Question

In: Accounting

Purchase Corporation purchased 60 percent of Steal Company ownership on January 1, 20X7, for $280,500. Steal...

Purchase Corporation purchased 60 percent of Steal Company ownership on January 1, 20X7, for $280,500. Steal reported the following net income and dividend payments:

Year Net Income Dividends Paid
20X7 $ 53,000 $ 33,000
20X8 63,000 43,000
20X9 38,000 18,000


On January 1, 20X7, Steal had $253,000 of $8 par value common stock outstanding and retained earnings of $153,000, and the fair value of the noncontrolling interest was $187,000. Steal held land with a book value of $31,500 and a market value of $39,000 and equipment with a book value of $320,000 and a market value of $360,000 at the date of combination. The remainder of the differential at acquisition was attributable to an increase in the value of patents, which had a remaining useful life of 10 years. All depreciable assets held by Steal at the date of acquisition had a remaining economic life of eight years.

Required:
a. Compute the increase in the fair value of patents held by Steal.

b. Prepare the consolidation entries needed at January 1, 20X7, to prepare a consolidated balance sheet.

c. Compute the balance reported by Purchase as its investment in Steal at December 31, 20X8.

d. Prepare the journal entries recorded by Purchase with regard to its investment in Steal during 20X9.

e. Prepare the consolidation entries needed at December 31, 20X9, to prepare a three-part consolidation worksheet.

Solutions

Expert Solution

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

Pirate Company purchased 60 percent ownership of Ship Corporation on January 1, 20X1, for $82,800. On...
Pirate Company purchased 60 percent ownership of Ship Corporation on January 1, 20X1, for $82,800. On that date, the noncontrolling interest had a fair value of $55,200 and Ship reported common stock outstanding of $100,000 and retained earnings of $20,000. The full amount of the differential is assigned to land to be used as a future building site. Pirate uses the fully adjusted equity method in accounting for its ownership of Ship. On December 31, 20X2, the trial balances of...
Pillow Corporation acquired 80 percent ownership of Sheet Company on January 1, 20X7, for $173,000. At...
Pillow Corporation acquired 80 percent ownership of Sheet Company on January 1, 20X7, for $173,000. At that date, the fair value of the noncontrolling interest was $43,250. The trial balances for the two companies on December 31, 20X7, included the following amounts: Pillow Corporation Sheet Company Item Debit Credit Debit Credit Cash $ 38,000 $ 25,000 Accounts Receivable 50,000 55,000 Inventory 240,000 100,000 Land 80,000 20,000 Buildings & Equipment 500,000 150,000 Investment in Sheet Company 202,000 Cost of Goods Sold...
Roller Corporation purchased 100 percent ownership of Steam Company on January 1, 20X5, for $284,000. On...
Roller Corporation purchased 100 percent ownership of Steam Company on January 1, 20X5, for $284,000. On that date, the book value of Steam’s reported net assets was $216,000. The excess over book value paid is attributable to depreciable assets with a remaining useful life of 5 years. Net income and dividend payments of Steam in the following periods were: Year Net Income Dividends   20X5 $31,000 $6,000 20X6 51,000 16,000 20X7 31,000 52,000 Required: a. Prepare journal entries on Roller Corporation’s...
Roller Corporation purchased 100 percent ownership of Steam Company on January 1, 20X5, for $288,000. On...
Roller Corporation purchased 100 percent ownership of Steam Company on January 1, 20X5, for $288,000. On that date, the book value of Steam’s reported net assets was $211,000. The excess over book value paid is attributable to depreciable assets with a remaining useful life of 10 years. Net income and dividend payments of Steam in the following periods were   Year Net Income Dividends   20X5 $ 25,000 $ 6,000   20X6 45,000 16,000   20X7 25,000 37,000 Required: a. Prepare journal entries on...
Penn Corporation purchased 80 percent ownership of State Company on January 1, 20X2, at underlying book...
Penn Corporation purchased 80 percent ownership of State Company on January 1, 20X2, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 20 percent of the book value of State. On January 1, 20X4, Penn sold 2,000 shares of State's stock for $65,000 to Nonaffiliated Company and recorded a $12,000 increase in additional paid-in capital. Trial balances for the companies on December 31, 20X4, contain the following data: Penn Corporation State Company...
Penn Corporation purchased 80 percent ownership of State Company on January 1, 20X2, at underlying book...
Penn Corporation purchased 80 percent ownership of State Company on January 1, 20X2, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 20 percent of the book value of State. On January 1, 20X4, Penn sold 2,000 shares of State's stock for $65,000 to Nonaffiliated Company and recorded a $12,000 increase in additional paid-in capital. Trial balances for the companies on December 31, 20X4, contain the following data: Penn Corporation State Company...
On January 1, 2017, Chamberlain Corporation pays $388,000 for a 60 percent ownership in Neville. Annual...
On January 1, 2017, Chamberlain Corporation pays $388,000 for a 60 percent ownership in Neville. Annual excess fair-value amortization of $15,000 results from the acquisition. On December 31, 2018, Neville reports revenues of $400,000 and expenses of $300,000 and Chamberlain reports revenues of $700,000 and expenses of $400,000. The parent figures contain no income from the subsidiary. What is the amount that should be applied to the non-controlling interest net income?
Prince Corporation acquired 100 percent of Sword Company on January 1, 20X7, for $195,000. The trial...
Prince Corporation acquired 100 percent of Sword Company on January 1, 20X7, for $195,000. The trial balances for the two companies on December 31, 20X7, included the following amounts: Prince Corporation Sword Company Item Debit Credit Debit Credit Cash $ 83,000 $ 31,000 Accounts Receivable 67,000 72,000 Inventory 177,000 104,000 Land 81,000 26,000 Buildings and Equipment 491,000 159,000 Investment in Sword Company 255,000 Cost of Goods Sold 491,000 253,000 Depreciation Expense 21,000 11,000 Other Expenses 66,000 66,000 Dividends Declared 52,000...
Prince Corporation acquired 100 percent of Sword Company on January 1, 20X7, for $183,000. The trial...
Prince Corporation acquired 100 percent of Sword Company on January 1, 20X7, for $183,000. The trial balances for the two companies on December 31, 20X7, included the following amounts: Prince Corporation Sword Company Item Debit Credit Debit Credit Cash $ 88,000 $ 27,000 Accounts Receivable 53,000 58,000 Inventory 182,000 120,000 Land 86,000 22,000 Buildings and Equipment 491,000 155,000 Investment in Sword Company 233,000 Cost of Goods Sold 491,000 258,000 Depreciation Expense 21,000 11,000 Other Expenses 62,000 62,000 Dividends Declared 55,000...
Mighty Company purchased a 60 percent interest in Lowly Company on January 1, 2017, for $544,200...
Mighty Company purchased a 60 percent interest in Lowly Company on January 1, 2017, for $544,200 in cash. Lowly's book value at that date was reported as $775,000 and the fair value of the noncontrolling interest was assessed at $362,800. Any excess acquisition-date fair value over Lowly's book value is assigned to trademarks to be amortized over 20 years. Subsequently, on January 1, 2018, Lowly acquired a 20 percent interest in Mighty. The price of $346,000 was equivalent to 20...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT