Question
In: Accounting
Davis Corporation acquired 40% of the voting common stock of ABC, Inc. on January 1, 20X2,...
Davis Corporation acquired 40% of the voting common stock of ABC,
Inc. on January 1, 20X2, for $250,000, giving Davis Corporation
significant influence over the operations of ABC, Inc. For the year
ended December 31, 20X2, ABC, Inc.’s audited financial statements
reported a net income of $50,000. Also, ABC, Inc. declared and paid
total dividends to its shareholders of $25,000 on December 31,
20X2. The fair value of the shares purchased by Davis Corporation
was $280,000 on December 31, 20X2.
a) How should Davis Corporation account for its
investment in ABC, Inc.?
b) Prepare the 20X2 journal entries made to account
for the investment on Davis
Corporation’s books.
c) Based on your answers to parts (a) and (b), what
is the balance in the “Investment in
ABC, Inc.” account that will appear in the Statement of Financial
Position on December 31, 20X2? Would your answer be any different
if the Financial Accounting Standards Board’s Statement of
Financial Accounting Standards No. 159, “Fair Value Option for
Financial Assets and Financial Liabilities” were applied?
d) Would any of your journal entries in answer to part (b) have been different if Davis Corporation had acquired 40% of the voting common stock on July 1, 20X2?
Solutions
ekkarill92 answered 2 years agoRelated Solutions
Pop Corporation acquired 70 percent of Soda Company's voting common shares on January 1, 20X2, for...
Pop Corporation acquired 70 percent of Soda Company's voting
common shares on January 1, 20X2, for $118,300. At that date, the
noncontrolling interest had a fair value of $50,700 and Soda
reported $70,000 of common stock outstanding and retained earnings
of $31,000. The differential is assigned to buildings and
equipment, which had a fair value $24,000 higher than book value
and a remaining 10-year life, and to patents, which had a fair
value $44,000 higher than book value and a...
Pop Corporation acquired 70 percent of Soda Company's voting common shares on January 1, 20X2, for...
Pop Corporation acquired 70 percent of Soda Company's voting
common shares on January 1, 20X2, for $119,000. At that date, the
noncontrolling interest had a fair value of $51,000 and Soda
reported $70,000 of common stock outstanding and retained earnings
of $33,000. The differential is assigned to buildings and
equipment, which had a fair value $29,000 higher than book value
and a remaining 10-year life, and to patents, which had a fair
value $38,000 higher than book value and a...
Pop Corporation acquired 70 percent of Soda Company's voting common shares on January 1, 20X2, for...
Pop Corporation acquired 70 percent of Soda Company's voting
common shares on January 1, 20X2, for $118,300. At that date, the
noncontrolling interest had a fair value of $50,700 and Soda
reported $70,000 of common stock outstanding and retained earnings
of $31,000. The differential is assigned to buildings and
equipment, which had a fair value $24,000 higher than book value
and a remaining 10-year life, and to patents, which had a fair
value $44,000 higher than book value and a...
Pop Corporation acquired 70 percent of Soda Company's voting common shares on January 1, 20X2, for $118,300.
Pop Corporation acquired 70 percent of Soda Company's voting common shares on January 1, 20X2, for $118,300. At that date, the noncontrolling interest had a fair value of $50,700 and Soda reported $70,000 of common stock outstanding and retained earnings of $31,000. The differential is assigned to buildings and equipment, which had a fair value $24,000 higher than book value and a remaining 10-year life, and to patents, which had a fair value $44,000 higher than book value and a...
Grant Company acquired 40% of the voting stock of Jake Corporation on January 1, 2016, for...
Grant Company acquired 40% of the voting stock of Jake
Corporation on January 1, 2016, for $50,000,000. Basis differences
were attributed entirely to goodwill. During the 5-year period from
January 1, 2016 through December 31, 2020, Jake reported total net
income of $23,000,000 and paid $8,000,000 in dividends. During
2021, Jake reported net income of $3,000,000 and paid $800,000 in
dividends.
