In: Finance
At the beginning of 2019, Robotics Inc. acquired a manufacturing facility for $12.7 million. $9.7 million of the purchase price was allocated to the building. Depreciation for 2019 and 2020 was calculated using the straight-line method, a 25-year useful life, and a $1.7 million residual value. In 2021, the estimates of useful life and residual value were changed to 20 total years and $570,000, respectively. What is depreciation on the building for 2021?
In: Finance
At the beginning of 2019, Robotics Inc. acquired a manufacturing facility for $13.0 million. $10.0 million of the purchase price was allocated to the building. Depreciation for 2019 and 2020 was calculated using the straight-line method, a 20-year useful life, and a $2.0 million residual value. In 2021, the estimates of useful life and residual value were changed to 15 total years and $600,000, respectively. What is depreciation on the building for 2021?
In: Accounting
Adjusting entry
the prepaid insurance account is reported at $800 on the December 31, 2019, unadjusted trial balance. Analysis of the insurance coverage reveals that the company has two policies that were acquired at the same premium :
A- policy A for 3 years was acquired on January 1, 2017.
b- policy B for 2 years was acquired on January 1, 2019.
In: Accounting
Imagine you’re the CFO of a company with 10 product lines and an infrastructure that includes several functional departments which support some or all of these product lines. The CEO is curious as to what effect dropping one of the product lines or increasing investment in certain product lines might have on company profits.
Based specifically on what we’ve been reading about in recent weeks, what information should the CFO be gathering and key metrics calculated to help the CEO make such decisions? What are “fixed” expenses, are they truly “fixed” and how should they be considered when making such decisions?
In: Accounting
Imagine you’re the CFO of a company with 10 product lines and an infrastructure that includes several functional departments which support some or all of these product lines. The CEO is curious as to what effect dropping one of the product lines or increasing investment in certain product lines might have on company profits.
Based specifically on what we’ve been reading about in recent weeks, what information should the CFO be gathering and key metrics calculated to help the CEO make such decisions? What are “fixed” expenses, are they truly “fixed” and how should they be considered when making such decisions?"
In: Accounting
Milani, Inc., acquired 10 percent of Seida Corporation on January 1, 2020, for $187,000 and appropriately accounted for the investment using the fair-value method. On January 1, 2021, Milani purchased an additional 30 percent of Seida for $653,000 which resulted in significant influence over Seida. On that date, the fair value of Seida's common stock was $2,100,000 in total. Seida’s January 1, 2021, book value equaled $1,950,000, although land was undervalued by $135,000. Any additional excess fair value over Seida's book value was attributable to a trademark with an eight-year remaining life. During 2021, Seida reported income of $267,000 and declared and paid dividends of $120,000.
Prepare the 2021 journal entries for Milani related to its investment in Seida. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
1
Record acquisition of Seida stock.
2
Record the 40% income earned during period by Seida.
3
Record 2021 amortization for trademark excess fair value.
4
Record dividend declaration from Seida.
5
Record collection of dividend from investee.
In: Accounting
In: Accounting
Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2020, in exchange for $6,039,000 in cash. Allison intends to maintain Mathias as a wholly owned subsidiary. Both companies have December 31 fiscal year-ends. At the acquisition date, Mathias’s stockholders’ equity was $2,040,000 including retained earnings of $1,540,000.
At the acquisition date, Allison prepared the following fair-value allocation schedule for its newly acquired subsidiary:
| Consideration transferred | $ | 6,039,000 | |||||
| Mathias stockholders' equity | 2,040,000 | ||||||
| Excess fair over book value | $ | 3,999,000 | |||||
| to unpatented technology (8-year remaining life) | $ | 864,000 | |||||
| to patents (10-year remaining life) | 2,580,000 | ||||||
| to increase long-term debt (undervalued, 5-year remaining life) | (140,000 | ) | 3,304,000 | ||||
| Goodwill | $ | 695,000 | |||||
Postacquisition, Allison employs the equity method to account for its investment in Mathias. During the two years following the business combination, Mathias reports the following income and dividends:
| Income | Dividends | |||
| 2020 | $ | 465,000 | $ | 25,000 |
| 2021 | 930,000 | 50,000 | ||
No asset impairments have occurred since the acquisition date.
Individual financial statements for each company as of December 31, 2021, follow. Parentheses indicate credit balances. Dividends declared were paid in the same period.
