Question
In: Accounting
On January 1, 2016, Monica Company acquired 80 percent of Young Company’s outstanding common stock for...
On January 1, 2016, Monica Company acquired 80 percent of Young Company’s outstanding common stock for $728,000. The fair value of the noncontrolling interest at the acquisition date was $182,000. Young reported stockholders’ equity accounts on that date as follows:
| Common stock—$10 par value | $ | 300,000 | |
| Additional paid-in capital | 70,000 | ||
| Retained earnings | 430,000 | ||
In establishing the acquisition value, Monica appraised Young's assets and ascertained that the accounting records undervalued a building (with a five-year remaining life) by $70,000. Any remaining excess acquisition-date fair value was allocated to a franchise agreement to be amortized over 10 years.
During the subsequent years, Young sold Monica inventory at a 30 percent gross profit rate. Monica consistently resold this merchandise in the year of acquisition or in the period immediately following. Transfers for the three years after this business combination was created amounted to the following:
| Year | Transfer Price | Inventory Remaining at Year-End (at transfer price) |
|||||||
| 2016 | $ | 40,000 | $ | 12,000 | |||||
| 2017 | 60,000 | 14,000 | |||||||
| 2018 | 70,000 | 20,000 | |||||||
In addition, Monica sold Young several pieces of fully depreciated equipment on January 1, 2017, for $38,000. The equipment had originally cost Monica $54,000. Young plans to depreciate these assets over a 5-year period.
In 2018, Young earns a net income of $160,000 and declares and pays $35,000 in cash dividends. These figures increase the subsidiary's Retained Earnings to a $760,000 balance at the end of 2018.
Monica employs the equity method of accounting. Hence, it reports $119,760 investment income for 2018 with an Investment account balance of $921,200. Under these circumstances, prepare the worksheet entries required for the consolidation of Monica Company and Young Company.
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ekkarill92 answered 11 months agoRelated Solutions
On January 1, 2016, Monica Company acquired 80 percent of Young Company’s outstanding common stock for...
On January 1, 2016, Monica Company acquired 80 percent of Young
Company’s outstanding common stock for $728,000. The fair value of
the noncontrolling interest at the acquisition date was $182,000.
Young reported stockholders’ equity accounts on that date as
follows:
Common stock—$10 par value
$
300,000
Additional paid-in capital
70,000
Retained earnings
430,000
In establishing the acquisition value, Monica appraised Young's
assets and ascertained that the accounting records undervalued a
building (with a five-year remaining life) by $70,000. Any
remaining...
On January 1, 2019, Monica Company acquired 80 percent of Young Company’s outstanding common stock for...
On January 1, 2019, Monica Company acquired 80 percent of Young
Company’s outstanding common stock for $888,000. The fair value of
the noncontrolling interest at the acquisition date was $222,000.
Young reported stockholders’ equity accounts on that date as
follows:
Common stock—$10 par value
$
300,000
Additional paid-in capital
70,000
Retained earnings
630,000
In establishing the acquisition value, Monica appraised Young's
assets and ascertained that the accounting records undervalued a
building (with a five-year remaining life) by $90,000. Any
remaining...
On January 1, 2019, Monica Company acquired 80 percent of Young Company’s outstanding common stock for...
On January 1, 2019, Monica Company acquired 80 percent of Young
Company’s outstanding common stock for $776,000. The fair value of
the noncontrolling interest at the acquisition date was $194,000.
Young reported stockholders’ equity accounts on that date as
follows: Common stock—$10 par value $ 200,000 Additional paid-in
capital 70,000 Retained earnings 490,000 In establishing the
acquisition value, Monica appraised Young's assets and ascertained
that the accounting records undervalued a building (with a
five-year remaining life) by $70,000. Any remaining...
On January 1, 2016, Monica Company acquired 70 percent of Young Company’s outstanding common stock for...
On January 1, 2016, Monica Company acquired 70 percent of Young
Company’s outstanding common stock for $658,000. The fair value of
the noncontrolling interest at the acquisition date was $282,000.
