Assume the following sales took place during 2020 for a variety of individual capital assets for Ron (all normal capital assets with gains subject to 0%, 15%, or 20% tax rates).
|
Property purchase date |
Property sale date | Adjusted basis | Sale proceeds | Gain/Loss | Character of gain/loss |
| 12/6/2020 | 12/9/2020 | 1,000 | 1,060 | 60 | short term gain |
| 1/7/2000 | 6/15/2020 | 5,000 | 6,200 | 1,200 | long term gain |
| 11/6/2013 | 8/20/2020 | 5,000 | 4,200 | -800 | long term loss |
| 5/1/2020 | 10/31/2020 | 2,500 | 2,200 | -300 | short term loss |
| 6/8/2011 | 3/22/2020 | 8,600 | 10,000 | 1,400 | long term gain |
| 7/10/1999 | 1/19/2020 | 2,000 | 4,100 | 2,100 | long term gain |
| 3/16/2016 | 3/16/2020 | 5,300 | 6,000 | 700 | long term gain |
(I also want to make sure the characters of gain/loss and numbers are correct)
Second enter the information to the Form 8949
Column a: description of property, column b: date acquired, column c: date sold, column d: sales proceeds, column e: cost, column f: codes from instruction, column g:amount of adjustment, column h: gain or loss
In: Accounting
Percy Footwear acquired all the voting stock of Simali Inc. at the beginning of 2016. The acquisition cost was $400,000, and Simali’s book value at that time consisted of $25,000 in capital stock and $75,000 in retained earnings. Revaluation information for Simali’s identifiable net assets is as follows:
It is now the end of 2020 (five years after the acquisition). Simali’s retained earnings at the beginning of 2020 is $125,000, and it reports net income of $45,000 for 2020. It declares no dividends. Percy uses the complete equity method to report its investment in Simali on its own books. Simali sells merchandise to Percy on a regular basis, at a markup of 20 percent on cost. Total sales made to Percy in 2020 were $200,000. Percy’s beginning inventory balance has $12,000 in merchandise purchased from Simali. Percy’s ending inventory balance has $18,000 in merchandise purchased from Simali.
Required
a. Calculate equity in net income for 2020, reported on Percy’s books.
b. Calculate the December 31, 2020 balance for investment in Simali, reported on Percy’s books.
c. Calculate the original balance for goodwill, reported for this acquisition.
In: Finance
On January 1, 2020, McIlroy, Inc., acquired a 60 percent interest in the common stock of Stinson, Inc., for $334,800. Stinson's book value on that date consisted of common stock of $100,000 and retained earnings of $197,900. Also, the acquisition-date fair value of the 40 percent noncontrolling interest was $223,200. The subsidiary held patents (with a 10-year remaining life) that were undervalued within the company's accounting records by $86,200 and an unrecorded customer list (15-year remaining life) assessed at a $62,400 fair value. Any remaining excess acquisition-date fair value was assigned to goodwill. Since acquisition, McIlroy has applied the equity method to its Investment in Stinson account and no goodwill impairment has occurred. At year-end, there are no intra-entity payables or receivables.