| Allison | Mathias | ||||||
| Income Statement | |||||||
| Sales | $ | (6,560,000 | ) | $ | (3,940,000 | ) | |
| Cost of goods sold | 4,612,000 | 2,526,000 | |||||
| Depreciation expense | 915,000 | 301,000 | |||||
| Amortization expense | 450,000 | 115,000 | |||||
| Interest expense | 71,000 | 68,000 | |||||
| Equity earnings in Mathias | (592,000 | ) | 0 | ||||
| Net income | $ | (1,104,000 | ) | $ | (930,000 | ) | |
| Statement of Retained Earnings | |||||||
| Retained earnings 1/1 | $ | (5,420,000 | ) | $ | (1,980,000 | ) | |
| Net income (above) | (1,104,000 | ) | (930,000 | ) | |||
| Dividends declared | 560,000 | 50,000 | |||||
| Retained earnings 12/31 | $ | (5,964,000 | ) | $ | (2,860,000 | ) | |
| Balance Sheet | |||||||
| Cash | $ | 87,000 | $ | 155,000 | |||
| Accounts receivable | 990,000 | 245,000 | |||||
| Inventory | 1,780,000 | 825,000 | |||||
| Investment in Mathias | 6,683,000 | 0 | |||||
| Equipment (net) | 3,780,000 | 2,080,000 | |||||
| Patents | 115,000 | 0 | |||||
| Unpatented technology | 2,165,000 | 1,490,000 | |||||
| Goodwill | 453,000 | 0 | |||||
| Total assets | $ | 16,053,000 | $ | 4,795,000 | |||
| Accounts payable | $ | (889,000 | ) | $ | (235,000 | ) | |
| Long-term debt | (1,000,000 | ) | (1,200,000 | ) | |||
| Common stock | (8,200,000 | ) | (500,000 | ) | |||
| Retained earnings 12/31 | (5,964,000 | ) | (2,860,000 | ) | |||
| Total liabilities and equity | $ | (16,053,000 | ) | $ | (4,795,000 | ) | |
Required:
Determine the fair value in excess of book value for Allison's acquisition date investment in Mathias.
Prepare a worksheet to determine the consolidated values to be reported on Allison’s financial statements.
In: Accounting
Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2020, in exchange for $6,387,500 in cash. Allison intends to maintain Mathias as a wholly owned subsidiary. Both companies have December 31 fiscal year-ends. At the acquisition date, Mathias’s stockholders’ equity was $2,125,000 including retained earnings of $1,625,000.
At the acquisition date, Allison prepared the following fair-value allocation schedule for its newly acquired subsidiary:
| Consideration transferred | $ | 6,387,500 | |||||
| Mathias stockholders' equity | 2,125,000 | ||||||
| Excess fair over book value | $ | 4,262,500 | |||||
| to unpatented technology (8-year remaining life) | $ | 1,000,000 | |||||
| to patents (10-year remaining life) | 2,750,000 | ||||||
| to increase long-term debt (undervalued, 5-year remaining life) | (225,000 | ) | 3,525,000 | ||||
| Goodwill | $ | 737,500 | |||||
Postacquisition, Allison employs the equity method to account for its investment in Mathias. During the two years following the business combination, Mathias reports the following income and dividends:
| Income | Dividends | |||
| 2020 | $ | 433,125 | $ | 25,000 |
| 2021 | 866,250 | 50,000 | ||
No asset impairments have occurred since the acquisition date.
Individual financial statements for each company as of December 31, 2021, follow. Parentheses indicate credit balances. Dividends declared were paid in the same period.
| Allison | Mathias | ||||||
| Income Statement | |||||||
| Sales | $ | (6,900,000 | ) | $ | (4,025,000 | ) | |
| Cost of goods sold | 4,850,000 | 2,581,250 | |||||
| Depreciation expense | 1,000,000 | 352,000 | |||||
| Amortization expense | 492,500 | 140,500 | |||||
| Interest expense | 105,000 | 85,000 | |||||
| Equity earnings in Mathias | (511,250 | ) | 0 | ||||
| Net income | $ | (963,750 | ) | $ | (866,250 | ) | |
| Statement of Retained Earnings | |||||||
| Retained earnings 1/1 | $ | (5,590,000 | ) | $ | (2,033,125 | ) | |
| Net income (above) | (963,750 | ) | (866,250 | ) | |||
| Dividends declared | 560,000 | 50,000 | |||||
| Retained earnings 12/31 | $ | (5,993,750 | ) | $ | (2,849,375 | ) | |
| Balance Sheet | |||||||
| Cash | $ | 112,500 | $ | 180,500 | |||
| Accounts receivable | 1,075,000 | 287,500 | |||||
| Inventory | 1,950,000 | 910,000 | |||||
| Investment in Mathias | 6,901,875 | 0 | |||||
| Equipment (net) | 3,950,000 | 2,139,500 | |||||
| Patents | 157,500 | 0 | |||||
| Unpatented technology | 2,250,000 | 1,575,000 | |||||
| Goodwill | 512,500 | 0 | |||||
| Total assets | $ | 16,909,375 | $ | 5,092,500 | |||
| Accounts payable | $ | (1,715,625 | ) | $ | (543,125 | ) | |
| Long-term debt | (1,000,000 | ) | (1,200,000 | ) | |||
| Common stock | (8,200,000 | ) | (500,000 | ) | |||
| Retained earnings 12/31 | (5,993,750 | ) | (2,849,375 | ) | |||
| Total liabilities and equity | $ | (16,909,375 | ) | $ | (5,092,500 | ) | |
Required:
Determine the fair value in excess of book value for Allison's acquisition date investment in Mathias.
Prepare a worksheet to determine the consolidated values to be reported on Allison’s financial statements.
In: Accounting