A-1 On January 1, Year 5, AB Company (AB) purchased 80% of the outstanding common shares of Dandy Limited (Dandy) for $8,000.On that date, Dandy's shareholders' equity consisted of common shares of $1,000 and retained earnings of $6,000.In negotiating the purchase price at the date of acquisition, it was agreed that the fair values of all of Dandy's assets and liabilitieswere equal to their carrying amounts and tax base except for the following:EquipmentFairValue$950Dandy has recorded deferred income taxes on its separate-entity balance sheet on all temporary differences. Dandy had a losscarry-forward of $800 as at December 31, Year 4. This carry-forward can be applied against taxable income in the future. Dandydid not previously recognize the benefit of the carry-forward because it was not sure whether it would earn $800 in taxableincome in the future. Now that AB controls Dandy, AB is sure that Dandy will be able to utilize the loss carry-forwards because ABwill transfer income-earning assets to Dandy if necessary to generate taxable income in Dandy. AB plans to utilize these losscarry-forwards as soon as possible.YearYear 5CarryingValue$700Both companies use the straight-line method for amortizing their property, plant, and equipment and pay taxes at a rate of 40%.Dandy's equipment had a remaining useful life of 10 years at the date of acquisition.Year 6Year 7TaxBase$600Dandy reported income before application of any loss carry-forwards as follows for the first three years after being acquired byAB:Incomebefore Tax$ 0100200 Required:(a) Calculate goodwill at the date of acquisition. Be sure to consider the deferred tax implications on the acquisition differential.(Omit $ sign in your response.)Goodwill$ 6750(b) Calculate non-controlling interest at the date of acquisition. (Omit $ sign in your response.)Non-controlling interest$ 250

Consolidation is an activity in which financial statements of a parent and its subsidiary should be…

On January 1, Year 5, AB Company (AB) purchased 80% of the outstanding common shares of Dandy Limited (Dandy) for $8,000. On that date, Dandy's shareholders' equity consisted of common shares of $1,000 and retained earnings of $6,000. In negotiating the purchase price at the date of acquisition, it was agreed that the fair values of all of Dandy's assets and liabilities were equal to their carrying amounts and tax base except for the following:

On January 1, Year 5, AB Company (AB) purchased 80% of the outstanding common shares of Dandy Limited (Dandy) for $8,000. On that date, Dandy's shareholders' equity consisted of common shares of $1,000 and retained earnings of $6,000. In negotiating the purchase price at the date of acquisition, it was agreed that the fair values of all of Dandy's assets and liabilities were equal to their carrying amounts and tax base except for the following:

