Fundamentals of Advanced Accounting
Fundamentals of Advanced Accounting
7th Edition
ISBN: 9781259722639
Author: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik
Publisher: McGraw-Hill Education
Question
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Chapter 2, Problem 26P
To determine

Find the consolidated balances for the following accounts.

a. Net income

b. Retained earnings, 1/1/17

c. Patented technology

d. Goodwill

e. Liabilities

f. Common stock

g. Additional paid-in capital.

Expert Solution & Answer
Check Mark

Answer to Problem 26P

 AccountsConsolidated value
a.Net income $        210,000
b.Retained earnings, 1/1/17 $        800,000
c.Patented technology $     1,180,000
d.Goodwill $        50,000
e.Liabilities $     1,210,000
f.Common stock $        510,000
g.Additional paid-in capital $        680,000

Table: (1)

Explanation of Solution

The consolidated balances are as follows:

 AccountsBook values in Company PFair values in Company SConsolidated value
a.Net income (1)   $        210,000
b.Retained earnings, 1/1/17 $       800,000  $        800,000
c.Patented technology $       900,000 $      280,000 $     1,180,000
d.Goodwill (2) $        50,000
e.Liabilities (3) $       500,000 $      410,000 $     1,210,000
f.Common stock (4)   $        510,000
g.Additional paid-in capital (5)   $        680,000

Table: (2)

Working note:

Computation of net income:

Netincome=NetincomeinbooksofCompanyWBroker'sfees=$240,000$30,000=$210,000 (1)

Computation of Goodwill:

ParticularsAmountAmount

Consideration paid ($300,000)+(15,000×$40)

 $ 900,000
Cash $    110,000 
Receivables $  170,000 
Patented Technology (net) $    280,000 
Equipment (net) $    700,000 
Liabilities$    (410,000)
Fair value of net identifiable assets  $ 850,000
Goodwill  $   80,000 (2)

Table: (3)

Computation of liabilities:

Liabilities=LiabilitiesinthebooksofCompanyW+Debtissued+LiabilitiesinthebooksofCompanyB=$500,000+$410,000+$300,000=$1,210,000 (3)

Computation of Common Stock:

Commonstock=CommonstockinthebooksofCompanyW+Stockissued=$360,000+(15,000×$10)=$510,000 (4)

Computation of Additional paid-in capital:

Additional paid-in capital=Additional paid-in capitalinthebooksofCompanyW+Additional paid-in capitalonstockissuedStockissuecosts=$270,000+(15,000×$30)$40,000=$680,000 (5)

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