Belden, Inc. acquires 30 percent of the outstanding voting shares of Sheffield, Inc. on January 1, 2017, for $312,000, which gives Belden the ability to significantly influence Sheffield. Sheffield has a net book value of $800,000 at January 1, 2017. Sheffield’s asset and liability accounts showed carrying amounts considered equal to fair values except for a copyright whose value accounted for Belden’s excess cost over book value in its 30 percent purchase. The copyright had a remaining life of 16 years at January 1, 2017. No
Sheffield reported net income of $180,000 in 2017 and $230,000 of net income during 2018. Dividends of $70,000 and $80,000 are declared and paid in 2017 and 2018, respectively. Belden uses the equity method.
a. On its 2018 comparative income statements, how much income would Belden report for 2017 and 2018 in connection with the company’s investment in Sheffield?
b. If Belden sells its entire investment in Sheffield on January 1, 2019, for $400,000 cash, what is the impact on Belden’s income?
c. Assume that Belden sells inventory to Sheffield during 2017 and 2018 as follows:
What amount of equity income should Belden recognize for the year 2018?
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Chapter 1 Solutions
GEN COMBO ADVANCED ACCOUNTING; CONNECT ACCESS CARD
- On January 1, 2017, 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 2018. Since being acquired, Rockne has regularly supplied inventory to Doone at 25 percent more than cost. Sales to Doone amounted to $250,000 in 2017 and $300,000 in 2018. 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 2018 income?b. Prepare Doone’s 2018 consolidation entries required by the intra-entity inventory transfers.arrow_forwardMilani, Inc., acquired 10 percent of Seida Corporation on January 1, 2017, for $195,000 and appropriately accounted for the investment using the fair-value method. On January 1, 2018, Milani purchased an additional 30 percent of Seida for $600,000 which resulted in significant influence over Seida. On that date, the fair value of Seida's common stock was $2,000,000 in total. Seida's January 1, 2018 book value equaled $1,850,000, although land was undervalued by $130,000. Any additional excess fair value over Seida's book value was attributable to a trademark with an 8-year remaining life. During 2018, Seida reported income of $332,000 and declared and paid dividends of $101,000. Prepare the 2018 journal entries for Milani related to its investment in Seida. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 1 2 3 4 5 > Record acquisition of Seida stock. Note: Enter debits before…arrow_forwardOn January 1, 2016, Aspen Company acquired 80 percent of Birch Company’s voting stock for $288,000. Birch reported a $300,000 book value, and the fair value of the noncontrolling interest was $72,000 on that date. Then, on January 1, 2017, Birch acquired 80 percent of Cedar Company for $104,000 when Cedar had a $100,000 book value and the 20 percent noncontrolling interest was valued at $26,000. In each acquisition, the subsidiary’s excess acquisition-date fair over book value was assigned to a trade name with a 30-year remaining life.These companies report the following financial information. Investment income figures are not included.Assume that each of the following questions is independent:a. If all companies use the equity method for internal reporting purposes, what is the December 31, 2017, balance in Aspen’s Investment in Birch Company account?b. What is the consolidated net income for this business combination for 2018?c. What is the net income attributable to the…arrow_forward
- On January 1, 2016, Aspen Company acquired 80 percent of Birch Company's voting stock for $480,000. Birch reported a $495,000 book value and the fair value of the noncontrolling interest was $120,000 on that date. Then, on January 1, 2017, Birch acquired 80 percent of Cedar Company for $168,000 when Cedar had a $165,000 book value and the 20 percent noncontrolling interest was valued at $42,000. In each acquisition, the subsidiary's excess acquisition-date fair over book value was assigned to a trade name with a 30-year remaining life. These companies report the following financial information. Investment income figures are not included. 2016 2017 2018 Sales: Aspen Company $ 472,500 $ 645,000 $ 850,000 Birch Company 262,250 337,500 607,300 Cedar Company Not available 233,800 251,600 Expenses: Aspen Company $ 397,500 $ 642,500 $ 690,000 Birch Company 205,000 267,000 520,000 Cedar Company Not available 219,000…arrow_forwardBorn Company acquires an 80% interest in Roland Company for $660,000 cash on January 1, 2017. The NCI has a fair value of $165,000. Any excess of cost over book value is attributed to goodwill. To help pay for the acquisition, Born Company issues 5,000 shares of its common stock with a fair value of $70 per share. Roland’s balance sheet on the date of the purchase is as follows: Assets Liabilities and Equity Cash . . . . . . . . . . . . . . . . . . . . $ 20,000 Inventory . . . . . . . . . . . . . . . . 140,000 Property, plant, andequipment (net). . . . . . . . . . 550,000 Total assets . . . . . . . . . . . . . $710,000 Current liabilities . . . . . . . $110,000 Bonds payable . . . . . . . . . 100,000 Common stock ($10 par) . . 200,000 Retained earnings . . . . .. . . 300,000 Total liabilities and equity $710,000 Controlling share of net income for 2017 is $150,000, net of the noncontrolling interest of $10,000. Born declares and pays dividends of $10,000, and Roland…arrow_forwardOn January 1, 2016, Aspen Company acquired 80 percent of Birch Company's voting stock for $428,000. Birch reported a $445,000 book value and the fair value of the noncontrolling interest was $107,000 on that date. Then, on January 1, 2017, Birch acquired 80 percent of Cedar Company for $176,000 when Cedar had a $193,000 book value and the 20 percent noncontrolling interest was valued at $44,000. In each acquisition, the subsidiary's excess acquisition-date fair over book value was assigned to a trade name with a 30-year remaining life. These companies report the following financial information. Investment income figures are not included. 2016 2017 2018 Sales: Aspen Company $ 572,500 $ 625,000 $ 767,500 Birch Company 255,750 363,250 582,600 Cedar Company Not available 231,900 267,000 Expenses: Aspen Company $ 390,000 $ 607,500 $ 722,500 Birch Company 193,000 289,000 517,500 Cedar Company Not available 217,000…arrow_forward
- On January 1, 2016, Aspen Company acquired 80 percent of Birch Company's voting stock for $372,000. Birch reported a $360,000 book value and the fair value of the noncontrolling interest was $93,000 on that date. Then, on January 1, 2017, Birch acquired 80 percent of Cedar Company for $180,000 when Cedar had a $126,000 book value and the 20 percent noncontrolling interest was valued at $45,000. In each acquisition, the subsidiary's excess acquisition-date fair over book value was assigned to a trade name with a 30-year remaining life. These companies report the following financial information. Investment income figures are not included. 2016 2017 2018 Sales: Aspen Company $ 517,500 $ 655,000 $ 910,000 Birch Company 272,000 344,250 575,400 Cedar Company Not available 171,900 288,600 Expenses: Aspen Company $ 425,000 $ 545,000 $ 747,500 Birch Company 231,000 266,000 495,000 Cedar Company Not available 161,000 249,000…arrow_forwardOn January 1, 2017, Doone Corporation acquired 60 percent of the outstanding voting stock of Rockne Company for $312,000 consideration. At the acquisition date, the fair value of the 40 percent noncontrolling interest was $208,000 and Rockne's assets and liabilities had a collective net fair value of $520,000. Doone uses the equity method in its internal records to account for its investment in Rockne. Rockne reports net income of $150,000 in 2018. Since being acquired, Rockne has regularly supplied inventory to Doone at 25 percent more than cost. Sales to Doone amounted to $210,000 in 2017 and $310,000 in 2018. Approximately 35 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 2018 income? b. Prepare Doone's 2018 consolidation entries required by the intra-entity inventory transfers. Complete this question by entering your answers in the tabs below. Required A Required B What is the…arrow_forwardLegan, Inc., acquired 10 percent of Barta Corporation on January 1, 2017, for $186,000 and appropriately accounted for the investment using the fair-value method. On January 1, 2018, Legan purchased an additional 30 percent of Barta for $661,000 which resulted in significant influence over Barta. On that date, the fair value of Barta’s common stock was $2,030,000 in total. Barta’s January 1, 2018 book value equaled $1,880,000, although land was undervalued by $135,000. Any additional excess fair value over Barta's book value was attributable to a trademark with an 8-year remaining life. During 2018, Barta reported income of $345,000 and declared and paid dividends of $100,000. Prepare the 2018 journal entries for Legan related to its investment in Barta.arrow_forward
- Dunker Company purchases an 80% interest in the common stock of Fennig Company for $850,000 on January 1, 2017. The fair value of the NCI is $212,500. At the time of the purchase, the total stockholders’ equity of Fennig is $968,750. The price paid is $75,000 in excess of the book value of the controlling portion of Fennig equity. The excess is attributed to a patent with a 10-year life.During 2019, Dunker Company and Fennig Company report the following internally generated income before taxes: Dunker Company Fennig CompanySales . . . . . . . . . . . . . . . . . . . . . . . . . . $ 300,000 $120,000Cost of goods sold . . . . . . . . .. . . . . (200,000) (90,000)Gain on machine. . . . . . . . . . . . . . . . . . 5,000Expenses . . . . . . . . . . . . . . . . . . . . . . . . (40,000) (20,000)Income before taxes . . . . . .. . . . . . . $ 65,000 $ 10,000Fennig…arrow_forwardBrown purchases 30% of Orange Company on Jan. 1, 2016 for $300,000. This acquisition gave Brown the ability to exercise signiticant influence over Oranges operating and financing policies. Orange reports assets on that date of $800,000 with liabilities of $250,000. One building with a 10-year remaining life is undervalued on Orange's books by $70,000 while the book value for its trademark (7-year remaining life) is undervalued by $105,000. During the year, Orange reports net income of $45,000 while declaring dividends of $15,000. Requirement: Prepare 2016 journal entries.arrow_forwardBaker Company acquires an 80%interest in the common stock of Cain Company for $440,000 on January 1, 2015. The price is equal to the book value of the interest acquired. Baker Company maintains its investment in Cain Company under the cost method. Able Company acquires a 60% interest in the common stock of Baker Company on January 1, 2019, for $2,700,000. Any excess of cost is attributable to Cain Company equipment, which is understated by $80,000, and a Baker Company building, which is understated by $200,000. Any remaining excess is considered goodwill. Relevant stockholders’ equities are as follows:(see attached)1. Prepare a determination and distribution of excess schedule for Able Company’s investment in Baker Company. 2. On January 1, 2020, Cain Company sells a machine with a net book value of $35,000 to Able Company for $60,000. The machine has a 5-year life. Prepare the eliminations and adjustments needed on the December 31, 2021, trial balance worksheet that relate to this…arrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning