On January 1, 20X8, Package Company acquired 80 percent of Stamp Company's common stock for $280,000 cash. At that date, Stamp reported common stock outstanding of $200,000 and retained earnings of $100,000, and the fair value of the noncontrolling interest was $70,000. The book values and fair values of Stamp's assets and liabilities were equal, except for other intangible assets which had a fair value $50,000 greater than book value and an 8-year remaining life. Stamp reported the following data for 20X8 and 20X9:
|
Stamp Corporation |
||||||||||||||||
|
Year |
Net Income |
Comprehensive Income |
Dividends Paid |
|||||||||||||
|
20X8 |
$ |
25,000 |
$ |
30,000 |
$ |
5,000 |
||||||||||
|
20X9 |
35,000 |
45,000 |
10,000 |
|||||||||||||
Package reported net income of $100,000 and paid dividends of $30,000 for both the years.
43) Based on the preceding information, what is the amount of consolidated comprehensive income reported for 20X8?
A) $125,000
B) $123,750
C) $118,750
D) $130,000
44) Based on the preceding information, what is the amount of consolidated comprehensive income reported for 20X9?
A) $145,000
B) $135,000
C) $138,750
D) $128,750
45) Based on the preceding information, what is the amount of comprehensive income attributable to the controlling interest for 20X8?
A) $123,750
B) $118,750
C) $119,000
D) $104,000
46) Based on the preceding information, what is the amount of comprehensive income attributable to the controlling interest for 20X9?
A) $138,750
B) $131,000
C) $128,750
D) $135,000
I highlighted the answers please explain using clear math steps how to arrive at that answer
In: Accounting
Kitty Company began operations in the current year and acquired short-term debt investments in trading securities. The year-end cost and fair values for its portfolio of these debt investments follow.
| Portfolio of Trading Securities | Cost | Fair Value | ||||||||
| Tesla Bonds | $ | 12,900 | $ | 9,675 | ||||||
| Nike Bonds | 21,200 | 22,260 | ||||||||
| Ford Bonds | 5,300 | 4,240 | ||||||||
Prepare journal entry to record the December 31 year-end fair value adjustment for the debt securities.
In: Accounting
Peanut Company acquired 75 percent of Snoopy Company's stock at underlying book value on January 1, 20X8. At that date, the fair value of the noncontrolling interest was equal to 25 percent of the book value of Snoopy Company. Snoopy Company reported shares outstanding of $350,000 and retained earnings of $100,000. During 20X8, Snoopy Company reported net income of $60,000 and paid dividends of $3,000. In 20X9, Snoopy Company reported net income of $90,000 and paid dividends of $15,000. The following transactions occurred between Peanut Company and Snoopy Company in 20X8 and 20X9: Snoopy Co. sold equipment to Peanut Co. for a $42,000 gain on December 31, 20X8. Snoopy Co. had originally purchased the equipment for $140,000 and it had a carrying value of $28,000 on December 31, 20X8. At the time of the purchase, Peanut Co. estimated that the equipment still had a seven-year remaining useful life. Peanut sold land costing $90,000 to Snoopy Company on June 28, 20X9, for $110,000. Give all consolidating entries needed to prepare a consolidation worksheet for 20X9 assuming that Peanut Co. uses the cost method to account for its investment in Snoopy Company.
In: Accounting
Question from: International Accounting, Fourth Edition
Company ABC acquired a piece of equipment in Year 1 at a cost of $100,000. The equipment has a 10-year estimated life, zero salvage value, and is depreciated on a straight-line basis. Technological innovations take place in the industry in which the company operates in Year 4. Company ABC gathers the following information for this piece of equipment at the end of Year 4:
Expected future undiscounted cash flows from continued use: $59,000
Present Value of expected future cash flows from continued use: $51,000
Net selling price in the use equipment market: $50,000
At the end of Year 6, it is discovered that the technological innovations related to this equipment are not as affective as first expected. Company ABC estimates the following for this piece of equipment at the end of Year 6.
