More than 50% of all MBAs leave their first employer within five years.  Although the change may mean career growth for these individuals, it represents a loss to the employers.  What are some of the probable reasons a MBA would leave his/her first employer?

Preston Company acquired the assets (except for cash) and assumed the liabilities of Saville Company. Immediately prior to the acquisition, Saville Company’s balance sheet was as follows:

                                                                           Book Value      Fair Value

Cash                                                                $ 120,000           $ 120,000

Receivables (net)                                               192,000              250,000

Inventory                                                             360,000             400,000

Plant and equipment (net)                                   480,000             600,000

Land                                                                    420,000             600,000

Total assets                                                   $1,572,000            $1,944,000

Liabilities                                                          $ 540,000           $ 600,000

Common stock ($5 par value)                             480,000

Other contributed capital                                     132,000

Retained earnings                                                420,000

Total equities                                                   $1,572,000

Required:

A. Prepare the journal entries on the books of Preston Company to record the purchase of the assets and assumption of the liabilities of Saville Company if the amount paid was $1,600,000 in cash.

B. Repeat the requirement in (A) assuming that the amount paid was $1000,000.

C- Repeat the requirement in (A) assuming that the Preston Company issued 25000 shares of its common stock (par value $40 , fair value $ 50).

Bellingham Corporation, a U.S. company, acquired a 100% interest in Kayno Manufacturing, a Japanese company, on December 31, 2017, when the exchange rate for the Japanese yen (JPY)) was 103.960. Kayno’s functional currency is the Japanese Yen. Relevant exchange rates for JPY are:

On July 1, 2016, Killearn Company acquired 109,000 of the outstanding shares of Shaun Company for $21 per share. This acquisition gave Killearn a 40 percent ownership of Shaun and allowed Killearn to significantly influence the investee's decisions.

As of July 1, 2016, the investee had assets with a book value of $5 million and liabilities of $344,500. At the time, Shaun held equipment appraised at $210,000 above book value; it was considered to have a seven-year remaining life with no salvage value. Shaun also held a copyright with a five-year remaining life on its books that was undervalued by $672,500. Any remaining excess cost was attributable to goodwill. Depreciation and amortization are computed using the straight-line method. Killearn applies the equity method for its investment in Shaun.

Shaun's policy is to declare and pay a $1 per share cash dividend every April 1 and October 1. Shaun's income, earned evenly throughout each year, was $634,000 in 2016, $675,800 in 2017, and $733,000 in 2018.

In addition, Killearn sold inventory costing $126,600 to Shaun for $211,000 during 2017. Shaun resold $118,000 of this inventory during 2017 and the remaining $93,000 during 2018.

1. Determine the equity income to be recognized by Killearn during each of these years.

2. Compute Killearn's investment in Shaun Company's balance as of December 31, 2018.

(For all requirements, enter your answers in whole dollars and not in millions.)

On July 1, 2016, Killearn Company acquired 103,000 of the outstanding shares of Shaun Company for $21 per share. This acquisition gave Killearn a 40 percent ownership of Shaun and allowed Killearn to significantly influence the investee's decisions. As of July 1, 2016, the investee had assets with a book value of $6 million and liabilities of $1,468,500. At the time, Shaun held equipment appraised at $140,000 above book value; it was considered to have a seven-year remaining life with no salvage value. Shaun also held a copyright with a five-year remaining life on its books that was undervalued by $562,500. Any remaining excess cost was attributable to goodwill. Depreciation and amortization are computed using the straight-line method. Killearn applies the equity method for its investment in Shaun. Shaun's policy is to declare and pay a $1 per share cash dividend every April 1 and October 1. Shaun's income, earned evenly throughout each year, was $580,000 in 2016, $606,600 in 2017, and $649,200 in 2018. In addition, Killearn sold inventory costing $93,000 to Shaun for $155,000 during 2017. Shaun resold $97,500 of this inventory during 2017 and the remaining $57,500 during 2018.

a.Determine the equity income to be recognized by Killearn during each of these years.

b.Compute Killearn's investment in Shaun Company's balance as of December 31, 2018.

A. Equity income 2016

Equity income 2017

Equity income 2018

B. Investment in Shaun

On July 1, 2016, Killearn Company acquired 136,000 of the outstanding shares of Shaun Company for $15 per share. This acquisition gave Killearn a 25 percent ownership of Shaun and allowed Killearn to significantly influence the investee's decisions.

