Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2020, in exchange for $6,162,000 in cash. Allison intends to maintain Mathias as a wholly owned subsidiary. Both companies have December 31 fiscal year-ends. At the acquisition date, Mathias’s stockholders’ equity was $2,070,000 including retained earnings of $1,570,000.
At the acquisition date, Allison prepared the following fair-value allocation schedule for its newly acquired subsidiary:
Consideration transferred $ 6,162,000
Mathias stockholders' equity 2,070,000
Excess fair over book value $ 4,092,000
to unpatented technology (8-year remaining life) $ 912,000
to patents (10-year remaining life) 2,640,000
to increase long-term debt (undervalued, 5-year remaining life) (170,000 ) 3,382,000
Goodwill $ 710,000
Postacquisition, Allison employs the equity method to account for its investment in…
Alfonso Inc. acquired 100 percent of the voting shares of BelAire Company on January 1, 2020. In exchange, Alfonso paid $326,750 in cash and issued 100,000 shares of its own $1 par value common stock. On this date, Alfonso’s stock had a fair value of $15 per share. The combination is a statutory merger with BelAire subsequently dissolved as a legal corporation. BelAire’s assets and liabilities are assigned to a new reporting unit.
The following shows fair values for the BelAire reporting unit for January 1, 2020 along with respective carrying amounts on December 31, 2021.
BelAire Reporting Unit
Fair Values1/1/20
Carrying Amounts12/31/21
Cash
$
99,500
$
51,500
Receivables
196,000
246,500
Inventory
215,000
261,500
Patents
731,000
840,500
Customer relationships
617,250
590,000
Equipment (net)
322,500
241,000
Goodwill
?
436,000
Accounts payable
(176,000
)
(256,000
)
Long-term liabilities
(614,500
)…
Alfonso Inc. acquired 100 percent of the voting shares of BelAire Company on January 1, 2020. In exchange, Alfonso paid $461,000 in
cash and issued 100,000 shares of its own $1 par value common stock. On this date, Alfonso's stock had a fair value of $15 per share.
The combination is a statutory merger with BelAire subsequently dissolved as a legal corporation. BelAire's assets and liabilities are
assigned to a new reporting unit.
The following shows fair values for the BelAire reporting unit for January 1, 2020 along with respective carrying amounts on December
31, 2021.
TT
Fair Values
1/1/20
$
Carrying Amounts
BelAire Reporting Unit
Cash
12/31/21
$
89,000
189,750
218,750
776, 500
586,000
355,000
48,000
243,000
258,000
860,000
546,000
269,000
452,000
(184,000)
(518,000)
Receivables
Inventory
Patents
Customer relationships
Equipment (net)
Goodwill
Accounts payable
Long-term liabilities
(114,500)
(591,500)
Note: Parentheses indicate a credit balance.
