On January 1, 2021, Marshall Company acquired 100 percent of the outstanding common stock of Tucker Company. To acquire these shares, Marshall issued $295,000 in long-term liabilities and 20,000 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Marshall paid $26,500 to accountants, lawyers, and brokers for assistance in the acquisition and another $11,500 in connection with stock issuance costs.
Prior to these transactions, the balance sheets for the two companies were as follows:
| Marshall Company Book Value |
Tucker Company Book Value |
||||||
| Cash | $ | 63,000 | $ | 29,200 | |||
| Receivables | 306,000 | 189,000 | |||||
| Inventory | 426,000 | 168,000 | |||||
| Land | 207,000 | 213,000 | |||||
| Buildings (net) | 484,000 | 237,000 | |||||
| Equipment (net) | 167,000 | 73,800 | |||||
| Accounts payable | (221,000 | ) | (62,700 | ) | |||
| Long-term liabilities | (444,000 | ) | (295,000 | ) | |||
| Common stock—$1 par value | (110,000 | ) | |||||
| Common stock—$20 par value | (120,000 | ) | |||||
| Additional paid-in capital | (360,000 | ) | 0 | ||||
| Retained earnings, 1/1/21 | (518,000 | ) | (432,300 | ) | |||
Note: Parentheses indicate a credit balance.
In Marshall’s appraisal of Tucker, it deemed three accounts to be undervalued on the subsidiary’s books: Inventory by $7,550, Land by $17,600, and Buildings by $25,400. Marshall plans to maintain Tucker’s separate legal identity and to operate Tucker as a wholly owned subsidiary.
In: Accounting
Baird Manufacturing Company was started on January 1, 2018, when it acquired $84,000 cash by issuing common stock. Baird immediately purchased office furniture and manufacturing equipment costing $9,800 and $35,100, 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 four years. The company paid $11,700 for salaries of administrative personnel and $15,300 for wages to production personnel. Finally, the company paid $8,780 for raw materials that were used to make inventory. All inventory was started and completed during the year. Baird completed production on 4,100 units of product and sold 3,140 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.)
a. total product cost? average cost per unit?
b. cost of good sold?
c. ending inventory?
d. net income?
e. retained earning?
f. total asset?
In: Accounting
On January 1, 2017, Ridge Road Company acquired 25 percent of the voting shares of Sauk Trail, Inc., for $3,500,000 in cash. Both companies provide commercial Internet support services but serve markets in different industries. Ridge Road made the investment to gain access to Sauk Trail's board of directors and thus facilitate future cooperative agreements between the two firms. Ridge Road quickly obtained several seats on Sauk Trail's board which gave it the ability to significantly influence Sauk Trail's operating and investing activities.
The January 1, 2017, carrying amounts and corresponding fair values for Sauk Trail's assets and liabilities follow:
| Carrying Amount | Fair Value | |||||
| Cash and receivables | $ | 150,000 | $ | 150,000 | ||
| Computing equipment | 5,360,000 | 6,340,000 | ||||
| Patented technology | 140,000 | 4,080,000 | ||||
| Trademark | 190,000 | 2,080,000 | ||||
| Liabilities | (225,000 | ) | (225,000 | ) | ||
Also as of January 1, 2017, Sauk Trail's computing equipment had a seven-year remaining estimated useful life. The patented technology was estimated to have a four-year remaining useful life. The trademark's useful life was considered indefinite. Ridge Road attributed to goodwill any unidentified excess cost.
During the next two years, Sauk Trail reported the following net income and dividends:
| Net Income | Dividends Declared | |||||
| 2017 | $ | 1,880,000 | $ | 190,000 | ||
| 2018 | 2,065,000 | 200,000 | ||||
How much of Ridge Road's $3,500,000 payment for Sauk Trail is attributable to goodwill?
What amount should Ridge Road report for its equity in Sauk Trail's earnings on its income statements for 2017 and 2018?
What amount should Ridge Road report for its investment in Sauk Trail on its balance sheets at the end of 2017 and 2018?
In: Accounting
On January 1, 2017, Ridge Road Company acquired 25 percent of the voting shares of Sauk Trail, Inc., for $3,700,000 in cash. Both companies provide commercial Internet support services but serve markets in different industries. Ridge Road made the investment to gain access to Sauk Trail's board of directors and thus facilitate future cooperative agreements between the two firms. Ridge Road quickly obtained several seats on Sauk Trail's board which gave it the ability to significantly influence Sauk Trail's operating and investing activities.
