Francisco Inc. acquired 100 percent of the voting shares of Beltran Company on January 1, 2017. In exchange, Francisco paid $794,250 in cash and issued 112,000 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.
| Beltran Reporting Unit |
Fair Values 1/1/17 |
Fair Values 12/31/18 |
Book Values 12/31/18 |
||||||
| Cash | $ | 120,500 | $ | 87,500 | $ | 87,500 | |||
| Receivables | 286,250 | 340,500 | 340,500 | ||||||
| Inventory | 271,250 | 316,000 | 306,100 | ||||||
| Patents | 686,500 | 790,000 | 658,500 | ||||||
| Customer relationships | 586,250 | 564,000 | 528,500 | ||||||
| Equipment (net) | 312,000 | 242,000 | 233,700 | ||||||
| Goodwill | ? | ? | 534,000 | ||||||
| Accounts payable | (139,500 | ) | (203,000 | ) | (203,000 | ) | |||
| Long-term liabilities | (519,000 | ) | (428,000 | ) | (428,000 | ) | |||
a. Prepare Francisco’s journal entry to record the assets acquired and the liabilities assumed in the Beltran merger on January 1, 2017.
b. 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 $1,823,000. What amount of goodwill impairment, if any, should Francisco recognize on its 2018 income statement?
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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 $1,823,000. What amount of goodwill impairment, if any, should Francisco recognize on its 2018 income statement?
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In: Accounting
Protrade Corporation acquired 80 percent of the outstanding voting stock of Seacraft Company on January 1, 2014, for $612,000 in cash and other consideration. At the acquisition date, Protrade assessed Seacraft’s identifiable assets and liabilities at a collective net fair value of $765,000 and the fair value of the 20 percent noncontrolling interest was $153,000. 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, 2015:
| Protrade | Seacraft | |
| Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $880,000 | $600,000 |
| Cost of goods sold . . . . . . . . . . . . . . . . . . . . . | 410,000 | 317,000 |
| Operating expenses . . . . . . . . . . . . . . . . . . . . | 174,000 | 129,000 |
| Retained earnings, 1/1/15 . . . . . . . . . . . . . . . | 980,000 | 420,000 |
| Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 370,000 | 144,000 |
| Buildings (net) . . . . . . . . . . . . . . . . . . . . . . . . | 382,000 | 181,000 |
| Investment income . . . . . . . . . . . . . . . . . . . . | Not given | –0– |
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 $114,000 in 2014 and $134,000 in 2015. Of this inventory, Seacraft retained and then sold $52,000 of the 2014 transfers in 2015 and held $66,000 of the 2015 transfers until 2016.
Determine balances for the following items that would appear on consolidated financial statements for 2015:
Cost of Goods Sold
Inventory
Net Income Attributable to Noncontrolling Interest
b.Assume that Seacraft sells inventory to Protrade at a markup equal to 60 percent of cost. Intra-entity transfers were $74,000 in 2014 and $104,000 in 2015. Of this inventory, $45,000 of the 2014 transfers were retained and then sold by Protrade in 2015, whereas $59,000 of the 2015 transfers were held until 2016.
Determine balances for the following items that would appear on consolidated financial statements for 2015:
Cost of Goods Sold
Inventory
Net Income Attributable to Noncontrolling Interest
c.Protrade sells Seacraft a building on January 1, 2014, for $128,000, although its book value was only $74,000 on this date. The building had a 5-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 2015:
Buildings (net)
Operating Expenses
Net Income Attributable to Noncontrolling Interest
In: Accounting
On January 1, 2017, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing, Inc., for a total of $980,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $790,000, retained earnings of $340,000, and a noncontrolling interest fair value of $420,000. 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:
| Net Income | Dividends Declared | Inventory Purchases from Corgan | |||||||
| 2017 | $ | 240,000 | $ | 44,000 | $ | 190,000 | |||
| 2018 | 220,000 | 54,000 | 210,000 | ||||||
Corgan sells inventory to Smashing using a 60 percent markup on cost. At the end of 2017 and 2018, 50 percent of the current year purchases remain in Smashing's inventory.
a. Compute the equity method balance in Corgan's Investment in Smashing, Inc., account as of December 31, 2018.
b.Prepare the worksheet adjustments for the December 31, 2018, consolidation of Corgan and Smashing.
a.Compute the equity method balance in Corgan's Investment in Smashing, Inc., account as of December 31, 2018.