a. Prepare Alfonso's journal entry…
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- Alfonso Inc. acquired 100 percent of the voting shares of BelAire Company on January 1, 2020. In exchange, Alfonso paid $263,500 in cash and issued 100,000 shares of its own $1 par value common stock. On this date, Alfonso's stock had a fair value of $15 per share. The combination is a statutory merger with BelAire subsequently dissolved as a legal corporation. BelAire's assets and liabilities are assigned to a new reporting unit. The following shows fair values for the BelAire reporting unit for January 1, 2020 along with respective carrying amounts on December 31, 2021. BelAire Reporting Unit Cash Receivables Inventory Patents Customer relationships Equipment (net) Goodwill Accounts payable Long-term liabilities Note: Parentheses indicate credit balance. Fair Values 1/1/20 68,000 182,500 219,000 $ 371,500 603,500 404,500 ? (123,500) (524,000) Carrying Amounts $ 12/31/21 41,000 236,000 251,000 467,000 574,000 339,000 562,000 (188,000) (452,000) a. Prepare Alfonso's journal entry to…arrow_forwardOn December 31, 2020, Yang issued 55,000 new shares of its $10 par value stock in exchange for all the outstanding shares of Martinez. Yang's shares had a fair value on that date of $30 per share. Yang paid $33,000 to an investment bank for assisting in the arrangements. Yang also paid $22,000 in stock issuance costs to effect the acquisition of Martinez. Martinez will retain its incorporation. Required: a) Prepare the journal entry to record the issuance. of stock by Yang to execute the purchase. b) Prepare the journal entry to record the payment of the combination costs.arrow_forwardAllison Corporation acquired all of the outstanding voting stock of Mathias, Incorporated, on January 1, 2023, in exchange for $6,059,500 in cash. Allison intends to maintain Mathias as a wholly owned subsidiary. Both companies have December 31 fiscal year-ends. At the acquisition date, Mathias’s stockholders’ equity was $2,045,000 including retained earnings of $1,545,000. At the acquisition date, Allison prepared the following fair-value allocation schedule for its newly acquired subsidiary: Consideration transferred $ 6,059,500 Mathias stockholders' equity 2,045,000 Excess fair over book value $ 4,014,500 to unpatented technology (8-year remaining life) $ 872,000 to patents (10-year remaining life) 2,590,000 to increase long-term debt (undervalued, 5-year remaining life) (145,000) 3,317,000 Goodwill $ 697,500 Postacquisition, Allison employs the equity method to account for its investment in Mathias. During the two years following the business…arrow_forward
- ABC Inc. purchased 35,000 voting shares out of 123 Inc.'s 50,000 outstanding voting shares for $350,000 on January 1, 2020. On the date of acquisition, 123's common shares and retained earnings were valued at $120,000 and $180,000, respectively. 123's book values approximated its fair values on the acquisition date with the exception of a patent and a trademark, neither of which had been previously recorded. The fair values of the patent and trademark on the date of acquisition were $30,000 and $20,000 respectively. On January 2, 2020, ABC sold 7,000 shares of 123 on the open market for $57,750. ABC Inc. uses the equity method to account for its investment in 123 Inc. What is the carrying value of the trademark after the sale? A. $12,600 B. $18,000 C. $20,000 D. $30,000arrow_forwardMidlothian acquires 100 percent of the outstanding voting shares of Cedar Company on January 1, 2020. To obtain these shares, Midlothian pays $400,000 cash and issues 20,000 shares of $1 par value common stock on this date. Midlothian's stock had a fair value of $10 per share. Midlothian also pays an additional $3,000 in stock issuance costs. At date of acquisition, the book values and fair values of Cedar's net assets amounted to $450,000 and $520,000, respectively. How much additional paid-in capital was recorded as a result of the combination? Select one: O A. $180,000 O B. $177,000 C. $197,000 0 D. $200,000arrow_forwardOn January 1, 2020, Doone Corporation acquired 80 percent of the outstanding voting stock of Rockne Company for $448,000 consideration. At the acquisition date, the fair value of the 20 percent noncontrolling interest was $112,000, and Rockne's assets and liabilities had a collective net fair value of $560,000. Doone uses the equity method in its internal records to account for its investment in Rockne. Rockne reports net income of $170,000 in 2021. Since being acquired, Rockne has regularly supplied inventory to Doone at 25 percent more than cost. Sales to Doone amounted to $230,000 in 2020 and $330,000 in 2021. Approximately 30 percent of the inventory purchased during any one year is not used until the following year. What is the noncontrolling interest's share of Rockne's 2021 income?arrow_forward