Expected future undiscounted cash flows from continued use: $50,000
Present Value of expected future cash flows from continued use: $44,000
Net selling price in the use equipment market: $42,000
a. Discuss whether Company ABC must conduct an impairment test on this piece of equipment at Dec 31, Year 4..
b. Determine the amount at which Company ABC should carry this piece of equipment on its balance sheet at December 31, Year4; December 31, Year 5; and December 31, Year 6. Prepare any related journal entries.
In: Accounting
On January 1, 2016, Monica Company acquired 70 percent of Young Company’s outstanding common stock for $658,000. The fair value of the noncontrolling interest at the acquisition date was $282,000. Young reported stockholders’ equity accounts on that date as follows:
| Common stock—$10 par value | $ | 300,000 | |
| Additional paid-in capital | 40,000 | ||
| Retained earnings | 460,000 | ||
In establishing the acquisition value, Monica appraised Young's assets and ascertained that the accounting records undervalued a building (with a five-year remaining life) by $40,000. Any remaining excess acquisition-date fair value was allocated to a franchise agreement to be amortized over 10 years.
During the subsequent years, Young sold Monica inventory at a 30 percent gross profit rate. Monica consistently resold this merchandise in the year of acquisition or in the period immediately following. Transfers for the three years after this business combination was created amounted to the following:
| Year | Transfer Price | Inventory Remaining at Year-End (at transfer price) |
|||||||
| 2016 | $ | 70,000 | $ | 15,000 | |||||
| 2017 | 90,000 | 17,000 | |||||||
| 2018 | 100,000 | 23,000 | |||||||
In addition, Monica sold Young several pieces of fully depreciated equipment on January 1, 2017, for $41,000. The equipment had originally cost Monica $60,000. Young plans to depreciate these assets over a 5-year period.
In 2018, Young earns a net income of $190,000 and declares and pays $50,000 in cash dividends. These figures increase the subsidiary's Retained Earnings to a $790,000 balance at the end of 2018.
Monica employs the equity method of accounting. Hence, it reports $127,340 investment income for 2018 with an Investment account balance of $821,770. Under these circumstances, prepare the worksheet entries required for the consolidation of Monica Company and Young Company. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
In: Accounting
Miller Company acquired an 80 percent interest in Taylor Company on January 1, 2016. Miller paid $896,000 in cash to the owners of Taylor to acquire these shares. In addition, the remaining 20 percent of Taylor shares continued to trade at a total value of $224,000 both before and after Miller’s acquisition. On January 1, 2016, Taylor reported a book value of $626,000 (Common Stock = $313,000; Additional Paid-In Capital = $93,900; Retained Earnings = $219,100). Several of Taylor’s buildings that had a remaining life of 20 years were undervalued by a total of $83,400. During the next three years, Taylor reports income and declares dividends as follows: Year Net Income Dividends 2016 $ 73,100 $ 10,500 2017 94,500 15,800 2018 105,300 21,100 Determine the appropriate answers for each of the following questions: What amount of excess depreciation expense should be recognized in the consolidated financial statements for the initial years following this acquisition? If a consolidated balance sheet is prepared as of January 1, 2016, what amount of goodwill should be recognized? If a consolidation worksheet is prepared as of January 1, 2016, what Entry S and Entry A should be included? On the separate financial records of the parent company, what amount of investment income would be reported for 2016 under each of the following accounting methods? The equity method. The partial equity method. The initial value method. On the parent company’s separate financial records, what would be the December 31, 2018, balance for the Investment in Taylor Company account under each of the following accounting methods? The equity method. The partial equity method. The initial value method. As of December 31, 2017, Miller’s Buildings account on its separate records has a balance of $844,000 and Taylor has a similar account with a $316,500 balance. What is the consolidated balance for the Buildings account? What is the balance of consolidated goodwill as of December 31, 2018? Assume that the parent company has been applying the equity method to this investment. On December 31, 2018, the separate