As of July 1, 2016, the investee had assets with a book value of $7 million and liabilities of $456,800. At the time, Shaun held equipment appraised at $319,200 above book value; it was considered to have a seven-year remaining life with no salvage value. Shaun also held a copyright with a five-year remaining life on its books that was undervalued by $980,000. Any remaining excess cost was attributable to goodwill. Depreciation and amortization are computed using the straight-line method. Killearn applies the equity method for its investment in Shaun.

Shaun's policy is to declare and pay a $1 per share cash dividend every April 1 and October 1. Shaun's income, earned evenly throughout each year, was $579,000 in 2016, $619,400 in 2017, and $675,200 in 2018.

In addition, Killearn sold inventory costing $111,000 to Shaun for $185,000 during 2017. Shaun resold $82,500 of this inventory during 2017 and the remaining $102,500 during 2018.

A).Determine the equity income to be recognized by Killearn during each of these years.

B).Compute Killearn's investment in Shaun Company's balance as of December 31, 2018.

On January 1, 2018, Pomegranate Company acquired 90% of the voting stock of Starfruit Company for $91,700,000 in cash. The fair value of the noncontrolling interest in Starfruit at the date of acquisition was $6,300,000. Starfruit’s book value was $13,000,000 at the date of acquisition. Starfruit’s assets and liabilities were reported on its books at values approximating fair value, except its plant and equipment (10-year life, straight-line) was overvalued by $25,000,000. Starfruit Company had previously unreported intangible assets, with a market value of $40,000,000 and 5-year life, straight-line, which were capitalized following GAAP.

At the date of acquisition, what would the consolidation eliminating entry (R) credits the noncontrolling interest in Starfruit Company amount be?

On July 1, 2016, Killearn Company acquired 88,000 of the outstanding shares of Shaun Company for $13 per share. This acquisition gave Killearn a 25 percent ownership of Shaun and allowed Killearn to significantly influence the investee’s decisions.

As of July 1, 2016, the investee had assets with a book value of $3 million and liabilities of $74,400. At the time, Shaun held equipment appraised at $364,000 above book value; it was considered to have a seven-year remaining life with no salvage value. Shaun also held a copyright with a five-year remaining life on its books that was undervalued by $972,000. Any remaining excess cost was attributable to goodwill. Depreciation and amortization are computed using the straight-line method. Killearn applies the equity method for its investment in Shaun.

Shaun’s policy is to declare and pay a $1 per share cash dividend every April 1 and October 1. Shaun’s income, earned evenly throughout each year, was $598,000 in 2016, $639,600 in 2017, and $692,400 in 2018.

In addition, Killearn sold inventory costing $91,200 to Shaun for $152,000 during 2017. Shaun resold $92,000 of this inventory during 2017 and the remaining $60,000 during 2018.

1. Determine the equity income to be recognized by Killearn during each of these years.

2. Compute Killearn’s investment in Shaun Company’s balance as of December 31, 2018.

P Company acquired the assets and assumed the liabilities of S Company on January 1, 2018, for $510,000 when S Company's balance sheet was as follows:

Fair values of S Company's assets and liabilities were equal to their book values except for the following:

1. Inventory has a fair value of $126,000.
2. Land has a fair value of $198,000.
3. The bonds pay interest semiannually on June 30 and December 31. The current yield rate on bonds of similar risk is 8%.

Prepare the journal entry on P Company's books to record the acquisition of the assets and assumption of the liabilities of S Company.

On July 1, 2016, Killearn Company acquired 84,000 of the outstanding shares of Shaun Company for $20 per share. This acquisition gave Killearn a 25 percent ownership of Shaun and allowed Killearn to significantly influence the investee's decisions.

As of July 1, 2016, the investee had assets with a book value of $5 million and liabilities of $266,400. At the time, Shaun held equipment appraised at $476,000 above book value; it was considered to have a seven-year remaining life with no salvage value. Shaun also held a copyright with a five-year remaining life on its books that was undervalued by $1,212,000. Any remaining excess cost was attributable to goodwill. Depreciation and amortization are computed using the straight-line method. Killearn applies the equity method for its investment in Shaun.

Shaun's policy is to declare and pay a $1 per share cash dividend every April 1 and October 1. Shaun's income, earned evenly throughout each year, was $645,000 in 2016, $679,800 in 2017, and $723,000 in 2018.

In addition, Killearn sold inventory costing $139,200 to Shaun for $232,000 during 2017. Shaun resold $101,500 of this inventory during 2017 and the remaining $130,500 during 2018.

1.Determine the equity income to be recognized by Killearn during each of these years.

2.Compute Killearn's investment in Shaun Company's balance as of December 31, 2018.