Advanced Accounting
Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
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Chapter 2, Problem 8.1E
To determine

Introduction: Acquisition is a corporate term used to represent purchase of another company and gaining the ownership of the company.

To Prepare: Value analysis, determination and distribution of excess schedule for second purchase in year 2020.

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On January 1, 2020, Sarasota Corporation purchased 20% of the common shares of Ivanhoe Company for $194,000. During the year, Ivanhoe earned net income of $82,000 and paid dividends of $20,500.Prepare the entries for Sarasota to record the purchase and any additional entries related to this investment in Ivanhoe Company in 2020.
On January 1, 2018, Deuce Inc. acquired 15% of Wiz Co's outstanding common stock for $62,400 and categorized the investment as an available-for-sale security. Wiz earned net income of $96,000 in 2018 and paid dividends of $36,000. On January 1, 2019, Deuce bought an additional 10% of Wiz for $54,000. This second purchase gave Deuce the ability to significantly influence the decision making of Wiz. During 2019, Wiz earned $120,000 and paid $48,000 in dividends. As of December 31, 2019, Wiz reported a net book value of $468,000. For both purchases, Deuce concluded that Wiz Co.'s book values approximated fair values and attributed any excess cost to goodwill. What amount of equity income should Deuce have reported for 2019? A) $18,000 B) $16,420 C) $38,340 D) $27,360 E) $32,840
Nascent, Inc., acquires 60 percent of Sea-Breeze Corporation for $414,000 cash on January 1, 2015. The remaining 40 percent of the Sea-Breeze shares traded near a total value of $276,000 both before and after the acquisition date. On January 1, 2015, Sea-Breeze had the following assets and liabilities:The companies’ financial statements for the year ending December 31, 2018, follow:Answer the following questions:a. How can the accountant determine that the parent has applied the initial value method?b. What is the annual excess amortization initially recognized in connection with this acquisition?c. If the parent had applied the equity method, what investment income would the parent have recorded in 2018?d. What amount should the parent report as retained earnings in its January 1, 2018, consolidated balance sheet?e. What is consolidated net income for 2018 and what amounts are attributable to the controlling and noncontrolling interests?f. Within consolidated statements at January 1,…
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