Perry Company acquires 100% of the stock of Hurley Corporation on January 1, 2017, for $3,800...

Perry Company acquires 100% of the stock of Hurley Corporation on January 1, 2017, for $3,800...

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In: Accounting

Perry Company acquires 100% of the stock of Hurley Corporation on January 1, 2017, for $3,800 cash. As of that date Hurley has the following trial balance:

	Debit		Credit
Cash	$	500
Accounts receivable		600
Inventory		800
Buildings (net) (5 year life)		1,500
Equipment (net) (2 year life)		1,000
Land		900
Accounts payable			$	400
Long-term liabilities (due 12/31/20)				1,800
Common stock				1,000
Additional paid-in capital				600
Retained earnings				1,500
Total	$	5,300	$	5,300

Net income and dividends reported by Hurley for 2017 and 2018 follow:

The fair value of Hurley’s net assets that differ from their book values are listed below:

	Fair Value
Buildings	$	1,200
Equipment		1,250
Land		1,300
Long-term liabilities		1,700

Any excess of consideration transferred over fair value of net assets acquired is considered goodwill with an indefinite life .

1. Compute the amount of Hurley's inventory that would be reported in a January 1, 2017, consolidated balance sheet.

Multiple Choice

a. $800.

b. $100.

c. $900.

d. $150.

e. $0.

2. Compute the amount of Hurley's buildings that would be reported in a December 31, 2017, consolidated balance sheet.

Multiple Choice

a. $1,560.

b. $1,260.

c. $1,440.

d. $1,160.

e. $1,140.

3. Compute the amount of Hurley's buildings that would be reported in a December 31, 2018, consolidated balance sheet.

Multiple Choice

a. $1,620.

b. $1,380.

c. $1,320.

d. $1,080.

e. $1,500.

1. Compute the amount of Hurley's inventory that would be reported in a January 1, 2017, consolidated balance sheet.

Multiple Choice

a. $800.

b. $100.

c. $900.

d. $150.

e. $0.

Ans is A $800, since there is no difference in inventory fair value and book value, as given in data.

2. Compute the amount of Hurley's buildings that would be reported in a December 31, 2017, consolidated balance sheet.

Multiple Choice

a. $1,560.

b. $1,260.

c. $1,440.

d. $1,160.

e. $1,140.

Ans is B $1,260

Explanation: the subsidiary’s book value less the $300 fair-value reduction allocation plus the current year expense reduction of $60.(1500-300+60)

3. Compute the amount of Hurley's buildings that would be reported in a December 31, 2018, consolidated balance sheet.

Multiple Choice

a. $1,620.

b. $1,380.

c. $1,320.

d. $1,080.

e. $1,500.

Ans is C $1,320

Explanation: the subsidiary’s book value less the $300 fair-value reduction allocation plus the current year and next year expense reduction of $120.(1500-300+60+60)

ekkarill92 answered 1 year ago

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Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2017. As of that date, Abernethy has the following trial balance:DebitCreditAccounts payable$53,700Accounts receivable$41,000Additional paid-in capital50,000Buildings (net) (4-year remaining life)184,000Cash and short-term investments77,250Common stock250,000Equipment (net) (5-year remaining life)400,000Inventory117,500Land107,500Long-term liabilities (mature 12/31/20)173,000Retained earnings, 1/1/17417,450Supplies16,900Totals$944,150$944,150During 2017, Abernethy reported net income of $98,000 while declaring and paying dividends of $12,000. During 2018, Abernethy reported net income of $128,250 while declaring and paying dividends of $39,000.Assume that Chapman Company acquired Abernethy’s common stock...

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Net income