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In: Accounting
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On January 1, 2015, Marshall Company acquired 100 percent of the outstanding common stock of Tucker Company. To acquire these shares, Marshall issued $206,700 in long-term liabilities and 26,500 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Marshall paid $36,600 to accountants, lawyers, and brokers for assistance in the acquisition and another $25,650 in connection with stock issuance costs. |
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Prior to these transactions, the balance sheets for the two companies were as follows: |
| Marshall Company Book Value |
Tucker Company Book Value |
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| Cash | $ | 68,000 | $ | 10,650 |
| Receivables | 314,000 | 104,850 | ||
| Inventory | 356,000 | 196,000 | ||
| Land | 229,000 | 282,000 | ||
| Buildings (net) | 436,000 | 221,000 | ||
| Equipment (net) | 203,000 | 57,500 | ||
| Accounts payable | (177,000) | (64,000) | ||
| Long-term liabilities | (513,000) | (261,000) | ||
| Common stock—$1 par value | (110,000) | |||
| Common stock—$20 par value | (120,000) | |||
| Additional paid-in capital | (360,000) | 0 | ||
| Retained earnings, 1/1/15 | (446,000) | (427,000) | ||
| Note: Parentheses indicate a credit balance. |
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In Marshall’s appraisal of Tucker, it deemed three accounts to be undervalued on the subsidiary’s books: Inventory by $7,050, Land by $26,400, and Buildings by $36,750. Marshall plans to maintain Tucker’s separate legal identity and to operate Tucker as a wholly owned subsidiary. |
| a. |
Determine the amounts that Marshall Company would report in its postacquisition balance sheet. In preparing the postacquisition balance sheet, any required adjustments to income accounts from the acquisition should be closed to Marshall’s retained earnings. |
| b. |
Prepare a worksheet to consolidate the balance sheets of these two companies as of January 1, 2015. (For accounts where multiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.) |
In: Accounting
Albuquerque, Inc., acquired 24,000 shares of Marmon Company several years ago for $720,000. At the acquisition date, Marmon reported a book value of $870,000, and Albuquerque assessed the fair value of the noncontrolling interest at $180,000. Any excess of acquisition-date fair value over book value was assigned to broadcast licenses with indefinite lives. Since the acquisition date and until this point, Marmon has issued no additional shares. No impairment has been recognized for the broadcast licenses. At the present time, Marmon reports $940,000 as total stockholders’ equity, which is broken down as follows: Common stock ($10 par value) $ 300,000 Additional paid-in capital 430,000 Retained earnings 210,000 Total $ 940,000 View the following as independent situations: a. & b. Marmon sells 10,000 and 2,000 shares of previously unissued common stock to the public for $42 and $22 per share. Albuquerque purchased none of this stock. What journal entry should Albuquerque make to recognize the impact of this stock transaction?
Record the entry to recognize the impact of selling of 10,000 shares.
Record the entry to recognize the impact of selling of 2,000 shares.
In: Accounting
Benson Manufacturing Company was started on January 1, 2018, when it acquired $81,000 cash by issuing common stock. Benson immediately purchased office furniture and manufacturing equipment costing $7,000 and $34,400, respectively. The office furniture had an eight-year useful life and a zero salvage value. The manufacturing equipment had a $3,600 salvage value and an expected useful life of four years. The company paid $11,100 for salaries of administrative personnel and $15,700 for wages to production personnel. Finally, the company paid $7,800 for raw materials that were used to make inventory. All inventory was started and completed during the year. Benson completed production on 4,000 units of product and sold 3,050 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.)
