Question

Haynes, Inc., obtained 100 percent of Turner Company’s common stock on January 1, 2020, by issuing 10,800 shares of $10 par value common stock. Haynes’s shares had a $15 per share fair value. On that date, Turner reported a net book value of $119,550. However, its equipment (with a five-year remaining life) was undervalued by $8,150 in the company’s accounting records. Also, Turner had developed a customer list with an assessed value of $34,300, although no value had been recorded on Turner’s books. The customer list had an estimated remaining useful life of 10 years. The following balances come from the individual accounting records of these two companies as of December 31, 2020: Haynes Turner Revenues $ (698,000 ) $ (340,000 ) Expenses 482,000 201,000 Investment income Not given 0 Dividends declared 110,000 60,000 The following balances come from the individual accounting records of these two companies as of December 31, 2021: Haynes Turner Revenues $ (873,000 ) $ (400,250 ) Expenses 511,100 239,300 Investment income Not given 0 Dividends declared 130,000 40,000 Equipment 570,000 323,000 a. What balance does Haynes’s Investment in Turner account show on December 31, 2021, when the equity method is applied? b. What is the consolidated net income for the year ending December 31, 2021? c-1. What is the consolidated equipment balance as of December 31, 2021? c-2. Would this answer be affected by the investment method applied by the parent? d. Prepare entry *C for the beginning of the Retained Earnings account on a December 31, 2021 by using initial value, partial equity and equity method.

Answer 1

a	An allocation of the acquisition price -based on the fair value of the shares issued .
	Acquisition Fair Value paid by Haynes*
	Book Value Equivalence	$162,000
	Excess of Turner fair value over book value	($119,550)
	Excess of Turner fair value over book value	$42,450
	* Acquisition Fair Value	$119,550+$8,150+$34,300
		$162,000
		Excess Fair Value assigned to specific accounts based on Fair Value	Life	Annual Excess Amortization
	Equipment	$8,150	5 Yrs	$1,630
	Customer List	$34,300	10 Yrs	$3,430
				$5,060
	Acquisition fair value 2020			$162,000
	Income Accrual 2020 (Rev-Exp)			$139,000
	(340,000-201,000)
	Dividend declared by Turner			($60,000)
	2020 Amortization above			($5,060)
	2021 Income Accrual
	(400,250-239,300)			160,950
	2021 dividend declared by turner			($40,000)
	2021 Amortization			($5,060)
	Investment in Turner account Balance			$351,830
b	Consolidated Net Income for yr ending 31 Dec 2021
	Net Income of Haynes	(873,000-511,100)		$361,900
	Net Income of Turner	(400,250-239,300)		$160,950
	Depreciation Expenses			($1,630)
	Amortization Expenses			($3,430)
	Consolidated Net Income 2021			$517,790
c-1	Consolidated Equipment Balance as on Dec 31 2021
	Equipment Balance Haynes			$570,000
	Equipment Balance Turner			$323,000
	Allocation based on fair value -above			$8,150
	Depreciation for 2020-2021	1,630*2		($3,260)
	Consolidated Equipment Balance as on Dec 31 2021			$897,890
c-2	Parent Choice of an investment method has no impact on consolidated totals
d		Journal Entries
	Date	Account Title		Debit-$	Credit-$
	12/31/2021	Investment in Turner		$73,940
		Retained Earnings			$73,940
		($139,000-$60,000-$5,060)
	12/31/2021	Retained Earnings		$5,060
		To Investment in Turner			$5,060
	12/31/2021	No Entry is required

Please give me a Thumbs up ?.Thanks!!