Young reported stockholders’ equity accounts on that date as
follows:
Common stock—$10 par value
$
300,000
Additional paid-in capital
40,000
Retained earnings
460,000
In establishing the acquisition value, Monica appraised Young's
assets and ascertained that the accounting records undervalued a
building (with a five-year remaining life) by $40,000. Any
remaining...
On January 1, 2016, Monica Company acquired 70 percent of Young Company’s outstanding common stock for...
On January 1, 2016, Monica Company acquired 70 percent of Young
Company’s outstanding common stock for $700,000. The fair value of
the noncontrolling interest at the acquisition date was $300,000.
Young reported stockholders’ equity accounts on that date as
follows:
Common stock—$10 par value
$
100,000
Additional paid-in capital
100,000
Retained earnings
520,000
In establishing the acquisition value, Monica appraised Young's
assets and ascertained that the accounting records undervalued a
building (with a five-year remaining life) by $40,000. Any
remaining...
On January 1, 2016, Monica Company acquired 70 percent of Young Company’s outstanding common stock for...
On January 1, 2016, Monica Company acquired 70 percent of Young
Company’s outstanding common stock for $665,000. The fair value of
the noncontrolling interest at the acquisition date was
$285,000.
Young reported stockholders’ equity accounts on that date as
follows:
Common stock—$10
par value
$
300,000
Additional
paid-in capital
90,000
Retained
earnings
410,000
In establishing the acquisition value, Monica appraised Young's
assets and ascertained that the accounting records undervalued a
building (with a five-year remaining life) by $50,000. Any
remaining...
On January 1, 2016, Monica Company acquired 70 percent of Young Company’s outstanding common stock for...
On January 1, 2016, Monica Company acquired 70 percent of Young
Company’s outstanding common stock for $770,000. The fair value of
the noncontrolling interest at the acquisition date was
$330,000.
Young reported stockholders’ equity accounts on that date as
follows:
Common stock—$10 par value
$
200,000
Additional paid-in capital
60,000
Retained earnings
620,000
In establishing the acquisition value, Monica appraised Young's
assets and ascertained that the accounting records undervalued a
building (with a five-year remaining life) by $80,000. Any
remaining...
On January 1, 2016, Monica Company acquired 70 percent of Young Company’s outstanding common stock for...
On January 1, 2016, Monica Company acquired 70 percent of Young
Company’s outstanding common stock for $784,000. The fair value of
the noncontrolling interest at the acquisition date was $336,000.
Young reported stockholders’ equity accounts on that date as
follows:
Common stock—$10 par value
$
100,000
Additional paid-in capital
80,000
Retained earnings
640,000
In establishing the acquisition value, Monica appraised Young's
assets and ascertained that the accounting records undervalued a
building (with a five-year remaining life) by $40,000. Any
remaining...
On January 1, 2016, Monica Company acquired 70 percent of Young Company’s outstanding common stock for...
On January 1, 2016, Monica Company acquired 70 percent of Young
Company’s outstanding common stock for $658,000. The fair value of
the noncontrolling interest at the acquisition date was $282,000.
Young reported stockholders’ equity accounts on that date as
follows: Common stock—$10 par value $ 300,000 Additional paid-in
capital 40,000 Retained earnings 460,000 In establishing the
acquisition value, Monica appraised Young's assets and ascertained
that the accounting records undervalued a building (with a
five-year remaining life) by $40,000. Any remaining...
On January 1, 2016, Monica Company acquired 70 percent of Young Company’s outstanding common stock for...
On January 1, 2016, Monica Company acquired 70 percent of Young
Company’s outstanding common stock for $700,000. The fair value of
the noncontrolling interest at the acquisition date was $300,000.
Young reported stockholders’ equity accounts on that date as
follows:
Common stock—$10 par value
$
100,000
Additional paid-in capital
100,000
Retained earnings
520,000
In establishing the acquisition value, Monica appraised Young's
assets and ascertained that the accounting records undervalued a
building (with a five-year remaining life) by $40,000. Any
remaining...
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