Question

On January 1, 20X8, Patriot Company acquired 100 percent of Stryder Company for $220,000 cash. The trial balances for the two companies on December 31, 20X8, included the following amounts:

	Patriot Corp.							Stryder Corporation
	Debit			Credit				Debit						Credit
Cash	$	50,000								$	30,000
Accounts Receivable		60,000									40,000
Inventory		75,000									80,000
Land		60,000									40,000
Buildings and Equipment		300,000									120,000
Investment in Stryder Company		256,000
Cost of Goods Sold		270,000									170,000
Depreciation Expense		30,000									12,000
Other Expenses		80,000									63,000
Dividends Declared		40,000									15,000
Accumulated Depreciation					$	120,000										$	48,000
Accounts Payable						50,000											27,000
Mortgages Payable						100,000											25,000
Common Stock						200,000											100,000
Retained Earnings						200,000											70,000
Sales						500,000											300,000
Income from Subsidiary						51,000
	$	1,221,000			$	1,221,000				$	570,000					$	570,000

On the acquisition date, Stryder reported net assets with a book value of $170,000. A total of $10,000 of the acquisition price is applied to goodwill, which was not impaired in 20X8. Stryder's depreciable assets had an estimated economic life of 10 years on the date of combination. The difference between fair value and book value of tangible assets is related entirely to buildings and equipment. Patriot used the equity method in accounting for its investment in Stryder. Analysis of receivables and payables revealed that Stryder owed Patriot $10,000 on December 31, 20X8.

25) Based on the information provided, the differential associated with this acquisition is:

A) $36,000.

B) $40,000.

C) $10,000.

D) $50,000.

26) Based on the information provided, the beginning differential assigned to buildings and equipment is:

A) $50,000.

B) $40,000.

C) $10,000.

D) $36,000.

27) Based on the information provided, the annual amortization of the differential assigned to buildings and equipment is:

A) $5,000.

B) $4,000.

C) $10,000.

D) $3,600.

28) Based on the information provided, what amount of retained earnings will be reported in the consolidated financial statements for the year?

A) $331,000

B) $110,000

C) $441,000

D) $456,000

29) Based on the information provided, what amount of net income will be reported in the consolidated financial statements for the year?

A) $226,000

B) $55,000

C) $230,000

D) $171,000

30) Based on the information provided, what amount of total assets will be reported in the consolidated balance sheet for the year?

A) $895,000

B) $801,000

C) $723,000

D) $1,111,000

I bolded each answer. Please expain to me how to get each answer in clear and neat steps using math. thank you

Answer 1

25	The differential associated with this acquisition is:
	Consideration paid for acquisition-cash	$220,000
	Less: Book value of net assets acquired	$170,000
	Differential	$50,000
26	Beginning differential assigned to building and equipment:
	Differential on acquisition	$50,000
	Less: Differential assigned to Goodwill	$10,000
	Differential assigned to building and equipment	$40,000
27	Annual amortization of differential assigned to building and equipment:
	Differential assigned to building and equipment	$40,000
	Estimated economic life	10 years
	Annual Amortization (40000/10)	$4,000
28	Amount of retained earnings that will be reported in the consolidated financial
	statement for the year
	Retained Earnings, 1/1	$200,000
	Add: Consolidated Net Income	$171,000
	Less: Dividend	$40,000
	Retained Earnings, 12/31	$331,000
	Sales	$500,000
	Cost of goods sold	$270,000
	Depreciation expense	$30,000
	Other expenses	$80,000
	Net Income of Patriot Corp.	$120,000
	Net income of Stryder Corp.	$51,000
	Consolidated net income	$171,000
29	Amount of net income that will be reported in the consolidated financial
	Net income of Patriot Corp.	$120,000
	Net income of Stryder Corp.	$51,000
	Consolidated net income	$171,000
30	Amount of total assets that will be reported in the consolidated financial
		Patriot	Stryder	Total
	Cash	$50,000	$30,000	$80,000
	Accounts Receivable	$60,000	$40,000	$100,000
	Inventory	$75,000	$80,000	$155,000
	Land	$60,000	$40,000	$100,000
	Building and equipment	$300,000	$160,000	$460,000
	Accumulated Depreciation	-$120,000	-$52,000	-$172,000
	Goodwill		$10,000	$10,000
	Total Assets			$733,000
	I think there is some typing mistake, total assets will be $733,000
	In building and equipment, differential of $40000 added and in accumulated depreciation
	annual amortization of $4000 is added