- On January 1, 2020, Doone Corporation acquired 80 percent of the outstanding voting stock of Rockne Company for $544,000 consideration. At the acquisition date, the fair value of the 20 percent noncontrolling interest was $136,000, and Rockne's assets and liabilities had a collective net fair value of $680,000. Doone uses the equity method in its internal records to account for its investment in Rockne. Rockne reports net income of $230,000 in 2021. Since being acquired, Rockne has regularly supplied inventory to Doone at 25 percent more than cost. Sales to Doone amounted to $290,000 in 2020 and $390,000 in 2021. Approximately 30 percent of the inventory purchased during any one year is not used until the following year. What is the noncontrolling interest's share of Rockne's 2021 income? Prepare Doone's 2021 consolidation entries required by the intra-entity inventory transfers.arrow_forwardOn January 1, 2019, GRANGER Co. acquired 80% interest in HISTORIA, Inc. by issuing 5,000 shares with fair value of P30 per share and par value of P20 per share. The financial statements of GRANGER Co. and HISTORIA, Inc. immediately after the acquisition are shown in the image. On January 1, 2019, the fair value of the assets and liabilities of HISTORIA, Inc. were determined by appraisal, show in the image. The equipment has a remaining useful life as of 4 years from January 1, 2019. Prepare the consolidated statement of financial position as at January 1, 2019. GRANGER Co. elects to measure non-controlling interest as its proportionate share in HISTORIA’s net identifiable assets.arrow_forwardOn January 1, 2020, 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 2021. Since being acquired, Rockne has regularly supplied inventory to Doone at 25 percent more than cost. Sales to Doone amounted to $250,000 in 2020 and $300,000 in 2021. Approximately 30 percent of the inventory purchased during any one year is not used until the following year. a) What is the non controlling interest's share of Rockne's 2021 income? b) Prepare Doone's 2021 consolidation entries required by the intra-entity inventory transfers.arrow_forward
- Santo, Inc. acquired 30% of Nino Corp.'s voting stock on January 1, 2019 for P360,000. During 2019, Nino earned P150,000 and paid dividends of P90,000. Santo's 30% interest in Nino gives Santo the ability to exercise significant influence over Nino's operating and financial policies. During 2020, Nino earned P180,000 and paid dividends of P60,000 on April 1 and P60,000 on October 1. On July 1, 2020, Santo sold half of its stock in Nino for its fair value of P237,000. Thereafter, Santo, Inc. designated the investment as FVTOCI. The remaining shares of Nino Corp. held by Santo, Inc. have a fair value of P220,000 at December 31, 2020. The gain on remeasurement of the retained investment is Group of answer choices: P48,000 P57,000 Nil P43,500arrow_forwardSanto, Inc. acquired 30% of Nino Corp.'s voting stock on January 1, 2019 for P360,000. During 2019, Nino earned P150,000 and paid dividends of P90,000. Santo's 30% interest in Nino gives Santo the ability to exercise significant influence over Nino's operating and financial policies. During 2020, Nino earned P180,000 and paid dividends of P60,000 on April 1 and P60,000 on October 1. On July 1, 2020, Santo sold half of its stock in Nino for its fair value of P237,000. Thereafter, Santo, Inc. designated the investment as FVTOCI. The remaining shares of Nino Corp. held by Santo, Inc. have a fair value of P220,000 at December 31, 2020. The gain on remeasurement of the retained investment is P48,000 Nil P43,500 P57,000arrow_forwardSanto, Inc. acquired 30% of Nino Corp.'s voting stock on January 1, 2019 for P360,000. During 2019, Nino earned P150,000 and paid dividends of P90,000. Santo's 30% interest in Nino gives Santo the ability to exercise significant influence over Nino's operating and financial policies. During 2020, Nino earned P180,000 and paid dividends of P60,000 on April 1 and P60,000 on October 1. On July 1, 2020, Santo sold half of its stock in Nino for its fair value of P237,000. Thereafter, Santo, Inc. designated the investment as FVTOCI. The remaining shares of Nino Corp. held by Santo, Inc. have a fair value of P220,000 at December 31, 2020. The gain on remeasurement of the retained investment is choices: A) Nil B) P57,000 C) P48,000 D) P43,500arrow_forward
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