Required:
a. Calculate the balance in Investment in Jake, reported on Grant’s
December 31, 2020 balance sheet.
b. Calculate...
Collins Inc. acquired 100% of the voting common stock of Merton Inc. on January 1, 2010....
Collins Inc. acquired 100% of the voting common stock of Merton
Inc. on January 1, 2010. The book value and fair value of Merton’s
accounts on that date are following. Credit balances are indicated
by parentheses. Collins used the equity method to account for
investment.
Book Value
Fair Value
Cash receivables
140,000
140,000
Inventory
340,000
340,000
Land
440,000
480,000
Buildings (20-year useful life)
480,000
480,000
Equipment (10-year useful life)
180,000
180,000
Liabilities
(860,000)
(860,000)
Common Stock
(160,000)
APIC
(80,000)
Retained...
Bullen Inc. acquired 100% of the voting common stock ofVicker Inc. on January 1, 2018. The...
Bullen Inc. acquired 100% of the voting common stock ofVicker
Inc. on January 1, 2018. The book value and fair value ofVicker's
accounts on that date (prior to creating the combination) are as
follows, along with the book value of Bullen1s accounts:
Bullen
Book Value
Vicker
Book Value
Vicker
Fair Value
Retained earnings,
1/1/2018
$250,000
$240,000
Cash and receivables
170,000
70,000
$70,000
Inventory
230,000
170,000
210,000
Land
280,000
220,000
240,000
Buildings (net)
480,000
240,000
270,000
Equipment (net)
120,000
90,000
90,000...
Liberty Inc. acquired 100% of the voting common stock of Valance Inc. on January 1, 2018...
Liberty Inc. acquired 100% of the voting common stock of Valance
Inc. on January 1, 2018 by issuing 4,000 shares of Liberty Inc. $40
par value common stock that had a fair value of $120 per share.
Valance Inc. will dissolve after the acquisition.
Liberty incurred $40,000 of legal and accounting fees; and paid
$25,000 in stock issuance costs as a result of this acquisition.
The book value and fair value of Valance’s accounts on that date
(prior to creating...
On January 1, 20X1, Warner Corporation purchased 40% of the common stock of ABC Corporation for...
On January 1, 20X1, Warner Corporation purchased 40% of the
common stock of ABC Corporation for $400,000. This purchase gives
Warner a significant influence in ABC?s operations. During the
year, ABC earned total net income of $200,000 and paid total
dividends of $40,000 to common stockholders. The fair market value
of the stock at year end is $450,000. Prepare the required 20X1
journal entries for the Warner Corporation?s purchase of stock in
ABC Corporation:
Brown Corporation holds 70 percent of Transom Company’s voting common stock. On January 1, 20X2, Transom...
Brown Corporation holds 70 percent of Transom Company’s voting
common stock. On January 1, 20X2, Transom paid $360,000 to acquire
a building with a 15-year expected economic life. Transom uses
straight-line depreciation for all depreciable assets. On December
31, 20X7, Brown purchased the building from Transom for $180,000.
Brown reported income, excluding investment income from Transom, of
$135,000 and $150,000 for 20X7 and 20X8, respectively. Transom
reported net income of $12,000 and $48,000 for 20X7 and 20X8,
respectively.
Required:
a....
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- JAVA Write a test program that prompts the user to enter a series of integers and...
- (2) Cite an example on how organizations like Google, Facebook, Youtube etc collect data for image...
- The legal landscape is perpetually changing. Psychologists must remain abreast of these changes to avoid potentially...
- We are evaluating a project that costs $1.68 million, has a six-year life, and has no...
- In C++ Having call-by-reference allows one to use storeback parameters, i.e., parameters whose values are transmitted...
- You must evaluate a proposal to buy a new milling machine. The base price is $175,000,...
- “Triangle Guessing” game in Python The program accepts the lengths of three (3) sides of a...
ADVERTISEMENT