Intra-entity inventory sales between the two companies have been made as follows:
| Year | Cost to McIlroy | Transfer Price to Stinson |
Ending Balance (at transfer price) |
| 2020 | $137,700 | $172,125 | $57,375 |
| 2021 | 113,400 | 151,200 | 37,800 |
The individual financial statements for these two companies as of December 31, 2021, and the year then ended follow:
| McIlroy, Inc. | Stinson, Inc. | ||||||
| Sales | $ | (757,000 | ) | $ | (398,000 | ) | |
| Cost of goods sold | 497,500 | 242,800 | |||||
| Operating expenses | 201,705 | 82,600 | |||||
| Equity in earnings in Stinson | (37,917 | ) | 0 | ||||
| Net income | $ | (95,712 | ) | $ | (72,600 | ) | |
| Retained earnings, 1/1/21 | $ | (838,200 | ) | $ | (285,800 | ) | |
| Net income | (95,712 | ) | (72,600 | ) | |||
| Dividends declared | 50,900 | 21,100 | |||||
| Retained earnings, 12/31/21 | $ | (883,012 | ) | $ | (337,300 | ) | |
| Cash and receivables | $ | 300,500 | $ | 153,600 | |||
| Inventory | 282,300 | 133,800 | |||||
| Investment in Stinson | 393,654 | 0 | |||||
| Buildings (net) | 366,000 | 208,300 | |||||
| Equipment (net) | 261,100 | 91,800 | |||||
| Patents (net) | 0 | 26,600 | |||||
| Total assets | $ | 1,603,554 | $ | 614,100 | |||
| Liabilities | $ | (420,542 | ) | $ | (176,800 | ) | |
| Common stock | (300,000 | ) | (100,000 | ) | |||
| Retained earnings, 12/31/21 | (883,012 | ) | (337,300 | ) | |||
| Total liabilities and equities | $ | (1,603,554 | ) | $ | (614,100 | ) | |
(Note: Parentheses indicate a credit balance.)
Show how McIlroy determined the $393,654 Investment in Stinson account balance. Assume that McIlroy defers 100 percent of downstream intra-entity profits against its share of Stinson’s income.
Prepare a consolidated worksheet to determine appropriate balances for external financial reporting as of December 31, 2021.
In: Accounting
On January 1, 2020, Peppard Inc. acquired all of the stock of Smith Telecom for $85,000 in cash. At the date of acquisition, Smith's shareholders' equity accounts were as follows:
Common Stock, $1 par: $1,000
APIC: $14,000
Retained Earnings: ($3,000)
Treasury Stock: ($200)
Total: $11,800
Both companies have a December 31 year end. At the date of acquisition, Smith reported net assets had book values approximating fair value. However, it had previously unreported indefinite life identifiable intangibles valued at $15,000, meeting ASC Topic 805 requirements for capitalization. Impairment losses in 2020 for identifiable intangibles were $600. Goodwill from this acquisition was not impaired in 2020. Smith reported net income of $900 in 2020, and paid no dividends. Peppard uses the complete equity method to report its investment in Smith on its own books.
Additional information:
The amount of Goodwill that resulted from this acquisition is $58,200.
The equity in net income reported on Peppard's books in 2020 is $300.
Required:
Prepare eliminating entries (C), (E), (R), and (O), required to consolidate Peppard's trial balance accounts with those of Smith on December 21, 2020.
In: Accounting
On September 1, 2020, Peter Corporation acquired Darcy Enterprises for a cash payment of $ 850,000. At the time of purchase, Darcy’s statement of financial position showed assets of $ 890,000, liabilities of $ 450,000, and owner’s equity of $ 440,000. The fair value of Darcy’s assets is estimated to be $ 1,150,000. Assume that Peter is a public company and the goodwill was allocated entirely to one cash-generating unit (CGU). Two years later, the CGU’s carrying amount is $ 3,450,000; its value in use is $ 3,380,000; the fair value less costs to sell is $ 2,980,000.
In: Accounting
On January 1, 2020, Wondersome Company acquired a 70% interest in Philmore Company for a purchase price that was $240,000 over the book value of the Philmore’s Stockholders’ Equity on the acquisition date. Wondersome uses the equity method to account for its investment in Philmore. Wondersome assigned the acquisition-date AAP as follows:
| AAP | Initial FV | Useful Life (in years) |
|---|---|---|
| PPE, net | $90,000 | 20 |
| Patent | $50,000 | 10 |
| $240,000 |
Philmore sells inventory to Wondersome (upstream) which includes that inventory in products that it, ultimately, sells to customers outside of the controlled group. You have compiled the following data for the years ending 2022 and 2023:
| 2022 | 2023 | |
|---|---|---|
| Transfer price, Inventory sale | $94,500 | $70,000 |
| COGS | -64,500 | -45,000 |
| Gross Profit | $30,000 | $25,000 |
| % inventory remain | 30% | 20% |
| GP deferred | $9,000 | $5,000 |
| EOY Receivable/Payable | $32,000 | $29,500 |
The inventory not remaining at the end of the year has been sold outside of the controlled group.
The parent and the subsidiary report the following financial statements at December 31, 2023:
Income Statement
| Wondersome | Philmore | |
|
Sales |
2,400,00 | 602,400 |
| COGS | -1,580,000 | -465,398 |
| Gross Profit | 820,000 | 137,002 |
| Income (loss) from subsidiary | 45,851 | |
| Operating expenses | -711,200 | -56,000 |
| Net income | $154,651 | $81,002 |
Statement of Retained Earnings
| Wondersome | Philmore | |
| BOY Retained earnings | 3,500,000 | 608,000 |
| Net income | 154,651 | 81,002 |
| Dividends | -85,000 | -15,000 |
| EOY Retained earnings | $3,569,651 | $674,002 |
Balance Sheet
| Wondersome | Philmore | |
| Assets: | ||
| Cash | 450,000 | 84,700 |
| Accounts receivable | 425,000 | 113,200 |
| Inventory | 654,000 | 142,100 |
| Equity investment | 803,251 | |
| PPE, net | 4,438,400 | 1,000,002 |
| TOTAL Assets | $6,770,651 | $1,340,002 |
| Liabilities & Stockholders' Equity: | ||
| Current liabilities | 505,900 | 99,500 |
| Long-term liabilities | 703,500 | 250,00 |
| Common stock | 402,000 | 75,300 |
| APIC | 1,589,600 | 241,200 |
| Retained earnings | 3,569,651 | 674,002 |
| TOTAL L & SE | $6,770,651 | $1,340,002 |
Required:
In: Accounting
On January 1st 2020, Hulk Company acquired all of the stock of Spiderman Company at book value.
Hulk uses the initial value method to account for its investment in Spiderman and Spiderman doesn't pay any dividends.
On January 1st 2015 Hulk purchased a piece of equipment for $100,000. This equipment is expected to last 10 years with $7000 salvage; Hulk uses straight line depreciation.
On January 1, 2018, Hulk sold the equipment to Spiderman for $81,000 receiving a 1 year 12% note with principle and interest due January 1, 2019. Spiderman believes the equipment will last 7 years and have a $4000 salvage.
On January 1, 2021 Spiderman sold the equipment to Aquaman (an outside company) for $57,000 cash.
REQUIRED:
A) Make Hulk's journal entry when they sold the equipment at to Spiderman
b) make Spiderman's journal entry when they buy the equipment from Hulk
c) Make the necessary worksheet entries for 2018
d) Hulk reported unconsolidated income of $500,000 in 2018 and Spiderman reported income of $70,000. What is consolidated income?
e) make the necessary worksheet entries for 2019
f) make the journal entry Spiderman makes when it sells the equipment to Aquaman
g) In 2021 Hulk reported income (unconsolidated) of $625,000 and Spiderman reported income of $123,000 what is consolidated income
In: Accounting
Parent acquired Subsidiary on January 1, 2020 at a price $450,000 in excess of book value. Of that excess, $350,000 was allocated to an unrecorded patent with a 10-year life, with the remainder to goodwill. The parent uses the equity method to account for its investment in its subsidiary.
In 2021, Subsidiary sold to Parent land having a book value of $90,000 for a total price of $244,000.
Financial statements of the two companies for the year ended December 31, 2022 are presented below.
|
Parent |
Subsidiary |
|
|
Sales revenue |
$7,500,000 |
$2,450,000 |
|
Cost of goods sold |
-5,930,000 |
-1,950,000 |
|
Gross profit |
1,570,000 |
500,000 |
|
Operating expenses |
-1,375,000 |
-286,000 |
|
Income (loss) from subsidiary |
179,000 |
0 |
|
Net Income |
$374,000 |
$214,000 |
|
Retained Earnings, 1/1/22 |
$4,045,000 |
$1,750,000 |
|
Net income |
374,000 |
214,000 |
|
Dividends |
-85,000 |
-176,000 |
|
Retained Earnings, 12/31/22 |
$4,334,000 |
$1,788,000 |
|
Cash and receivables |
$1,750,000 |
$1,145,600 |
|
Inventory |
958,000 |
758,000 |
|
Equity investment |
2,558,500 |
|
|
Property, plant & equipment (Net) |
4,562,980 |
1,116,590 |
|
Total Assets |
$9,829,480 |
$3,020,190 |
|
Accounts payable |
$980,000 |
$225,000 |
|
Accrued liabilities |
142,800 |
376,500 |
|
Notes payable |
1,010,200 |
51,190 |
|
Common stock |
1,792,000 |
158,000 |
|
Additional paid-in capital |
1,578,000 |
421,500 |
|
Retained Earnings, 12/31/22 |
4,334,000 |
1,788,000 |
|
Total Liabilities and Equities |
$9,837,000 |
$3,020,190 |
Required:
a. Prepare a schedule showing the computation of Income (loss) from subsidiary on the Parent's pre-consolidation books for 2022.
b. Prepare a schedule showing the computation of Equity Investment on the Parent's pre-consolidation books at December 31, 2022.
c. Prepare the consolidation entries for 2022.
In: Accounting
On January 1st 2020, Hulk Company acquired all of the stock of Spiderman Company at book value. Hulk uses the initial value method to account for its investment in Spiderman and Spiderman doesn't pay any dividends
On January 1st 2015 Hulk purchased a piece of equipment for $100,000. This equipment is expected to last 10 years with $7000 salvage; Hulk uses straight line depreciation.
On January 1, 2018, Hulk sold the equipment to Spiderman for $81,000 receiving a 1 year 12% note with principle and interest due January 1, 2019. Spiderman believes the equipment will last 7 years and have a $4000 salvage.
On January 1, 2021 Spiderman sold the equipment to Aquaman (an outside company) for $57,000 cash.
Required:
A) Make Hulk's journal entry when they sold the equipment at to Spiderman
b) make Spiderman's journal entry when they buy the equipment from Hulk
c) Make the necessary worksheet entries for 2018
d) Hulk reported unconsolididated income of $500,000 in 2018 and Spiderman reported income of $70,000. What is consolidated income?
e) make the necessary worksheet entries for 2019
f) make the journal entry Spiderman makes when it sells the equipment to Aquaman
g) In 2021 Hulk reported income (unconsolidated) of $625,000 and Spiderman reported income of $123,000 what is consoldiated income
In: Accounting
On January 1st 2020, Hightower Company acquired all of the stock of Striker Company at book value. Hightower uses the initial value method to account for its investment in Striker and Striker doesn't pay any dividends.
On January 1st 2015 Hightower purchased a piece of equipment for $100,000. This equipment is expected to last 10 years. with $7000 salvage; Hightower uses straight line depreciation.
On January 1, 2018, Hightower sold the equipment to Striker for $81,000 receiving a 1 year 12% note with principle and interest due January 1, 2019. Striker believes the equipment will last 7 years and have a $4000 salvage.
On January 1, 2021 Striker sold the equipment to Smith Co. (an outside company) for $57,000 cash.
A) Make Hightower's journal entry when they sold the equipment at to Striker
B) Make Striker's journal entry when they buy the equipment from Hightower
C) Make the necessary worksheet entries for 2018
D) Hightower reported unconsolidated income of $500,000 in 2018 and Striker reported income of $70,000. What is consolidated income?
E) Make the necessary worksheet entries for 2019
F) Make the journal entry Striker makes when it sells the equipment to Smith Co.
G) In 2021 Hightower reported income (unconsolidated) of $625,000 and Striker reported income of $123,000 what is consolidated income
In: Accounting