On January 1, 2015, Pack Co. acquired 80% of the common stock of Sack Co. by...

On January 1, 2015, Pack Co. acquired 80% of the common stock of Sack Co. by paying $80,000. On that date Sack' land was undervalued $3,800 and its Buildings (7 yr life) were undervalued $4,200 and its equipment (5 Yr life) were undervalued $2,000. A. Show the elements making of the cost of the investment. (Hint: Set up a schedule showing the controlling and non-controlling interest in the individual elements) B. Prepare consolidation entry S to eliminate the sub’s equity accounts at 12/31/15: C. Prepare consolidation entry A (acquisition) D. Prepare consolidation entry I (income) E. Prepare consolidation entry D (dividends) F. Prepare consolidation entry E (expenses)

Expert Solution

A	Elements making cost of investment

	Computation of Goodwill	Total	Pack Co. (80%)	NCI (20%)
	Consideration paid to acquire 80% stock		$80,000
	Fair value of 20% noncontrolling interest			$20,000
	Total fair value	$100,000	$80,000	$20,000
	Less: Book Value
	Total Book value	$90,000	$72,000	$18,000
	Excess of fair value over book value	$10,000	$8,000	$2,000
	Excess allocated to:
	Land	$3,800	$3,040	$760
	Building	$4,200	$3,360	$840
	Equipment	$2,000	$1,600	$400

B	Consolidation entry S
	Common Stock	$90,000
	Investment in Sack Co.		$72,000
	Non-controlling Interest		$18,000

C	Consolidation entry A
	Land	$3,800
	Building	$4,200
	Equipment	$2,000
	Investment in Sack Co.		$8,000
	Non-controlling Interest		$2,000

D	Consolidation Entry I
	Need income details of Sack Co.

E.	Consolidation Entry D
	Need information about dividend distribution by Sack Co.

F	Consolidation Entry E
	Depreciation expense	$1,000
	Building (4200/7)		$600
	Equipment (2000/5)		$400

ekkarill92 answered 1 year ago

On January 1, 2018, Riney Co. owned 80% of the common stock of Garvin Co. On...

On January 1, 2018, Riney Co. owned 80% of the common stock of Garvin Co. On that date, Garvin's stockholders' equity accounts had the following balances: Common stock ($5 par value) $ 250,000 Additional paid-in capital 110,000 Retained earnings 330,000 Total stockholders’ equity $ 690,000 The balance in Riney's Investment in Garvin Co. account was $552,000, and the noncontrolling interest was $138,000. On January 1, 2018, Garvin Co. sold 10,000 shares of previously unissued common stock for $15 per share....

Matthews Co. acquired all of the common stock of Jackson Co. on January 1, 2020. As...

Matthews Co. acquired all of the common stock of Jackson Co. on January 1, 2020. As of that date, Jackson had the following trial balance: Debit Credit Accounts payable $ 60,000 Accounts receivable $ 50,000 Additional paid-in capital 60,000 Buildings (net) (20-year life) 140,000 Cash and short-term investments 70,000 Common stock 300,000 Equipment (net) (8-year life) 240,000 Intangible assets (indefinite life) 110,000 Land 90,000 Long-term liabilities (mature 12/31/22) 180,000 Retained earnings, 1/1/20 120,000 Supplies 20,000 Totals $ 720,000 $ 720,000...

) Matthews Co. acquired all of the common stock of Jackson Co. on January 1, 2017....

) Matthews Co. acquired all of the common stock of Jackson Co. on January 1, 2017. As of that date, Jackson had the following trial balance: Debit Credit Accounts payable $ 60,000 Accounts receivable $ 50,000 Additional paid-in capital 60,000 Buildings (net) (20-year life) 140,000 Cash and short-term investments 70,000 Common stock 300,000 Equipment (net) (8-year life) 240,000 Intangible assets (indefinite life) 110,000 Land 90,000 Long-term liabilities (mature 12/31/19) 180,000 Retained earnings, 1/1/17 120,000 Supplies 20,000 Totals $ 720,000 $...

