Concept explainers
a.
Identify the amount of excess
b.
Find the amount of
c.
Identify Entry S and Entry A which should be included if a consolidation worksheet is prepared as of January 1, 2016.
d.
Determine the amount of investment income which would be reported for 2016 under each of the following accounting methods:
- The equity method
- The partial equity method
- The initial value method
e.
Identify what would be the December 31, 2018, balance for the Investment in Company T Company account under each of the following accounting methods:
- The equity method
- The partial equity method
- The initial value method
f.
Find the consolidated balance for the Buildings account.
g.
Determine balance of consolidated goodwill as of December 31, 2018.
h.
Determine the consolidated balance of each of these accounts.
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Chapter 4 Solutions
Soft Bound Version for Advanced Accounting 13th Edition
- On January 2, 2014, MARIE CORP. bought 30% of the outstanding ordinary shares of CURIE INC. for P2,580,000 cash. MARIE accounts for this investment by the equity method. At the date of acquisition of the stock, MARIE's net assets had a book and fair value of P6,200,000. CURIE's net profit for the year ended December 31, 2014 was P1,800,000. During 2014, CURIE declared and paid cash dividends of P200,000. CURIE INC. also reported the following changes in equity that were not included in the profit or loss; Unrealized loss on equity investment at fair value to other comprehensive income, P300,000 and a Revaluation surplus on property, plant and equipment, P800,000. On December 31, 2014, how much should MARIE CORP. carry its investment in CURIE INC.?arrow_forwardOn January 1, 2015, Pam Corporation made a significant acquisition, purchasing 75 percent of SamCorporation's outstanding voting stock for a total of $4,200,000. Sam Corporation's stockholders'equity at that time was made up of the following components (all values in thousands):Capital stock with a par value of $10: $2,000Additional paid-in capital: $1200Retained earnings as of December 31, 2014: $1500Total stockholders' equity: $4700The surplus fair value of the net assets obtained from this acquisition was allocated as follows: 10percent to underappreciated inventory (which was subsequently sold in 2015), 40 percent tounderappreciated plant assets with a remaining useful life of eight years, and the remaining 50 percentto goodwill.Fast forward to December 31, 2019, and the comparative trial balances for both Pam Corporation andSam Corporation as follows: Pam SamOther assets—net $5,845 $4500Investment in Sam—75% 3,640 —Expenses (including cost of sales) 5,285 800Dividends 600 300…arrow_forwardAdams Corporation acquired 90 percent of the outstanding voting shares of Barstow, Inc., on December 31, 2016. Adams paid a total of $603,000 in cash for these shares. The 10 percent noncontrolling interest shares traded on a daily basis at fair value of $67,000 both before and after Adams’s acquisition. On December 31, 2016, Barstow had the following account balances: Book Value Fair Value Current assets $ 160,000 $ 160,000 Land 120,000 150,000 Buildings (10-year remaining life) 220,000 200,000 Equipment (5-year remaining life) 160,000 200,000 Patents (10-year remaining life) 0 50,000 Notes payable (due in 5 years) (200,000 ) (180,000 ) Common stock (180,000 ) Retained earnings, 12/31/16 (280,000 ) December 31, 2018, adjusted trial balances for the two companies follow: AdamsCorporation Barstow,Inc. Debits Current assets $ 610,000 $ 250,000 Land…arrow_forward
- On July 1, 2016, Gupta Corporation bought 25% of the outstanding common stock of VB Company for $100 million cash. At the date of acquisition of the stock, VB’s net assets had a total fair value of $350 million and a book value of $220 million. Of the $130 million difference, $20 million was attributable to the appreciated value of inventory that was sold during the last half of 2016, $80 million was attributable to buildings that had a remaining depreciable life of 10 years, and $30 million related to equipment that had a remaining depreciable life of 5 years. Between July 1, 2016, and December 31, 2016, VB earned net income of $32 million and declared and paid cash dividends of $24 million. Required: 1. Prepare all appropriate journal entries related to the investment during 2016, assuming Gupta accounts for this investment by the equity method. 2. Determine the amounts to be reported by Gupta: a. As an investment in Gupta’s December 31, 2016, balance sheet. b. As investment revenue…arrow_forwardOn January 1, 2015 ,Pub Corporation made a significant acquisition, purchasing 75 percent of SubCorporation's outstanding voting stock for a total of $4,200,000. Sub Corporation's stockholders'equity at that time was made up of the following components (all values in thousands):Capital stock with a par value of $10: $2,000Additional paid-in capital: $1200Retained earnings as of December 31, 2014: $1500Total stockholders' equity: $4700The surplus fair value of the net assets obtained from this acquisition was allocated as follows: 10percent to underappreciated inventory (which was subsequently sold in 2015), 40 percent tounderappreciated plant assets with a remaining useful life of eight years, and the remaining 50 percentto goodwill.Fast forward to December 31, 2019, and we have the comparative trial balances for both PubCorporation and Sub Corporation.…arrow_forwardOn January 1, 2015, Pub Corporation made a significant acquisition, purchasing 75 percent of SubCorporation's outstanding voting stock for a total of $4,200,000. Sub Corporation's stockholders'equity at that time was made up of the following components (all values in thousands):Capital stock with a par value of $10: $2,000Additional paid-in capital: $1200Retained earnings as of December 31, 2014: $1500Total stockholders' equity: $4700The surplus fair value of the net assets obtained from this acquisition was allocated as follows: 10percent to underappreciated inventory (which was subsequently sold in 2015), 40 percent tounderappreciated plant assets with a remaining useful life of eight years, and the remaining 50 percentto goodwill.Fast forward to December 31, 2019, and we have the comparative trial balances for both PubCorporation and Sub Corporation. Pub SubOther assets—net $5,845 $4500Investment in Sub—75% 3,640 —Expenses (including cost of sales) 5,285 800Dividends 600 300 $15370…arrow_forward
- On January 1, 2015 ,Pub Corporation made a significant acquisition, purchasing 75 percent of Sub Corporation's outstanding voting stock for a total of $4,200,000. Sub Corporation's stockholders'equity at that time was made up of the following components (all values in thousands):Capital stock with a par value of $10: $2,000Additional paid-in capital: $1200Retained earnings as of December 31, 2014: $1500Total stockholders' equity: $4700The surplus fair value of the net assets obtained from this acquisition was allocated as follows: 10percent to underappreciated inventory (which was subsequently sold in 2015), 40 percent tounderappreciated plant assets with a remaining useful life of eight years, and the remaining 50 percentto goodwill.Fast forward to December 31, 2019, and we have the comparative trial balances for both PubCorporation and Sub Corporation.…arrow_forwardNascent, 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,…arrow_forwardOn July 1, 2015, Cleopatra Corporation acquired 25% of the shares of Marcus, Inc. for P1,000,000. At that date, the equity of Marcus was P4,000,000, with all the identifiable assets and liabilities being measured at amounts equal to fair value. The table below shows the profits and losses made by Marcus during 2015 to 2019: Year Profit (Loss) 2015 200,000 2016 2,000,000 2017 2,500,000 2018 160,000 2019 300,000 How much will the Investment in Associate account be debited/credited in 2018? Group of answer choices P1,060,000 Cr. P1,035,000 Cr. No entry P40,000 Dr.arrow_forward
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