(1) On January 1, 2018, Panorama Company acquired 80% of Scann Corporation for $6,400,000.
At the time of the acquisition, the book value of Scann's assets and liabilities was equal to the fair value except for equipment that was undervalued $80,000 with a four-year remaining useful life and inventories that were undervalued $20,000 and sold in 2018. Panorama separate net income in 2018 and 2019 was $1,100,000 and $1,150,000, respectively. Scann separate net income in 2018 and 2019 was $300,000 and $360,000, respectively. Dividend payments by Scann in 2018 and 2019 were $60,000 and $60,000, respectively
Required: Using equity method,
(Support your answer in all points with detailed calculations and explanation)
In: Accounting
(A) Corporation acquired 20,000 of the 100,000 outstanding common shares of (B) Company on January 1, 2016, for a cash consideration of $200,000. During 2016, (B) Company had net income of $120,000 and paid dividends of $80,000. At the end of 2016, shares of (B) Company were trading for $11 each. During 2017, (B) Company had a loss of $60,000 and paid dividends of $40,000. Income for the first half of the year was $80,000 and the loss in the second half of the year was $140,000. The dividends were paid on June 30. On July 2, 2017, (A) Corporation sold 5,000 shares of (B) Company for a consideration of $12 per share. At the end of 2017, the share price of (B) Company had fallen to $6 per share. The average of market analysts' forecasts was that the share price could be expected to rise to $8 per share over the next five years. (Assume that the future recoverable value of the shares is assessed to be $8 per share.)
Provide journal entries for (A) Corporation for all transactions relating to its investment in (B) Company for the year 2017 if it accounts for its investment in (B) Company using the equity method.
In: Accounting
Plug Products owns 80 percent of the stock of Spark 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 Spark Filter.
Summarized trial balance data for the two companies as of December
31, 20X8, are as follows:
| Plug Products | Spark Filter Company | ||||||||||||||||
| Debit | Credit | Debit | Credit | ||||||||||||||
| Cash and Accounts Receivable | $ | 160,000 | $ | 95,000 | |||||||||||||
| Inventory | 232,000 | 121,000 | |||||||||||||||
| Buildings & Equipment (net) | 272,000 | 193,000 | |||||||||||||||
| Investment in Spark Filter Company | 267,628 | ||||||||||||||||
| Cost of Goods Sold | 166,000 | 131,000 | |||||||||||||||
| Depreciation Expense | 40,000 | 30,000 | |||||||||||||||
| Current Liabilities | $ | 186,893 | $ | 60,093 | |||||||||||||
| Common Stock | 187,000 | 88,000 | |||||||||||||||
| Retained Earnings | 471,000 | 218,000 | |||||||||||||||
| Sales | 253,907 | 203,907 | |||||||||||||||
| Income from Spark Filter Company | 38,828 | ||||||||||||||||
| Total | $ | 1,137,628 | $ | 1,137,628 | $ | 570,000 | $ | 570,000 | |||||||||
On January 1, 20X8, Plug's inventory contained filters purchased
for $63,000 from Spark Filter, which had produced the filters for
$43,000. In 20X8, Spark Filter spent $103,000 to produce additional
filters, which it sold to Plug for $150,907. By December 31, 20X8,
Plug had sold all filters that had been on hand January 1, 20X8,
but continued to hold in inventory $45,272 of the 20X8 purchase
from Spark 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.)
Consolidation Worksheet Entries
Note: Enter debits before credits.
|
b. Compute consolidated net income and income assigned to the
controlling interest in the 20X8 consolidated income
statement.
Consolidated net income
Income assigned to the controlling interest
c. Compute the balance assigned to the noncontrolling interest in
the consolidated balance sheet as of December 31, 20X8.
|
In: Accounting
In: Accounting
Petunia Corporation acquired 90 percent of the stock of Spring Company on January 1, 20X2, for $360,000. At that date, the fair value of the noncontrolling interest was $40,000. Spring’s balance sheet contained the following amounts at the time of the combination:
| Cash | $ | 20,000 | Accounts Payable | $ | 25,000 | |||
| Accounts Receivable | 60,000 | Bonds Payable | 75,000 | |||||
| Inventory | 70,000 | Common Stock | 100,000 | |||||
| Buildings and Equipment (net) | 350,000 | Retained Earnings | 300,000 | |||||
| Total Assets | $ | 500,000 | Total Liabilities & Equity | $ | 500,000 | |||
During each of the next three years, Spring reported net income of
$70,000 and paid dividends of $20,000. On January 1, 20X4, Petunia
sold 3,000 shares of Spring’s $5 par value shares for $90,000 in
cash. Petunia used the fully adjusted equity method in accounting
for its ownership of Spring Company.
Based on the preceding information, in the consolidation entries to complete a consolidation worksheet at January 1, 20X4 (after the sale of the 3,000 shares of Spring stock), Investment in Spring Stock will be credited for what amount?
In: Accounting
1. Millburn Company has acquired a property that included both land and a building for $530,000. The company hired an appraiser who has determined that the market value of the land is $320,000 and that of the building is $480,000.
Prepare the journal entry to record the purchase of these assets. (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.)
2. Calculate the depreciation expense using the straight-line and units-of-production methods for all years for the following operating asset.
Cost $65,000
Salvage value $5,000
Expected useful life is 4 years and total expected output is 150,000 units as follows:
Yr. 1 70,000
Yr. 2 35,000
Yr. 3 25,000
Yr. 4 20,000
In: Accounting
Bracy Company acquired a new piece of construction equipment on January 1, 2015, at a cost of $92,300. The equipment was expected to have a useful life of 7 years and a residual value of $16,000 and is being depreciated on a straight-line basis.
On January 1, 2016, the equipment was appraised and determine to have a fair value of $92,920, a salvage value of $16,000, and a remaining useful life of six years.
a. Determine the amount of depreciation expense that Bracy should recognize in determining net income in 2015, 2016, and 2017 and the amount at which equipment should be carried on December 31, 2015, 2016, and 2017 balance sheets using (1) U.S. GAAP and (2) IFRS. In measuring property, plant, and equipment subsequent to the acquisition, Bracy used the revaluation model in IAS16.
b. Determine the adjustments that Bracy would make in 2015, 2016, and 2017 to reconcile net income and stockholders' equity under U.S. GAAP to IFRS.
In: Accounting
Parnell Company acquired construction equipment on January 1, 2017, at a cost of $71,700. The equipment was expected to have a useful life of five years and a residual value of $10,000 and is being depreciated on a straight-line basis. On January 1, 2018, the equipment was appraised and determined to have a fair value of $67,700, a salvage value of $10,000, and a remaining useful life of four years. In measuring property, plant, and equipment subsequent to acquisition under IFRS, Parnell would opt to use the revaluation model in IAS 16. Assume that a U.S.–based company is issuing securities to foreign investors who require financial statements prepared in accordance with IFRS. Thus, adjustments to convert from U.S. GAAP to IFRS must be made. Ignore income taxes. Required: Prepare journal entries for this equipment for the years ending December 31, 2017, and December 31, 2018, under (1) U.S. GAAP and (2) IFRS. Prepare the entry(ies) that Parnell would make on the December 31, 2018 conversion worksheet to convert U.S. GAAP balances to IFRS.
In: Accounting
Paco Company acquired 100 percent of the stock of Garland Corp. on December 31, 20X8. The stockholder's equity section of Garland's balance sheet at that date is as follows:
|
Common Stock |
$300,000 |
|
Additional Paid-In Capital |
500,000 |
|
Retained Earnings |
400,000 |
|
Total |
$1,200,000 |
Paco financed the acquisition by using $820,000 cash and giving
a note payable for $400,000. Book value approximated fair value for
all of Garland's assets and liabilities except for buildings which
had a fair value $60,000 more than its book value and a remaining
useful life of 10 years. Paco has an account payable to Garland in
the amount of $30,000.
Questions:
a) How much investment was recorded by Paco on December 31, 20X8?
b) How much gain was recorded by Paco on December 31, 20X8?
c) How much differential was resulted in the consolidation entries on December 31, 20X8?
d) How much accumulated depreciation was credited by Paco in the consolidation entries on December 31, 20X8?
e) How much accumulated depreciation was credited by Paco in the consolidation entries on December 31, 2010?
In: Accounting
(1) On January 1, 2018, Panorama Company acquired 80% of Scann Corporation for $6,400,000.
At the time of the acquisition, the book value of Scann's assets and liabilities was equal to the fair value except for equipment that was undervalued $80,000 with a four-year remaining useful life and inventories that were undervalued $20,000 and sold in 2018. Panorama separate net income in 2018 and 2019 was $1,100,000 and $1,150,000, respectively. Scann separate net income in 2018 and 2019 was $300,000 and $360,000, respectively. Dividend payments by Scann in 2018 and 2019 were $60,000 and $60,000, respectively
Required: Using equity method,
In: Accounting