The January 1, 2017, carrying amounts and corresponding fair values for Sauk Trail's assets and liabilities follow:
| Carrying Amount | Fair Value | |||||
| Cash and receivables | $ | 160,000 | $ | 160,000 | ||
| Computing equipment | 5,450,000 | 6,500,000 | ||||
| Patented technology | 150,000 | 4,100,000 | ||||
| Trademark | 200,000 | 2,100,000 | ||||
| Liabilities | (235,000 | ) | (235,000 | ) | ||
Also as of January 1, 2017, Sauk Trail's computing equipment had a seven-year remaining estimated useful life. The patented technology was estimated to have a four-year remaining useful life. The trademark's useful life was considered indefinite. Ridge Road attributed to goodwill any unidentified excess cost.
During the next two years, Sauk Trail reported the following net income and dividends:
| Net Income | Dividends Declared | |||||
| 2017 | $ | 1,900,000 | $ | 200,000 | ||
| 2018 | 2,085,000 | 210,000 | ||||
How much of Ridge Road's $3,700,000 payment for Sauk Trail is attributable to goodwill?
What amount should Ridge Road report for its equity in Sauk Trail's earnings on its income statements for 2017 and 2018?
What amount should Ridge Road report for its investment in Sauk Trail on its balance sheets at the end of 2017 and 2018?
In: Accounting
CC Ltd, a company incorporated in Singapore with December 31 year-ends, acquired a retail shop on 2 January 20X1 for $600,000 with the intention of renting it out. The property is leasehold with 20 years remaining on the lease. It has a zero residual value. On 1 July 20X1, CC Ltd rented out the retail shop to an unrelated company for a monthly rental of $8,000, payable at the end of each month. After 2 years, CC Ltd managed to terminate the lease with the existing tenant on 30 June 20X3. CC Ltd used the retail shop for its own operations from 1 July 20X3 onwards.
The market value of CC Ltd’s retail shop was determined as follows:
31 December 20X1 : $800,000
31 December 20X2 : $700,000
1 July 20X3 : $740,000
CC Ltd adopts the fair value model under FRS 40 Investment Property and adopts the cost model under FRS 16 Property, Plant and Equipment. CC Ltd depreciates all its assets on a straight-line basis where applicable.
Required:
Illustrate the accounting for the retail shop by preparing the journal entries (with journal narratives) to record the various events relating to CC Ltd’s retail shop from 2 January 20X1 to 31 December 20X3. Please round your answers to the nearest dollar.
Since CC Ltd adopts fair value, the gain or loss arising from the change in the fair value of the investment property must be recognised in the calculation of profit or loss for the period in which it arises.
In: Accounting
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: 1. Prepare all the journal entries required to record the preceding information including the year-end adjusting entry and any payments. Present value techniques should be used. 2. Show how the preceding items would be reported on the December 31, 2016, balance sheet.
In: Accounting
Protrade Corporation acquired 80 percent of the outstanding voting stock of Seacraft Company on January 1, 2017, for $428,000 in cash and other consideration. At the acquisition date, Protrade assessed Seacraft's identifiable assets and liabilities at a collective net fair value of $585,000 and the fair value of the 20 percent noncontrolling interest was $107,000. 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:
| Protrade | Seacraft | |||||
| Sales | $ | 700,000 | $ | 420,000 | ||
| Cost of goods sold | 320,000 | 227,000 | ||||
| Operating expenses | 156,000 | 111,000 | ||||
| Retained earnings, 1/1/18 | 800,000 | 240,000 | ||||
| Inventory | 352,000 | 116,000 | ||||
| Buildings (net) | 364,000 | 163,000 | ||||
| Investment income | Not given | 0 | ||||
Each of the following problems is an independent situation:
In: Accounting
Pastorall Ltd is an Australian
pastoral company. It recently acquired a beef cattle farm near
Gunnedah, New South Wales. The following assumptions
apply:
The company was created as at 1 November 2022; at that
time, 1100 baby cattle (calves) and 700 mature cattle were
acquired. The cost of acquisition for each unit of baby cattle
(calf) and mature cattle is the same as the costs to sell in the
table below
Calves becomes mature after six months.
