Question

In: Accounting

On January 1, 2018, Pomegranate Company acquired 90% of the voting stock of Starfruit Company for...

On January 1, 2018, Pomegranate Company acquired 90% of the voting stock of Starfruit Company for $91,700,000 in cash. The fair value of the noncontrolling interest in Starfruit at the date of acquisition was $6,300,000. Starfruit’s book value was $13,000,000 at the date of acquisition. Starfruit’s assets and liabilities were reported on its books at values approximating fair value, except its plant and equipment (10-year life, straight-line) was overvalued by $25,000,000. Starfruit Company had previously unreported intangible assets, with a market value of $40,000,000 and 5-year life, straight-line, which were capitalized following GAAP.

Additional information: Pomegranate uses the complete equity method to account for its investment in Starfruit on its own books. Goodwill recognized in this acquisition was impaired by a total of $2,000,000 in 2018 and 2019, and by $500,000 in 2020. It is now December 31, 2020, the accounting year-end.

Here is Starfruit Company’s trial balance at December 31, 2020:

Dr (Cr)

Current assets $28,200,000

Plant & equipment, net 188,000,000

Intangibles 2,000,000

Liabilities (180,000,000)

Capital stock (1,000,000)

Retained earnings, January 1 (29,500,000)

Acumulated other comprehensive income, January 1 (500,000)

Dividends 400,000

Sales revenue (24,000,000)

Cost of goods sold 10,000,000

Operating expenses 6,500,000

Other comprehensive income (100,000)

$ 0

Question: On the 2020 consolidation working paper, eliminating entry (R) reduces the Investment in Starfruit by

$ 3,600,000

$64,800,000

$68,200,000

$81,000,000

Solutions

Expert Solution

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

On January 1, 2018, Pomegranate Company acquired 90% of the voting stock of Starfruit Company for...
On January 1, 2018, Pomegranate Company acquired 90% of the voting stock of Starfruit Company for $91,700,000 in cash. The fair value of the noncontrolling interest in Starfruit at the date of acquisition was $6,300,000. Starfruit’s book value was $13,000,000 at the date of acquisition. Starfruit’s assets and liabilities were reported on its books at values approximating fair value, except its plant and equipment (10-year life, straight-line) was overvalued by $25,000,000. Starfruit Company had previously unreported intangible assets, with a...
On January 1, 2018, Pomegranate Company acquired 90% of the voting stock of Starfruit Company for...
On January 1, 2018, Pomegranate Company acquired 90% of the voting stock of Starfruit Company for $91,700,000 in cash. The fair value of the noncontrolling interest in Starfruit at the date of acquisition was $6,300,000. Starfruit’s book value was $13,000,000 at the date of acquisition. Starfruit’s assets and liabilities were reported on its books at values approximating fair value, except its plant and equipment (10-year life, straight-line) was overvalued by $25,000,000. Starfruit Company had previously unreported intangible assets, with a...
On January 1, 2018, Pomegranate Company acquired 90% of the voting stock of Starfruit Company for...
On January 1, 2018, Pomegranate Company acquired 90% of the voting stock of Starfruit Company for $91,700,000 in cash. The fair value of the noncontrolling interest in Starfruit at the date of acquisition was $6,300,000. Starfruit’s book value was $13,000,000 at the date of acquisition. Starfruit’s assets and liabilities were reported on its books at values approximating fair value, except its plant and equipment (10-year life, straight-line) was overvalued by $25,000,000. Starfruit Company had previously unreported intangible assets, with a...
On January 1, 2020, QuickPort Company acquired 90 percent of the outstanding voting stock of NetSpeed,...
On January 1, 2020, QuickPort Company acquired 90 percent of the outstanding voting stock of NetSpeed, Inc., for $1,161,000 in cash and stock options. At the acquisition date, NetSpeed had common stock of $1,220,000 and Retained Earnings of $61,000. The acquisition-date fair value of the 10 percent noncontrolling interest was $129,000. QuickPort attributed the $9,000 excess of NetSpeed's fair value over book value to a database with a five-year remaining life. During the next two years, NetSpeed reported the following:...
On January 1, 2020, QuickPort Company acquired 90 percent of the outstanding voting stock of NetSpeed,...
On January 1, 2020, QuickPort Company acquired 90 percent of the outstanding voting stock of NetSpeed, Inc., for $1,152,000 in cash and stock options. At the acquisition date, NetSpeed had common stock of $1,210,000 and Retained Earnings of $60,500. The acquisition-date fair value of the 10 percent noncontrolling interest was $128,000. QuickPort attributed the $9,500 excess of NetSpeed's fair value over book value to a database with a five-year remaining life. During the next two years, NetSpeed reported the following:...
On January 1, 2017, QuickPort Company acquired 90 percent of the outstanding voting stock of NetSpeed,...
On January 1, 2017, QuickPort Company acquired 90 percent of the outstanding voting stock of NetSpeed, Inc., for $855,000 in cash and stock options. At the acquisition date, NetSpeed had common stock of $860,000 and Retained Earnings of $43,000. The acquisition-date fair value of the 10 percent noncontrolling interest was $95,000. QuickPort attributed the $47,000 excess of NetSpeed's fair value over book value to a database with a five-year remaining life. During the next two years, NetSpeed reported the following:...
Company A acquired 100% of Company B's voting stock on January 1, 2018 by issuing 10,000...
Company A acquired 100% of Company B's voting stock on January 1, 2018 by issuing 10,000 shares of its $10 par value common stock. Company A's common stock had a fair value of $14 per share at that time. Company B's stockholder's equity was $105,000 at date of acquisition. The trademark was undervalued by $10,000. It has an indefinite life. Equipment (with a 5 year life) was undervalued by $5,000. A customer list that had been created internally had an...
Yosef Corporation acquired 90% of the outstanding voting stock of Randeep Inc. on January 1, Year...
Yosef Corporation acquired 90% of the outstanding voting stock of Randeep Inc. on January 1, Year 6. During Year 6, intercompany sales of inventory of $45,000 (original cost of $27,000) were made. Only 20% of this inventory was still held within the consolidated entity at the end of Year 6 and was sold in Year 7. Intercompany sales of inventory of $60,000 (original cost of $33,000) occurred in Year 7. Of this merchandise, 30% had not been resold to outside...
Public Corporation acquired 90 percent of Station Company’s voting common stock on January 1, 20X1, for...
Public Corporation acquired 90 percent of Station Company’s voting common stock on January 1, 20X1, for $502,200. At the time of the combination, Station reported common stock outstanding of $129,000 and retained earnings of $384,000, and the fair value of the noncontrolling interest was $55,800. The book value of Station’s net assets approximated market value except for patents that had a market value of $45,000 more than their book value. The patents had a remaining economic life of five years...
Public Corporation acquired 90 percent of Station Company’s voting common stock on January 1, 20X1, for...
Public Corporation acquired 90 percent of Station Company’s voting common stock on January 1, 20X1, for $501,300. At the time of the combination, Station reported common stock outstanding of $121,000 and retained earnings of $381,000, and the fair value of the noncontrolling interest was $55,700. The book value of Station’s net assets approximated market value except for patents that had a market value of $55,000 more than their book value. The patents had a remaining economic life of ten years...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT