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On January 1, 2020, Barber Corp. paid $1,160,000 to acquire Thompson Co. Thompson maintained separate incorporation....

On January 1, 2020, Barber Corp. paid $1,160,000 to acquire Thompson Co. Thompson maintained separate incorporation. Barber used the equity method to account for the investment. The following information is available for Thompson’s assets, liabilities, and stockholders' equity accounts on January 1, 2020:

Book
Value		 Fair
Value
Current assets $ 130,000 $ 130,000
Land 75,000 193,000
Building (twenty year life) 250,000 276,000
Equipment (ten year life) 540,000 518,000
Current liabilities 26,000 26,000
Long-term liabilities 124,000 124,000
Common stock 233,000
Additional paid-in capital 389,000
Retained earnings 223,000

Thompson earned net income for 2020 of $134,000 and paid dividends of $51,000 during the year.

At the end of 2020, the consolidation entry to eliminate Barber’s accrual of Thompson’s earnings would include a credit to Investment in Thompson Co. for

Solutions

Expert Solution

Net income earned in 2020                              $134,000

Add: amortization                                               $900

                                                                              $134,900

Working notes:

Fair value

Book value

FV-BV/no. of years

1

Building

276,000

250,000

1,300(26,000/20)

Equipment

518,000

540000

-2,200 (-22,000/10)

-900

I HOPE IT USEFUL TO YOU IF YOU HAVE ANY DOUBT PLZ COMMENT GIVE ME UP-THUMB. THANKS.......

ekkarill92 answered 1 year ago
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