Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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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…
On January 1, 2018, 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:In Marshall’s appraisal of Tucker, it deemed three accounts to be undervalued on the subsidiary’s books: Inventory by $5,000, Land by $20,000, and Buildings by $30,000. Marshall plans to maintain Tucker’s separate legal identity and to operate Tucker as a wholly owned subsidiary.a. Determine the amounts that Marshall Company would report in its postacquisition balance sheet. In preparing the postacquisition balance sheet, any required adjustments to income accounts…
On January 1, 2021, the Moody Company entered into a transaction for 100% of the outstanding common stock of Osorio Company. To acquire these shares, Moody issued $400 in long-term liabilities and also issued 40 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Moody paid $20 to lawyers, accountants, and brokers for assistance in bringing about this acquisition. Another $15 was paid in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows:
Moody
Osorio
Cash
$
180
$
40
Receivables
810
180
Inventories
1,080
280
Land
600
360
Buildings (net)
1,260
440
Equipment (net)
480
100
Accounts payable
(450
)
(80
)
Long-term liabilities
(1,290
)
(400
)
Common stock ($1 par)
(330
)
Common stock ($20 par)
(240
)
Additional paid-in capital
(1,080
)
(340
)
Retained…
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- On January 1, 2018, 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 $20 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 Company Book Value Tucker Company Book Value Cash $ 60,000 $ 20,000 Receivables 270,000 90,000 Inventory 360,000 140,000 Land…arrow_forwardOn January 1, 2021, the Moody Company entered into a transaction for 100% of the outstanding common stock of Osorio Company. To acquire these shares, Moody issued $400 in long-term liabilities and also issued 40 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Moody paid $20 to lawyers, accountants, and brokers for assistance in bringing about this acquisition. Another $15 was paid in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows: Moody Osorio Cash $ 180 $ 40 Receivables 810 180 Inventories 1,080 280 Land 600 360 Buildings (net) 1,260 440 Equipment (net) 480 100 Accounts payable (450 ) (80 ) Long-term liabilities (1,290 ) (400 ) Common stock ($1 par) (330 ) Common stock ($20 par) (240 ) Additional paid-in capital (1,080 ) (340 ) Retained…arrow_forwardOn January 1, 2024, the Moody Company entered into a transaction for 100% of the outstanding common stock of Osorio Company. To acquire these shares, Moody issued $400 in long- term liabilities and also issued 40 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Moody paid $20 to lawyers, accountants, and brokers for assistance in bringing about this acquisition. Another $15 was paid in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows: Cash Receivables Inventories Land Buildings (net) Equipment (net) Accounts payable Long-term liabilities. Common stock ($1 par) Common stock ($20 par) Additional paid-in capital Retained earnings Note: Parentheses indicate a credit balance. Multiple Choice O $1,760 In Moody's appraisal of Osorio, three assets were deemed to be undervalued on the subsidiary's books: Inventory by $10, Land by $40, and Buildings by $60. Compute the amount of…arrow_forward
- On January 1, 2024, the Moody Company entered into a transaction for 100% of the outstanding common stock of Osorio Company. To acquire these shares, Moody issued $400 in long- term liabilities and also issued 40 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Moody paid $20 to lawyers, accountants, and brokers for assistance in bringing about this acquisition. Another $15 was paid in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows: Cash Receivables Inventories Land Buildings (net) Equipment (net) Accounts payable Long-term liabilities Common stock ($1 par) Common stock ($20 par) Additional paid-in capital Retained earnings Note: Parentheses indicate a credit balance. Moody $ 180 810 1,080 600 1,260 480 (450) (1,290) (330) (1,080) (1,260) Osorio $40 180 280 360 440 100 (80) (400) (240) (340) (340) In Moody's appraisal of Osorio, three assets were deemed to be…arrow_forwardOn January 1, 2024, Presidio Company acquired 100 percent of the outstanding common stock of Mason Company. To acquire these shares, Presidio issued to the owners of Mason $310,000 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. Presidio