Francisco Inc. acquired 100 percent of the voting shares of Beltran Company on January 1, 2017. In exchange, Francisco paid $795,250 in cash and issued 108,000 shares of its own $1 par value common stock. On this date, Francisco’s stock had a fair value of $12 per share. The combination is a statutory merger with Beltran subsequently dissolved as a legal corporation. Beltran’s assets and liabilities are assigned to a new reporting unit.

The following reports the fair values for the Beltran reporting unit for January 1, 2017, and December 31, 2018, along with their respective book values on December 31, 2018.

Rooney Manufacturing Company was started on January 1, 2018, when it acquired $75,000 cash by issuing common stock. Rooney immediately purchased office furniture and manufacturing equipment costing $9,100 and $26,600, respectively. The office furniture had an eight-year useful life and a zero salvage value. The manufacturing equipment had a $3,500 salvage value and an expected useful life of three years. The company paid $11,500 for salaries of administrative personnel and $15,400 for wages to production personnel. Finally, the company paid $9,580 for raw materials that were used to make inventory. All inventory was started and completed during the year. Rooney completed production on 4,300 units of product and sold 3,320 units at a price of $15 each in 2018. (Assume that all transactions are cash transactions and that product costs are computed in accordance with GAAP.)

On October 30, 2016, Sanchez Company acquired a piece of machinery and signed a 12-month note for $24,000. The face value of the note includes the price of the machinery and interest. The note is to be paid in four $6,000 quarterly installments. The value of the machinery is the present value of the four quarterly payments discounted at an annual interest rate of 16%.

Required:

Prepare all the journal entries required to record the information given including the year-end adjusting entry and any payments. Payments are made at month-end on January 31, April 30, July 31 and October 31. Present value techniques should be used.

PAGE 9

GENERAL JOURNAL

Show how the items would be reported on the December 31, 2016, balance sheet. Additional Instructions

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Francisco Inc. acquired 100 percent of the voting shares of Beltran Company on January 1, 2017. In exchange, Francisco paid $657,500 in cash and issued 110,000 shares of its own $1 par value common stock. On this date, Francisco’s stock had a fair value of $12 per share. The combination is a statutory merger with Beltran subsequently dissolved as a legal corporation. Beltran’s assets and liabilities are assigned to a new reporting unit.

The following reports the fair values for the Beltran reporting unit for January 1, 2017, and December 31, 2018, along with their respective book values on December 31, 2018.

1. Prepare Francisco’s journal entry to record the assets acquired and the liabilities assumed in the Beltran merger on January 1, 2017.

2. On December 31, 2018, Francisco opts to forgo any goodwill impairment qualitative assessment and estimates that the total fair value of the entire Beltran reporting unit is $1,740,250. What amount of goodwill impairment, if any, should Francisco recognize on its 2018 income statement?

The Donut Stop acquired equipment for $23,000. The company uses straight-line depreciation and estimates a residual value of $3,400 and a four-year service life. At the end of the second year, the company estimates that the equipment will be useful for four additional years, for a total service life of six years rather than the original four. At the same time, the company also changed the estimated residual value to $2,000 from the original estimate of $3,400.

Required:

Calculate how much The Donut Stop should record each year for depreciation in years 3 to 6.

Cost of the equipment:

Less: accumulated depreciation (year 1 & 2):

Book value, end of year 2:

Less: new residual value:

New depreciable cost:

Remaining service life:

Annual depreciation in years 3 to 6

Consolidation several years subsequent to date of acquisition—Equity method
Assume that a parent company acquired a subsidiary on January 1, 2014. The purchase price was $785,000 in excess of the subsidiary’s book value of Stockholders’ Equity on the acquisition date, and that excess was assigned to the following [A] assets:

The [A] assets with definite useful lives have been depreciated or amortized as part of the parent’s preconsolidation equity method accounting. The Goodwill asset has been tested annually for impairment, and has not been found to be impaired. The financial statements of the parent and its subsidiary for the year ended December 31, 2016, are as follows:

a. Compute the Equity Investment balance as of January 1, 2016.

$Answer

b. Show the computation to yield the $159,150 equity income reported by the parent for the year ended December 31, 2016.

Do not use negative signs with your answers.

c. Show the computation to yield the $1,650,550 Equity Investment account balance reported by the parent at December 31, 2016.

Do not use negative signs with your answers.

