Baird Manufacturing Company was started on January 1, 2018, when it acquired $81,000 cash by issuing common stock. Baird immediately purchased office furniture and manufacturing equipment costing $9,800 and $24,900, respectively. The office furniture had an 8-year useful life and a zero salvage value. The manufacturing equipment had a $3,300 salvage value and an expected useful life of three years. The company paid $11,500 for salaries of administrative personnel and $15,800 for wages to production personnel. Finally, the company paid $16,360 for raw materials that were used to make inventory. All inventory was started and completed during the year. Baird completed production on 4,800 units of product and sold 3,880 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. 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. 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
Francisco Inc. acquired 100 percent of the voting shares of Beltran Company on January 1, 2017. In exchange, Francisco paid $450,000 in cash and issued 104,000 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 |
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| Cash | $ | 75,000 | $ | 50,000 | $ | 50,000 | |||
| Receivables | 193,000 | 225,000 | 225,000 | ||||||
| Inventory | 281,000 | 305,000 | 300,000 | ||||||
| Patents | 525,000 | 600,000 | 500,000 | ||||||
| Customer relationships | 500,000 | 480,000 | 450,000 | ||||||
| Equipment (net) | 295,000 | 240,000 | 235,000 | ||||||
| Goodwill | ? | ? | 400,000 | ||||||
| Accounts payable | (121,000 | ) | (175,000 | ) | (175,000 | ) | |||
| Long-term liabilities | (450,000 | ) | (400,000 | ) | (400,000 | ) | |||
Prepare Francisco’s journal entry to record the assets acquired and the liabilities assumed in the Beltran merger on January 1, 2017.
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 $1,425,000. What amount of goodwill impairment, if any, should Francisco recognize on its 2018 income statement?
In: Accounting
On January 1, 2018, Marshall Company acquired 100 percent of the outstanding common stock of Tucker Company. To acquire these shares, Marshall issued $300,000 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 $29,000 to accountants, lawyers, and brokers for assistance in the acquisition and another $14,000 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 |
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| Cash | $ | 69,900 | $ | 30,000 | |||
| Receivables | 364,000 | 117,000 | |||||
| Inventory | 360,000 | 198,000 | |||||
| Land | 280,000 | 194,000 | |||||
| Buildings (net) | 482,000 | 308,000 | |||||
| Equipment (net) | 160,000 | 72,900 | |||||
| Accounts payable | (210,000 | ) | (52,800 | ) | |||
| Long-term liabilities | (496,000 | ) | (300,000 | ) | |||
| Common stock—$1 par value | (110,000 | ) | |||||
| Common stock—$20 par value | (120,000 | ) | |||||
| Additional paid-in capital | (360,000 | ) | 0 | ||||
| Retained earnings, 1/1/18 | (539,900 | ) | (447,100 | ) | |||
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 $9,500, Land by $22,800, and Buildings by $33,000. 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.
| Cash | |
| Receivables | |
| Inventory | |
| Land | |
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Building Ne |
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| Equipment net | |
| total assets | |
| accounts payable | |
| long term liabilities | |
| common stock | |
| addtional paid in capital | |
| retained earnings | |
| Total liabilities and equities |
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. (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.)
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Please show calculations, thanks.
In: Accounting
Rooney Manufacturing Company was started on January 1, 2018, when it acquired $79,000 cash by issuing common stock. Rooney immediately purchased office furniture and manufacturing equipment costing $7,700 and $33,300, respectively. The office furniture had an 8-year useful life and a zero salvage value. The manufacturing equipment had a $3,700 salvage value and an expected useful life of four years. The company paid $11,900 for salaries of administrative personnel and $15,600 for wages to production personnel. Finally, the company paid $11,440 for raw materials that were used to make inventory. All inventory was started and completed during the year. Rooney completed production on 4,200 units of product and sold 3,220 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.
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
Thorn Corporation acquired 100 percent of the stock of Byrd Company by issuing 10,000 new shares for exchange. The par-value per share is $10 and the market value per share is $120. Summarized balance sheet information for the two companies immediately preceding the acquisition is as follows:
| Thorn | Byrd | |
| Cash and Receivables | 1,200,000 | 420,000 |
| Inventory | 40,000 | 470,000 |
| Land | 120,000 | 100,000 |
| Buildings and Equipment (net) | 2,460,000 | 220,000 |
| Bond Investments | 700,000 | |
| Total Assets | 4,520,000 | 1,210,000 |
| Accounts and Notes Payable | 820,000 | 220,000 |
| Common Stock | 1,040,000 | 440,000 |
| Additional Paid-In Capital | 1,600,000 | 240,000 |
| Retained Earnings | 1,060,000 | 310,000 |
| Total Liabilities and Stockholders' Equities | 4,520,000 | 1,210,000 |
At the time of acquisition, the book values and market values of Byrd's assets were approximately the same except its inventory was worth $500,000 and land was worth $120,000. At that date, Thorn owes Byrd $20,000 on account.
Required: Compute the balances to be reported in a consolidated balance sheet prepared immediately following the acquisition for:
In: Accounting
Benson Manufacturing Company (CMC) was started when it acquired $99,000 by issuing common stock. During the first year of operations, the company incurred specifically identifiable product costs (materials, labor, and overhead) amounting to $64,400. CMC also incurred $64,400 of engineering design and planning costs. There was a debate regarding how the design and planning costs should be classified. Advocates of Option 1 believe that the costs should be classified as general, selling, and administrative costs. Advocates of Option 2 believe it is more appropriate to classify the design and planning costs as product costs. During the year, CMC made 4,600 units of product and sold 3,700 units at a price of $39.00 each. All transactions were cash transactions.
Required
a-1. Prepare an income statement and balance sheet under option 1.
a-2. Prepare an income statement and balance sheet under option 2.
b. Identify the option that results in financial statements that are more likely to leave a favorable impression on investors and creditors.
c. Assume that CMC provides an incentive bonus to the company president equal to 13 percent of net income. Compute the amount of the bonus under each of the two options. Identify the option that provides the president with the higher bonus.
d. Assume a 40 percent income tax rate. Determine the amount of income tax expense under each of the two options. Identify the option that minimizes the amount of the company’s income tax expense.
In: Accounting
On December 31, Pacifica, Inc., acquired 100 percent of the voting stock of Seguros Company. Pacifica will maintain Seguros as a wholly owned subsidiary with its own legal and accounting identity. The consideration transferred to the owner of Seguros included 56,500 newly issued Pacifica common shares ($20 market value, $5 par value) and an agreement to pay an additional $130,000 cash if Seguros meets certain project completion goals by December 31 of the following year. Pacifica estimates a 50 percent probability that Seguros will be successful in meeting these goals and uses a 4 percent discount rate to represent the time value of money.
Immediately prior to the acquisition, the following data for both firms were available:
| Pacifica | Seguros Book Values | Seguros Fair Values | |||||||||
| Revenues | $ | (2,110,000 | ) | ||||||||
| Expenses | 1,477,000 | ||||||||||
| Net income | $ | (633,000 | ) | ||||||||
| Retained earnings, 1/1 | $ | (1,026,000 | ) | ||||||||
| Net income | (633,000 | ) | |||||||||
| Dividends declared | 171,000 | ||||||||||
| Retained earnings, 12/31 | $ | (1,488,000 | ) | ||||||||
| Cash | $ | 162,000 | $ | 154,000 | $ | 154,000 | |||||
| Receivables and inventory | 254,000 | 93,000 | 73,500 | ||||||||
| Property, plant, and equipment | 2,190,000 | 487,000 | 662,500 | ||||||||
| Trademarks | 353,000 | 248,000 | 293,000 | ||||||||
| Total assets | $ | 2,959,000 | $ | 982,000 | |||||||
| Liabilities | $ | (596,000 | ) | $ | (258,000 | ) | $ | (258,000 | ) | ||
| Common stock | (400,000 | ) | (200,000 | ) | |||||||
| Additional paid-in capital | (475,000 | ) | (70,000 | ) | |||||||
| Retained earnings | (1,488,000 | ) | (454,000 | ) | |||||||
| Total liabilities and equities | $ | (2,959,000 | ) | $ | (982,000 | ) | |||||
In addition, Pacifica assessed a research and development project under way at Seguros to have a fair value of $157,000. Although not yet recorded on its books, Pacifica paid legal fees of $24,600 in connection with the acquisition and $11,700 in stock issue costs.
a. Prepare Pacifica’s entries to account for the consideration transferred to the former owners of Seguros, the direct combination costs, and the stock issue and registration costs.
b.&c. Present a worksheet showing the postacquisition column of accounts for Pacifica and the consolidated balance sheet as of the acquisition date.