On 28 February 2023, 500 calves were born.
On 30 May 2023, 900 mature cattle were sold.
The fair value for the baby cattle (calves) and the
mature cattle as well as costs to sell is as follows:
Fair value per baby cattle (calf) per unit
2022- $26
2023-$30
Fair value per mature cattle per unit
2022-$36
2023-$40
Costs to sell or acquisition cost
Auctioneer’s fee
2022-$1.5
2023-2.0
Required
Provide journal entries for the following items
according to the requirement of IAS 41 Agriculture:
Establishment of the cattle farm on 1 November
2022
New born calves on 28 February 2023
Sale of mature cattle on 30 May 2023
The fair value change of the calves and the mature cattle as at 30 June 2023
that is all the data
In: Accounting
On January 1, 2017, Ridge Road Company acquired 25 percent of the voting shares of Sauk Trail, Inc., for $4,100,000 in cash. Both companies provide commercial Internet support services but serve markets in different industries. Ridge Road made the investment to gain access to Sauk Trail's board of directors and thus facilitate future cooperative agreements between the two firms. Ridge Road quickly obtained several seats on Sauk Trail's board which gave it the ability to significantly influence Sauk Trail's operating and investing activities.
The January 1, 2017, carrying amounts and corresponding fair values for Sauk Trail's assets and liabilities follow:
| Carrying Amount | Fair Value | |||||
| Cash and receivables | $ | 180,000 | $ | 180,000 | ||
| Computing equipment | 5,630,000 | 6,820,000 | ||||
| Patented technology | 170,000 | 4,140,000 | ||||
| Trademark | 220,000 | 2,140,000 | ||||
| Liabilities | (255,000 | ) | (255,000 | ) | ||
Also as of January 1, 2017, Sauk Trail's computing equipment had a seven-year remaining estimated useful life. The patented technology was estimated to have a five-year remaining useful life. The trademark's useful life was considered indefinite. Ridge Road attributed to goodwill any unidentified excess cost.
During the next two years, Sauk Trail reported the following net income and dividends:
| Net Income | Dividends Declared | |||||
| 2017 | $ | 1,940,000 | $ | 220,000 | ||
| 2018 | 2,125,000 | 230,000 | ||||
How much of Ridge Road's $4,100,000 payment for Sauk Trail is attributable to goodwill?
What amount should Ridge Road report for its equity in Sauk Trail's earnings on its income statements for 2017 and 2018?
What amount should Ridge Road report for its investment in Sauk Trail on its balance sheets at the end of 2017 and 2018?
In: Accounting
On January 1, 2017, Ridge Road Company acquired 25 percent of the voting shares of Sauk Trail, Inc., for $4,100,000 in cash. Both companies provide commercial Internet support services but serve markets in different industries. Ridge Road made the investment to gain access to Sauk Trail's board of directors and thus facilitate future cooperative agreements between the two firms. Ridge Road quickly obtained several seats on Sauk Trail's board which gave it the ability to significantly influence Sauk Trail's operating and investing activities.
The January 1, 2017, carrying amounts and corresponding fair values for Sauk Trail's assets and liabilities follow:
| Carrying Amount | Fair Value | |||||
| Cash and receivables | $ | 180,000 | $ | 180,000 | ||
| Computing equipment | 5,630,000 | 6,820,000 | ||||
| Patented technology | 170,000 | 4,140,000 | ||||
| Trademark | 220,000 | 2,140,000 | ||||
| Liabilities | (255,000 | ) | (255,000 | ) | ||
Also as of January 1, 2017, Sauk Trail's computing equipment had a seven-year remaining estimated useful life. The patented technology was estimated to have a five-year remaining useful life. The trademark's useful life was considered indefinite. Ridge Road attributed to goodwill any unidentified excess cost.
During the next two years, Sauk Trail reported the following net income and dividends:
| Net Income | Dividends Declared | |||||
| 2017 | $ | 1,940,000 | $ | 220,000 | ||
| 2018 | 2,125,000 | 230,000 | ||||
How much of Ridge Road's $4,100,000 payment for Sauk Trail is attributable to goodwill?
What amount should Ridge Road report for its equity in Sauk Trail's earnings on its income statements for 2017 and 2018?
What amount should Ridge Road report for its investment in Sauk Trail on its balance sheets at the end of 2017 and 2018?
In: Accounting