On January 1, 2015, Pepper Company purchases 80% of the common stock of Salty Company for...

On January 1, 2015, Pepper Company purchases 80% of the common stock of Salty Company for $270,000. On this date, Salty has total owners' equity of $300,000. The excess of cost over book value is due to goodwill. For tax purposes, goodwill is amortized over 15 years. During 2015, Pepper appropriately accounts for its investment in Salty using the simple equity method. During 2015, Pepper sells merchandise to Salty for $50,000, of which $10,000 is held by Salty on December...

Tulip Co acquired 80% of the share capital of Daffodil Co on 1 June 2015. The...

Tulip Co acquired 80% of the share capital of Daffodil Co on 1 June 2015. The summarised draft statements of profit or loss for Tulip Co and Daffodil Co for the year ended 31 May 2016 are shown below: Tulip Co Daffodil Co €'000 €'000 Sales revenue 8,400 3,200 Cost of sales (4,600) (1,700) Gross profit 3,800 1,500 Operating expenses (2,200) (960) Profit before tax 1,600 540 Taxation (600) (140) Profit for the year 1,000 400 During the year Tulip...

1) On January 1, Year 1, Shaq Co. acquired 100% of the outstanding common stock of...

1) On January 1, Year 1, Shaq Co. acquired 100% of the outstanding common stock of O’Neal Co. As part of the total consideration transferred, Shaq promised to the shareholders of O’Neal to issue on May 1, Year 2, additional 1,000 shares of common stock if the total consolidated net income for Year 1 is greater than $1Billion. The consolidated net income in Year 1 was $1.2 Billion. The controller of Shaq Co. took the ACCY 410 class at the...

On January 1, 2015, Marshall Company acquired 100 percent of the outstanding common stock of Tucker...

On January 1, 2015, Marshall Company acquired 100 percent of the outstanding common stock of Tucker Company. To acquire these shares, Marshall issued $206,700 in long-term liabilities and 26,500 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Marshall paid $36,600 to accountants, lawyers, and brokers for assistance in the acquisition and another $25,650 in connection with stock issuance costs. Prior to these transactions, the balance sheets for the...

Problem I. On January 1, 2019, P Corp acquired 80% of the outstanding common stock of...

Problem I. On January 1, 2019, P Corp acquired 80% of the outstanding common stock of S Corp for $820,000 cash. On that date, S Company’s stockholders’ equity consisted of common stock, $150,000; other contributed capital, $200,000; and retained earnings, $350,000. P Corp paid more than the book value of net assets acquired because the recorded cost of S Corp’s equipment (5 year remaining useful life) was $40,000 less than its fair value; the remainder was allocated to goodwill. There...

On January 1, 20X1, Pride, Inc. acquired 80% of the outstanding voting common stock of Strong...

On January 1, 20X1, Pride, Inc. acquired 80% of the outstanding voting common stock of Strong Corp. for $364,000. On this date, equipment (with a five-year life) was undervalued on Strong's books by $35,000. Any remaining excess was attributable to goodwill. As of December 31, 20X1, the financial statements appeared as follows: Pride Strong Revenues $420,000 $280,000 Cost of Goods Sold 196,000 112,000 Operating Expenses 28,000 14,000 Investment Income 100,800 Net Income $296,800 $154,000 Retained Earnings, 1/1/20X1 $420,000 $210,000 Net...

On January 1, 2015, when its $30 par value common stock was selling for $80 per...

On January 1, 2015, when its $30 par value common stock was selling for $80 per share, a corporation issued $30 million of 10% convertible debentures due in 10 years. The conversion option allowed the holder of each $1,000 bond to convert it into six shares of the corporation’s $30 par value common stock. The debentures were issued for $31 million. At the time of issuance, the present value of the bond payments was $28.50 million, and the corporation believes...

Question