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In: Accounting
Tudor Company acquired $500,000 of Carr Corporation bonds for $487,706.69 on January 1, 2019. The bonds carry an 11% stated interest rate, pay interest semiannually on January 1 and July 1, were issued to yield 12%, and are due January 1, 2022.
Required:
| 1. | Prepare an investment interest income and discount amortization schedule using the: |
| a. | straight-line method |
| b. | effective interest method |
| 2. | Prepare the July 1, 2021, journal entries to record the interest income under both methods. |
1a. Prepare an investment interest income and discount amortization schedule using the straight-line method.
Amortization Schedule Instructions
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TUDOR COMPANY |
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Bond Investment Interest Income and Discount Amortization Schedule |
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Straight-Line Method |
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1 |
Date |
Cash Debit |
Investment in Debt Securities Debit |
Interest Income Credit |
Carrying Value of Debt Securities |
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2 |
01/01/19 |
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3 |
07/01/19 |
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4 |
01/01/20 |
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5 |
07/01/20 |
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6 |
01/01/21 |
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7 |
07/01/21 |
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8 |
01/01/22 |
1b. Prepare an investment interest income and discount amortization schedule using the effective interest method.
Amortization Schedule Instructions
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TUDOR COMPANY |
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Bond Investment Interest Income and Discount Amortization Schedule |
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Effective Interest Method |
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1 |
Date |
Cash Debit |
Interest Income Credit |
Investment in Debt Securities Debit |
Carrying Value of Debt Securities |
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2 |
01/01/19 |
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3 |
07/01/19 |
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4 |
01/01/20 |
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5 |
07/01/20 |
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6 |
01/01/21 |
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7 |
07/01/21 |
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8 |
01/01/22 |
2a. Prepare the July 1, 2021, journal entry to record the interest income under the straight-line method.
General Journal Instructions
PAGE 1
GENERAL JOURNAL
| DATE | ACCOUNT TITLE | POST. REF. | DEBIT | CREDIT | |
|---|---|---|---|---|---|
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1 |
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2 |
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3 |
2b. Prepare the July 1, 2021, journal entry to record the interest income under the effective interest method.
General Journal Instructions
PAGE 1
GENERAL JOURNAL
| DATE | ACCOUNT TITLE | POST. REF. | DEBIT | CREDIT | |
|---|---|---|---|---|---|
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1 |
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2 |
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3 |
In: Accounting
Solomon Manufacturing Company was started on January 1, 2018, when it acquired $81,000 cash by issuing common stock. Solomon immediately purchased office furniture and manufacturing equipment costing $7,700 and $25,800, respectively. The office furniture had an 8-year useful life and a zero salvage value. The manufacturing equipment had a $3,900 salvage value and an expected useful life of three years. The company paid $11,200 for salaries of administrative personnel and $15,600 for wages to production personnel. Finally, the company paid $10,640 for raw materials that were used to make inventory. All inventory was started and completed during the year. Solomon completed production on 4,300 units of product and sold 3,340 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.
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
Protrade Corporation acquired 70 percent of the outstanding voting stock of Seacraft Company on January 1, 2017, for $367,500 in cash and other consideration. At the acquisition date, Protrade assessed Seacraft's identifiable assets and liabilities at a collective net fair value of $565,000 and the fair value of the 30 percent noncontrolling interest was $157,500. 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 | 680,000 | 400,000 |
| Cost of Goods Sold | 310,000 | 217,000 |
| Operating Expenses | 154,000 | 109,000 |
| Retained Earnings, 1/1/18 | 780,000 | 220,000 |
| Inventory | 350,000 | 114,000 |
| Buildings (net) | 362,000 | 161,000 |
| Investement Income | not given | - |
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 $94,000 in 2017 and $114,000 in 2018. Of this inventory, Seacraft retained and then sold $32,000 of the 2017 transfers in 2018 and held $46,000 of the 2018 transfers until 2019. Determine balances for the following items that would appear on consolidated financial statements for 2018:
(B) Assume that Seacraft sells inventory to Protrade at a markup equal to 60 percent of cost. Intra-entity transfers were $54,000 in 2017 and $84,000 in 2018. Of this inventory, $25,000 of the 2017 transfers were retained and then sold by Protrade in 2018, whereas $39,000 of the 2018 transfers were held until 2019. Determine balances for the following items that would appear on consolidated financial statements for 2018:
(C) Protrade sells Seacraft a building on January 1, 2017, for $88,000, although its book value was only $54,000 on this date. The building had a five-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 2018:
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In: Accounting