paid $24,000 to accountants, lawyers, and brokers for assistance in the acquisition and another $9,000 in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows: Items Presidio Company Cash Receivables $ 75,000 354,000 Mason Company $ 38,800 90,000 Inventory Land 380,000 229,000 246,000 253,000 Buildings (net) 476,000 274,000 Equipment (net) 174,000 50,400 Accounts payable Long-term liabilities Common stock-$1 par value (241,000) (41,400) (480,000) (310,000) (110,000) 0 Common stock-$20 par value Additional paid-in capital Retained earnings, 1/1/24 0 (120,000) (360,000) (514,000) 0 (463,800) Note:…arrow_forwardOn January 1, 2024, Presidio Company acquired 100 percent of the outstanding common stock of Mason Company. To acquire these shares, Presidio issued to the owners of Mason $273,000 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. Presidio paid $21,000 to accountants, lawyers, and brokers for assistance in the acquisition and another $6,000 in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows: Cash Items Presidio Company $ 62,100 $ 38,400 344,000 386,000 276,000 170,000 150,000 222,000 233,000 58,500 (66,300) 441,000 11 205,000 (192,000) (507,000) (273,000) (110,000) 0 (120,000) (360,000) (545,100) (412,600) Mason Company Receivables Inventory Land Buildings (net) Equipment (net) Accounts payable Long-term liabilities Common stock-$1 par value Common stock-$20 par value Additional paid-in capital Retained earnings, 1/1/24 Note:…arrow_forward
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- On January 1, 2023, Fisher Corporation purchased 40 percent (80,000 shares) of the common stock of Bowden, Incorporated, for $978,000 in cash and began to use the equity method for the investment. The price paid represented a $66,000 payment in excess of the book value of Fisher's share of Bowden's underlying net assets. Fisher was willing to make this extra payment because of a recently developed patent held by Bowden with a 15-year remaining life. All other assets were considered appropriately valued on Bowden's books. Bowden declares and pays a $104,000 cash dividend to its stockholders each year on September 15. Bowden reported net income of $408,000 in 2023 and $358,000 in 2024. Each income figure was earned evenly throughout its respective years. On July 1, 2024, Fisher sold 10 percent (20,000 shares) of Bowden's outstanding shares for $340,000 in cash. Although it sold this interest, Fisher maintained the ability to significantly influence Bowden's decision-making process.…arrow_forwardOn January 1, 2021, Johnsonville Enterprises, Inc., acquired 80 percent of Stayer Company's outstanding common shares in exchange for $3,000,000 cash. The price paid for the 80 percent ownership interest was proportionately representative of the fair value of all of Stayer's shares. At acquisition date, Stayer's books showed assets of $4,200,000 and liabilities of $1,600,000. The recorded assets and liabilities had fair values equal to their individual book values except that a building (10-year remaining life) with book value of $195,000 had an appraised fair value of $345,000. Stayer's books showed a $175,500 carrying amount for this building at the end of 2021. Also, at acquisition date Stayer possessed unrecorded technology processes (zero book value) with an estimated fair value of $1,000,000 and a 20-year remaining life. For 2021, Johnsonville reported net income of $650,000 (before recognition of Stayer's income), and Stayer separately reported earnings of $350,000. During 2021,…arrow_forwardOn January 1, 2023, Fisher Corporation purchased 40 percent (70,000 shares) of the common stock of Bowden, Incorporated, for $974,000 in cash and began to use the equity method for the investment. The price paid represented a $60,000 payment in excess of the book value of Fisher's share of Bowden's underlying net assets. Fisher was willing to make this extra payment because of a recently developed patent held by Bowden with a 15-year remaining life. All other assets were considered appropriately valued on Bowden's books. Bowden declares and pays a $102,000 cash dividend to its stockholders each year on September 15. Bowden reported net income of $390,000 in 2023 and $342,000 in 2024. Each income figure was earned evenly throughout its respective years. On July 1, 2024, Fisher sold 10 percent (17,500 shares) of Bowden's outstanding shares for $332,000 in cash. Although it sold this interest, Fisher maintained the ability to significantly influence Bowden's decision-making process.…arrow_forward
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