Albuquerque, Inc., acquired 27,000 shares of Marmon Company several years ago for $900,000. At the acquisition date, Marmon reported a book value of $980,000, and Albuquerque assessed the fair value of the noncontrolling interest at $100,000. 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 $1,070,000 as total stockholders’ equity, which is broken down as follows:

View the following as independent situations:

1. a. & b. Marmon sells 15,000 and 6,000 shares of previously unissued common stock to the public for $40 and $26 per share. Albuquerque purchased none of this stock. What journal entry should Albuquerque make to recognize the impact of this stock transaction? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round your intermediate calculations.)

The following events pertain to Super Cleaning Company:

1. Acquired $15,200 cash from the issue of common stock.

2. Provided $13,200 of services on account.

3. Provided services for $4,200 cash.

4. Received $2,600 cash in advance for services to be performed in the future.

5. Collected $9,200 cash from the account receivable created in Event 2.

6. Paid $5,200 for cash expenses.

7. Performed $1,300 of the services agreed to in Event 4.

8. Incurred $1,700 of expenses on account.

9. Paid $1,200 cash in advance for one-year contract to rent office space.

10. Paid $1,350 cash on the account payable created in Event 8.

11. Paid a $1,700 cash dividend to the stockholders.

12. Recognized rent expense for nine months’ use of office space acquired in Event 9.

Required

Show the effects of the events on the financial statements using a horizontal statements model like the following one. In the Cash Flows column, use the letters OA to designate operating activity, IA for investing activity, FA for financing activity, and NC for net change in cash. If an account is not affected by the event, leave the cell blank. The first event is recorded as an example. (Do not round intermediate calculations. Enter any decreases to account balances and cash outflows with a minus sign. Not every cell will require entry.)

On January 1, 2018, Marshall Company acquired 100 percent of the outstanding common stock of Tucker Company. To acquire these shares, Marshall issued $313,000 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 $23,000 to accountants, lawyers, and brokers for assistance in the acquisition and another $8,000 in connection with stock issuance costs.

Prior to these transactions, the balance sheets for the two companies were as follows:

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 $7,650, Land by $28,800, and Buildings by $37,000. 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. Other accounts will also need to be added or adjusted to reflect the journal entries Marshall prepared in recording the acquisition.

b) To verify the answers found in part (a), prepare a worksheet to consolidate the balance sheets of these two companies as of January 1, 2018.

Hospital Equipment Company (HEC) acquired several fMRI machines for its inventory at a cost of $3,600 per machine. HEC usually sells these machines to hospitals at a price of $6,960. HEC also separately sells 12 months of training and repair services for fMRI machines for $1,740. HEC is paid $6,960 cash on November 30 for the sale of an fMRI machine delivered on December 1. HEC sold the machine at its regular price, but included one year of free training and repair service. Required: For the machine sold at its regular price, but with one year of “free” training and repair service, determine the dollar amount of revenue earned from the equipment sale versus the revenue earned from the training and repair services.

Clean Air Products owns 80 percent of the stock of Superior Filter Company, which it acquired at underlying book value on August 30, 20X6. At that date, the fair value of the noncontrolling interest was equal to 20 percent of the book value of Superior Filter. Summarized trial balance data for the two companies as of December 31, 20X8, are as follows:

On January 1, 20X8, Clean Air's inventory contained filters purchased for $67,000 from Superior Filter, which had produced the filters for $47,000. In 20X8, Superior Filter spent $107,000 to produce additional filters, which it sold to Clean Air for $157,000. By December 31, 20X8, Clean Air had sold all filters that had been on hand January 1, 20X8, but continued to hold in inventory $47,100 of the 20X8 purchase from Superior Filter.

Required:

a.

Prepare all consolidation entries needed to complete a consolidation worksheet for 20X8. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

*Record the basic consolidation entry.

*Record the entry to reverse last year's deferral.

*Record the entry to defer the current year's unrealized profits on inventory transfers.

b.

Compute consolidated net income and income assigned to the controlling interest in the 20X8 consolidated income statement.

c.