financial statements for the two companies present the following information: Miller Company Taylor Company Common stock $ 527,500 $ 313,000 Additional paid-in capital 295,400 93,900 Retained earnings, 12/31/18 654,100 444,600 What will be the consolidated balance of each of these accounts? On the separate financial records of the parent company, what amount of investment income would be reported for 2016 under each of the following accounting methods? e. On the parent company’s separate financial records, what would be the December 31, 2018, balance for the Investment in Taylor Company account under each of the following accounting methods? Show less d. Investment Income e. Investment Balance The equity method The partial equity method The initial value method f. As of December 31, 2017, Miller’s Buildings account on its separate records has a balance of $844,000 and Taylor has a similar account with a $316,500 balance. What is the consolidated balance for the Buildings account? g. What is the balance of consolidated goodwill as of December 31, 2018? f. Consolidated balance g. Consolidated balance Assume that the parent company has been applying the equity method to this investment. On December 31, 2018, the separate financial statements for the two companies present the following information: Miller Company Taylor Company Common stock $ 527,500 $ 313,000 Additional paid-in capital 295,400 93,900 Retained earnings, 12/31/18 654,100 444,600 What will be the consolidated balance of each of these accounts?
Show less Common stock Additional paid-in capital Retained earnings, 12/31/18
In: Accounting
On January 1, 2016, Monica Company acquired 70 percent of Young Company’s outstanding common stock for $700,000. The fair value of the noncontrolling interest at the acquisition date was $300,000. Young reported stockholders’ equity accounts on that date as follows:
| Common stock—$10 par value | $ | 100,000 | |
| Additional paid-in capital | 100,000 | ||
| Retained earnings | 520,000 | ||
In establishing the acquisition value, Monica appraised Young's assets and ascertained that the accounting records undervalued a building (with a five-year remaining life) by $40,000. Any remaining excess acquisition-date fair value was allocated to a franchise agreement to be amortized over 10 years.
During the subsequent years, Young sold Monica inventory at a 30 percent gross profit rate. Monica consistently resold this merchandise in the year of acquisition or in the period immediately following. Transfers for the three years after this business combination was created amounted to the following:
| Year | Transfer Price |
Inventory Remaining at Year-End (at transfer price) |
|||||||
| 2016 | $ | 60,000 | $ | 21,000 | |||||
| 2017 | 80,000 | 23,000 | |||||||
| 2018 | 90,000 | 29,000 | |||||||
In addition, Monica sold Young several pieces of fully depreciated equipment on January 1, 2017, for $47,000. The equipment had originally cost Monica $72,000. Young plans to depreciate these assets over a 5-year period.
In 2018, Young earns a net income of $250,000 and declares and pays $80,000 in cash dividends. These figures increase the subsidiary's Retained Earnings to a $850,000 balance at the end of 2018.
Monica employs the equity method of accounting. Hence, it reports $160,740 investment income for 2018 with an Investment account balance of $829,510. Under these circumstances, prepare the worksheet entries required for the consolidation of Monica Company and Young Company. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
In: Accounting
Vernon Construction Company began operations on January 1, 2019, when it acquired $14,000 cash from the issuance of common stock. During the year, Vernon purchased $2,500 of direct raw materials and used $2,400 of the direct materials. There were 106 hours of direct labor worked at an average rate of $6 per hour paid in cash. The predetermined overhead rate was $3.00 per direct labor hour. The company started construction on three prefabricated buildings. The job cost sheets reflected the following allocations of costs to each building:
| Direct Materials | Direct Labor Hours | |||
| Job 1 | $ | 400 | 26 | |
| Job 2 | 1,000 | 52 | ||
| Job 3 | 1,000 | 28 | ||
The company paid $68 cash for indirect labor costs. Actual overhead cost paid in cash other than indirect labor was $236. Vernon completed Jobs 1 and 2 and sold Job 1 for $1,254 cash. The company incurred $140 of selling and administrative expenses that were paid in cash. Over- or underapplied overhead is closed to Cost of Goods Sold.