Required
Determine the total product cost and the average cost per unit of the inventory produced in 2018. (Round "Average cost per unit" to 2 decimal places.)
Determine the amount of cost of goods sold that would appear on the 2018 income statement. (Do not round intermediate calculations.)
Determine the amount of the ending inventory balance that would appear on the December 31, 2018, balance sheet. (Do not round intermediate calculations.)
Determine the amount of net income that would appear on the 2018 income statement. (Round your answer to the nearest dollar amount.)
Determine the amount of retained earnings that would appear on the December 31, 2018, balance sheet. (Round your answer to the nearest dollar amount.)
Determine the amount of total assets that would appear on the December 31, 2018, balance sheet. (Round your answer to the nearest dollar amount.)
In: Accounting
Walton Manufacturing Company was started on January 1, 2018, when it acquired $85,000 cash by issuing common stock. Walton immediately purchased office furniture and manufacturing equipment costing $9,100 and $26,400, respectively. The office furniture had an 8-year useful life and a zero salvage value. The manufacturing equipment had a $3,000 salvage value and an expected useful life of three years. The company paid $11,800 for salaries of administrative personnel and $15,900 for wages to production personnel. Finally, the company paid $7,050 for raw materials that were used to make inventory. All inventory was started and completed during the year. Walton completed production on 4,100 units of product and sold 3,100 units at a price of $14 each in 2018. (Assume that all transactions are cash transactions and that product costs are computed in accordance with GAAP.)
Required
Determine the total product cost and the average cost per unit of the inventory produced in 2018. (Round "Average cost per unit" to 2 decimal places.)
Determine the amount of cost of goods sold that would appear on the 2018 income statement. (Do not round intermediate calculations.)
Determine the amount of the ending inventory balance that would appear on the December 31, 2018, balance sheet. (Do not round intermediate calculations.)
Determine the amount of net income that would appear on the 2018 income statement.
Determine the amount of retained earnings that would appear on the December 31, 2018, balance sheet.
Determine the amount of total assets that would appear on the December 31, 2018, balance sheet.
In: Accounting
On January 1, 2017, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing, Inc., for a total of $1,190,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $850,000, retained earnings of $400,000, and a noncontrolling interest fair value of $510,000. 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:
|
Net Income |
Dividends Declared |
Inventory Purchases from Corgan |
|||||||
|
2017 |
$ |
300,000 |
$ |
50,000 |
$ |
250,000 |
|||
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2018 |
280,000 |
60,000 |
270,000 |
||||||
Corgan sells inventory to Smashing using a 60 percent markup on cost. At the end of 2017 and 2018, 50 percent of the current year purchases remain in Smashing's inventory.
A. Prepare the worksheet adjustments for the December 31, 2018, consolidation of Corgan and Smashing.
In: Accounting
On January 1, 2017, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing, Inc., for a total of $1,190,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $850,000, retained earnings of $400,000, and a noncontrolling interest fair value of $510,000. 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:
|
Net Income |
Dividends Declared |
Inventory Purchases from Corgan |
|||||||
|
2017 |
$ |
300,000 |
$ |
50,000 |
$ |
250,000 |
|||
|
2018 |
280,000 |
60,000 |
270,000 |
||||||
Corgan sells inventory to Smashing using a 60 percent markup on cost. At the end of 2017 and 2018, 50 percent of the current year purchases remain in Smashing's inventory.
A. Prepare entry *G
B. Prepare entry S
C. Prepare entry A
In: Accounting
On January 1, 2017, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing, Inc., for a total of $1,190,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $850,000, retained earnings of $400,000, and a noncontrolling interest fair value of $510,000. 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:
|
Net Income |
Dividends Declared |
Inventory Purchases from Corgan |
|||||||
|
2017 |
$ |
300,000 |
$ |
50,000 |
$ |
250,000 |
|||
|
2018 |
280,000 |
60,000 |
270,000 |
||||||
Corgan sells inventory to Smashing using a 60 percent markup on cost. At the end of 2017 and 2018, 50 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.
In: Accounting