Compute the balance assigned to the noncontrolling interest in the consolidated balance sheet as of December 31, 20X8.

On January 1, 2017, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing, Inc., for a total of $1,085,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $820,000, retained earnings of $370,000, and a noncontrolling interest fair value of $465,000. 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, 50 percent of the current year purchases remain in Smashing's inventory.

1. Compute the equity method balance in Corgan's Investment in Smashing, Inc., account as of December 31, 2018.
2. Prepare the worksheet adjustments for the December 31, 2018, consolidation of Corgan and Smashing.

On December 31, 2015, Milton Company acquired a computer from Hamil Corporation by issuing a $600,000 zero-interest-bearing note, payable in full on December 31, 2019. Milton Company’s credit rating permits it to borrow funds from its several lines of credit at 10%. The computer is expected to have a 5-year life and a $70,000 residual value.
Prepare the journal entry for the purchase on December 31, 2015 and any necessary adjusting entries relative to depreciation (use straight-line) and amortization on December 31, 2016

1.On January 1 of the current year (Year 1), our company acquired a truck for $75,000. The estimated useful life of the truck is 5 years or 100,000 miles. The residual value at the end of 5 years is estimated to be $5,000. The actual mileage for the truck was 22,000 miles in Year 1 and 27,000 miles in Year 2. What is the depreciation expense for the second year of use (Year 2) if we use the units of production method?

$14,000

$15,400

$16,800

$18,900

2.On January 1, our company purchased a truck for $85,000. The estimated useful life of the truck is 4 years. The residual value at the end of 4 years is estimated to be $5,000.

What is the depreciation expense for the second year of use if we use the double-declining balance method?

What is the balance in accumulated depreciation at the end of the second year of use if we use the double-declining balance method?

What is the book value at the end of the second year of use if we use the double-declining balance method.

3.On January 1, our company purchased a truck for $80,000. The estimated useful life of the truck is 4 years. The residual value at the end of 4 years is estimated to be $10,000. What is the depreciation expense for the third year of use if we use the straight-line method?

$17,500

$20,000

$35,000

$52,500

4.Our company uses the percentage of receivables method to estimate bad debt expense for the year. We had the following account balances on our unadjusted trial balance at the end of the year (December 31): accounts receivable, debit balance of $150,000; allowance for bad debts, debit balance of $1,000. We estimate that 3.5% of accounts receivable at the end of the year are uncollectible. What amount will be debited to bad debt expense when we record the adjusting entry?

$4,000

$4,250

$5,250

$6,250

5.Our company uses the percentage of sales method to estimate bad debt expense for the year. Our allowance for bad debts account has a credit balance of $1,000 prior to the adjusting entry for bad debt expense. We have estimated that 2% of net credit sales will be uncollectible for the current year. Net credit sales for the year totaled $200,000. What amount will be debited to bad debt expense when we record the adjusting entry?

3,000

$4,000

$5,000

$6,000

Thornton Manufacturing Company was started on January 1, 2018, when it acquired $86,000 cash by issuing common stock. Thornton immediately purchased office furniture and manufacturing equipment costing $7,700 and $35,500, respectively. The office furniture had an 8-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 $11,900 for salaries of administrative personnel and $15,100 for wages to production personnel. Finally, the company paid $10,010 for raw materials that were used to make inventory. All inventory was started and completed during the year. Thornton completed production on 4,300 units of product and sold 3,340 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

1. 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.)

2. Determine the amount of cost of goods sold that would appear on the 2018 income statement. (Do not round intermediate calculations.)

3. Determine the amount of the ending inventory balance that would appear on the December 31, 2018, balance sheet. (Do not round intermediate calculations.)

4. Determine the amount of net income that would appear on the 2018 income statement.

5. Determine the amount of retained earnings that would appear on the December 31, 2018, balance sheet.

6. Determine the amount of total assets that would appear on the December 31, 2018, balance sheet.

On January 1, 2017, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing, Inc., for a total of $805,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $740,000, retained earnings of $290,000, and a noncontrolling interest fair value of $345,000. 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, 30 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.