Required
Record the preceding events in a horizontal statements model. The first event for 2019 has been recorded as an example.
Reconcile all subsidiary accounts with their respective control accounts.
Record the closing entry for over- or underapplied manufacturing overhead in the horizontal statements model, assuming that the amount is insignificant.
Prepare a schedule of cost of goods manufactured and sold, an income statement, and a balance sheet for 2019.
In: Accounting
On July 1, 2017, Bramble Ltd., a publicly listed company, acquired assets from Sheffield Ltd. On the transaction date, a reliable, independent valuator assessed the fair values of these assets as follows: Manufacturing plant (building #1) $399,930 Storage warehouse (building #2) 209,860 Machinery (in building #1) 75,000 Machinery (in building #2) 44,860 The buildings are owned by the company, and the land that the buildings are situated on is owned by the local municipality and is provided free of charge to the owner of the buildings as a stimulus to encourage local employment. In exchange for the acquisition of these assets, Bramble issued 145,900 common shares. Bramble shares are thinly traded, and in the most recent sale of Bramble's shares on the Toronto Stock Exchange, 520 shares were sold for $5 per share. At the time of acquisition, both buildings were considered to have an expected remaining useful life of 10 years, the machinery in building #1 was expected to have a remaining useful life of 3 years, and the machinery in building #2 was expected to have a useful life of 9 years. Bramble uses straight-line depreciation with no residual values. At December 31, 2017, Bramble fiscal year end, Bramble recorded the correct depreciation amounts for the six months that the assets were in use. An independent appraisal concluded that the assets had the following fair values: Manufacturing plant (building #1) $386,830 Storage warehouse (building #2) 177,810 At December 31, 2018, Bramble once again retained an independent appraiser and determined that the fair value of the assets was: Manufacturing plant (building #1) $339,970 Storage warehouse (building #2) 159,500 Prepare the journal entries required for 2017 and 2018, assuming that the buildings are accounted for under the revaluation model (using the asset adjustment method), and that the machinery is accounted for under the cost model.
In: Accounting
On January 1, 2016, Monica Company acquired 70 percent of Young Company’s outstanding common stock for $665,000. The fair value of the noncontrolling interest at the acquisition date was $285,000.
Young reported stockholders’ equity accounts on that date as follows:
| Common stock—$10 par value | $ | 300,000 | |
| Additional paid-in capital | 90,000 | ||
| Retained earnings | 410,000 | ||
In establishing the acquisition value, Monica appraised Young's assets and ascertained that the accounting records undervalued a building (with a five-year remaining life) by $50,000. Any remaining excess acquisition-date fair value was allocated to a franchise agreement to be amortized over 10 years.
During the subsequent years, Young sold Monica inventory at a 30 percent gross profit rate. Monica consistently resold this merchandise in the year of acquisition or in the period immediately following. Transfers for the three years after this business combination was created amounted to the following:
| Year | Transfer Price |
Inventory Remaining at Year-End (at transfer price) |
||||||
| 2016 | $ | 60,000 | $ | 10,000 | ||||
| 2017 | 80,000 | 12,000 | ||||||
| 2018 | 90,000 | 18,000 | ||||||
In addition, Monica sold Young several pieces of fully depreciated equipment on January 1, 2017, for $36,000. The equipment had originally cost Monica $50,000. Young plans to depreciate these assets over a six-year period.
In 2018, Young earns a net income of $160,000 and declares and pays $50,000 in cash dividends. These figures increase the subsidiary's Retained Earnings to a $740,000 balance at the end of 2018. During this same year, Monica reported dividend income of $35,000 and an investment account containing the initial value balance of $665,000. No changes in Young's common stock accounts have occurred since Monica's acquisition.
Prepare the 2018 consolidation worksheet entries for Monica and Young.
Compute the net income attributable to the noncontrolling interest for 2018.
In: Accounting