Anxiety Company acquired three items of machinery. ▪ On January 1,2017,the entity purchased a machine for P500,000 down and four monthly installments of P1,250,000.The cash price of the machine was P4,700,000. ▪ On December 31,2017,the entity purchased a machine in exchange for a noninterest bearing note requiring ten payments of P500,000. ▪ The first payment was made on December 31,2018, and the others are due annually on December 31. ▪ The prevailing rate of interest for this type of note at date of issuance was 12%. ▪ The present value of an ordinary annuity of 1 at 12% is 5.33 for nine periods and 5.65 for ten periods.▪ On December 31,2017,the entity acquired used machinery by issuing the seller a two-ear, noninterest- bearing note for P3,000,000.In recent borrowing, the entity has paid a 12% interest for this type of note. ▪ The present value of 1 at 12% for 2 years is.80 and the present value of an ordinary annuity of 1 at 12% for 2 years is 1.69. Required: Prepare journal entries for 2017,2018 and 2019.

Protrade Corporation acquired 80 percent of the outstanding voting stock of Seacraft Company on January 1, 2017, for $440,000 in cash and other consideration. At the acquisition date, Protrade assessed Seacraft's identifiable assets and liabilities at a collective net fair value of $615,000 and the fair value of the 20 percent noncontrolling interest was $110,000. No excess fair value over book value amortization accompanied the acquisition.

The following selected account balances are from the individual financial records of these two companies as of December 31, 2018:

Each of the following problems is an independent situation:

a. Assume that Protrade sells Seacraft inventory at a markup equal to 60 percent of cost. Intra-entity transfers were $99,000 in 2017 and $119,000 in 2018. Of this inventory, Seacraft retained and then sold $37,000 of the 2017 transfers in 2018 and held $51,000 of the 2018 transfers until 2019.
Determine balances for the following items that would appear on consolidated financial statements for 2018:

b. Assume that Seacraft sells inventory to Protrade at a markup equal to 60 percent of cost. Intra-entity transfers were $59,000 in 2017 and $89,000 in 2018. Of this inventory, $30,000 of the 2017 transfers were retained and then sold by Protrade in 2018, whereas $44,000 of the 2018 transfers were held until 2019.
Determine balances for the following items that would appear on consolidated financial statements for 2018:

c. Protrade sells Seacraft a building on January 1, 2017, for $98,000, although its book value was only $59,000 on this date. The building had a five-year remaining life and was to be depreciated using the straight-line method with no salvage value.

Determine balances for the following items that would appear on consolidated financial statements for 2018:

a.Cost of goods sold: ?

Inventory: ?

Net income attributable to noncontrolling interest: ?

b.Cost of goods sold: ?

Inventory: ?

Net income attributable to noncontrolling interest: ?

c.Buildings (net): ?

Operating expenses: ?

Net income attributable to noncontrolling interest: ?

April

Date

1 Acquired $55000 to establish the company, $33,000 from an initial investment through the issue of common stock to themselves and $22,000 from a bank loan by signing a note. The entire note is due in five years and has a 7 per cent annual interest rate. Interest is payable in cash on March 31 of each year.

1 Paid $42000 (represents 3 months) in advance rent for a one-year lease on kitchen space.

1 Paid $35000 to purchase a refrigerator. The refrigerator is expected to have a useful life of five years and a salvage value of $5000 at the end of 5 years.

6 Purchased supplies for $500 for cash.

9 Received $700cash as an advance payment from a client to be served in May.

10 Recorded sales to customers. Cash receipts were $700, and invoices for sales on account were $1500.

15 Paid $1460 cash for employees semi-monthly salaries.

16 Collected $400 from accounts receivable.

23 Received monthly utility bills amounting to $340. The bills are to be paid in May.

25 Paid advertising expense for advertisements run during April, $260.

30 Recorded services to customers. Cash receipts were $1300 and invoices for services on account were $1800.

30 Paid $1460 cash for employees salaries.

Additional information provided by the Supreme Caterers for the end of April

1 Counted the supplies inventory on hand, $55.

Required:

1 Record the transactions for April in general journal.

2 Open general ledger accounts, using the T-accounts provided, and post the general journal entries to the ledger.

3 Record and post the appropriate adjusting entries.

4 Prepare an adjusted trial balance.

5 Prepare an income statement, statement of retained earnings, and balance sheet for April

On January 1, 2017, Corgan Company acquired 80 percent of the outstanding voting stock of Smashing, Inc., for a total of $1,080,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $780,000, retained earnings of $330,000, and a noncontrolling interest fair value of $270,000. Corgan attributed the excess of fair value over Smashing's book value to various covenants with a 20-year remaining life. Corgan uses the equity method to account for its investment in Smashing.

During the next two years, Smashing reported the following:

Corgan sells inventory to Smashing using a 60 percent markup on cost. At the end of 2017 and 2018, 40 percent of the current year purchases remain in Smashing's inventory.

Compute the equity method balance in Corgan's Investment in Smashing, Inc., account as of December 31, 2018.

Prepare the worksheet adjustments for the December 31, 2018, consolidation of Corgan and Smashing.