale debt securities. The fair value of Acker Inc.'s available-for-sale debt securities at December 31, 2020, was $190,000; its cost was $140,000. No securities were purchased during the year. Acker Inc.'s income statement for 2020 was as follows. (Ignore income taxes.) Acker Inc.Income StatementFor the Year Ended December 31, 2020 Dividend revenue $ 5,000 Gain on sale of investments 30,000 Net income $35,000 Instructions (Assume all transactions during the year were for cash.) d. Prepare a balance sheet as of December 31, 2020
On January 1, 2020, Acker Inc. had the following balance sheet. Acker Inc.Balance SheetAs of January 1, 2020 Assets Equity Cash $ 50,000 Common stock $260,000 Debt investments (available-for-sale) 240,000 Accumulated other comprehensive income 30,000 Total $290,000 Total $290,000 The accumulated other comprehensive income related to unrealized holding gains on available-for-sale debt securities. The fair value of Acker Inc.'s available-for-sale debt securities at December 31, 2020, was $190,000; its cost was $140,000. No securities were purchased during the year. Acker Inc.'s income statement for 2020 was as follows. (Ignore income taxes.) Acker Inc.Income StatementFor the Year Ended December 31, 2020 Dividend revenue $ 5,000 Gain on sale of investments 30,000 Net income $35,000 Instructions (Assume all transactions during the year were for cash.) a. Prepare the journal entry to record the sale of the…
On January 1, 2022, BTS Company purchased as debt investments at amortized cost, P1,000,000 of JK Company’s 8% for 906,000. The bonds were purchased to yield 10% interest. The bonds mature on January 1, 2032 and pay interest semi-annually on January 1 and July 1. BTS uses the effective interest method of amortization. In its December 31, 2022 statement of comprehensive income, what amount should BTS report as interest revenue?
At December 31, 2019, Velasco Corporation had the following investments: Investment in debt securities, due 3/31/20 (purchased 12/31/19) P600,000 Investment in debt securities, due 1/31/20 (purchased 1/1/19) 900,000 Investment in ordinary shares acquired on 12/1/19 which are intended for short-term profit purposes. The company intends to sell the same by 2/28/20. 400,000 Investment in ordinary shares acquired on 12/31/18 which the client is intending to hold as available-for-sale. 300,000 Investment in preference shares acquired on 12/1/19 redeemable at the option of the issuer by 2/28/20. 300.000 90-day certificate of deposit, due 2/28/20 (acquired on 12/10/19) 500,000 180-day certificate of deposit, due 3/15/20 (acquired on 9/16/19) 800,000 Velasco Corporation should report cash equivalents in its December 31, 2019 statement of financial position at
At the end of 2018, Terry Company prepared the following schedule of investments in available-for-sale debt securities (all of which were acquired at par value): Company Amortized Cost 12/31/18 Fair Value Cumulative Change in Fair Value Morgan Company $35,000 $34,200 $(800) Nance Company 50,000 53,100 3,100 Totals $85,000 $87,300 $2,300 During 2019, the following transactions occurred: July 1 Purchased Oscar Company debt securities with a par value of 100,000 for $98,000. The securities carry an annual interest rate of 10%, mature on December 31, 2021, and pay interest seminannually on July 1 and December 31. Terry uses the straight-line method to amortize any discounts or premiums. Oct. 11 Sold all of the Morgan Company securities for $33,000 plus interest of $1,300. Dec. 31 Received interest of $6,000 on the Nance Company and Oscar Company debt securities, and the following yearend total market values were available: Nance Company debt securities, $55,000; Oscar…
Z Corporation has the following transactions relating to its investment during 2020: Jan 5 Acquired 16,000 shares of Y company for P1,500,000 paying an additional P10,000 for brokerage and P5,000 for commission. Feb 14 Received dividends from Y company declared January 10,2020 to the stockholders of records January 31,2020, P16,000. Required:prepare all the necessary entries assuming the investment is 1. Financial asset at Fair Value through profit and loss 2. Financial asset at Fair Value through other comprehensive income