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 8MC

See similar textbooks

Similar questions

Pesto Corporation acquired 75 percent of Sauce Corporation's common stock on January 1, 20X7, for $306,000 in cash. At the acquisition date, the book values and fair values of Sauce's assets and liabilities were equal, and the fair value of the noncontrolling interest was equal to 25 percent of the total book value of Sauce. The stockholders' equity accounts of the two companies at the date of purchase are as follows: Common Stock ($10 par value) Additional Paid-In Capital Retained Earnings Total Stockholders' Equity Pesto Corporation $ 408,000 224,000 367,000 $999,000 Sauce Corporation. $ 188,000 57,000 163,000 $ 408,000 Required: a. What amount will be assigned to the noncontrolling interest on January 1, 20X7, in the consolidated balance sheet? b. Prepare the stockholders' equity section of Pesto and Sauce's consolidated balance sheet as of January 1, 20X7.
On 30 June 20X7, Edison Ltd acquired all the assets and liabilities of Oliver Ltd, with Oliver Ltd going into liquidation. In exchange for these assets and liabilities, Edison Ltd issued 60,000 shares, and the fair value of each share at the acquisition date is $4. Costs of issuing these shares amounted to $2,000. Legal costs associated with the acquisition of Oliver Ltd amounted to $1,500. The assets and liabilities of Oliver Ltd at 30 June 20X7 were as follows: Carrying amount Fair value Cash 12 000 12 000 Accounts receivable (Cost: $45 000, Estimated uncollectable debts: $5000) 40 000 36 000 Inventory 60 000 76 000 Plant (Cost: $200 000, Accumulated 120 000 145 000 depreciation: $80 000) Accounts payable 40 000 40 000 Additional information: • Oliver Ltd had not recorded an internally developed patent. Edison Ltd valued this at $26,000. Oliver Ltd had not recorded a legal claim as a liability due to the uncertainty of an outcome. Edison Ltd estimated the fair value of this…
Hanley acquired 85% of the ordinary share capital of Craig on 30 December 20X7 for $80,000. At this date the net assets of Craig were$95,000. NCI is valued using the fair value method and the fair value of the NCI on the acquisition date is $30,000 What goodwill arises on the acquisition?
On January 2, 2021, ABC Co. acquired 80% of XYZ Co. ordinary shares for P810,000. An amount of P37,500 of the excess is attributable to goodwill and the balance to a depreciable assets with an economic life of ten years. NCI is measured at fair value on the date of acquisition. On the date of acquisition, shareholder's equity accounts of the two entities were as follows: АВС Ordinary Shares - 1,312,500 Retained Earnings - 1,950,000 XYZ Ordinary Shares - 300,000 Retained Earnings - 525,000 On December 31, 2021, XYZ reported net income of 131,250 and paid dividends of P172,500. Goodwill have been impaired and should be reported at P7,500 on December 31, 2021. #6. What is the non-controlling interest in profit of XYZ on December 31, 2021? Select the correct response: 26,250.00 17,250.00 23,250.00 23,437.50
Proud Corporation acquired 80 percent of Spirited Company's voting stock on January 1, 20X3, at underlying book value. The fair value of the noncontrolling interest was equal to 20 percent of the book value of Spirited at that date. Assume that the accumulated depreciation on depreciable assets was $52,000 on the acquisition date. Proud uses the equity method in accounting for its ownership of Spirited. On December 31, 20X4, the trial balances of the two companies are as follows: Item Current Assets Depreciable Assets Investment in Spirited Company Depreciation Expense Other Expenses Dividends Declared Accumulated Depreciation Current Liabilities Long-Term Debt Common Stock Retained Earnings Sales Income from Spirited Company $ Proud Corporation Debit 255,000 518,000 133,280 23,000 148,000 53,000 Credit $ 200,000 63,000 127,880 193,000 277,000 231,000 38,400 $1,130,280 $1,130,280 Spirited Company Credit Debit $169,000 311,000 13,000 85,000 25,400 $603,400 $ 78,000 43,000 192,400 87,000…
Proud Corporation acquired 80 percent of Spirited Company's voting stock on January 1, 20X3, at underlying book value. The fair value of the noncontrolling interest was equal to 20 percent of the book value of Spirited at that date. Assume that the accumulated depreciation on depreciable assets was $60,000 on the acquisition date. Proud uses the equity method in accounting for its ownership of Spirited. On December 31, 20X4, the trial balances of the two companies are as follows: Item Current Assets Depreciable Assets Investment in Spirited Company Depreciation Expense Other Expenses Dividends Declared Accumulated Depreciation Current Liabilities Long-Term Debt Corman Stock Retained Earnings Sales Income from Spirited Company Proud Corporation Debit $ 235,080 500,000 152,000 Credit Spirited Company Debit $ 150,000 Credit 900,080 25,000 15,088 150,000 90,000 58,800 15,000 $ 200,000 $ 98,000 50,000 180,000 128,008 200,000 284 898 230,000 138,000 70,000 148,008 28,000 $ 1,112,000…
Proud Corporation acquired 80 percent of Spirited Company's voting stock on January 1, 20X3, at underlying book value. The fair value of the noncontrolling interest was equal to 20 percent of the book value of Spirited at that date. Assume that the accumulated depreciation on depreciable assets was $60,000 on the acquisition date. Proud uses the equity method in accounting for its ownership of Spirited. On December 31, 20X4, the trial balances of the two companies are as follows: Item Current Assets Depreciable Assets Investment in Spirited Company Depreciation Expense Other Expenses Dividends Declared Accumulated Depreciation Current Liabilities Long-Term Debt Common Stock Retained Earnings Sales Income from Spirited Company Proud Corporation Debit $ 235,000 500,000 152,000 25,000 150,000 50,000 Credit Spirited Company Debit Credit $ 150,000 300,000 15,000 90,000 15,000 $ 200,000 $ 90,000 70,000 50,000 100,000 120,000 200,000 100,000 284,000 70,000 230,000 148,000 28,008 $ 1,112,000…
On January 1, Year 1, East Company purchased West Company. East Company paid $670,000 cash and assumed all of West Company's liabilities. West's books showed tangible assets of $578,000, liabilities of $54,000, and equity of $632,000. An appraiser assessed the fair market value of the tangible assets at $622,000 at the date of acquisition. On December 31, Year 4 East determines that the goodwill suffered a $32,000 permanent impairment. However, on December 31, Year 6 East estimated that it had recovered $12,000 of the impairment that had previously been considered to be permanent impairment. Based on this information, the book value of the goodwill shown on the December 31, Year 6 balance sheet is: Multiple Choice O O O $102,000. $134,000. $54,000. $70,000.
On January 1, 2018, Johnsonville Enterprises, Inc., acquired 80 percent of Stayer Company’s outstanding common shares in exchange for $3,000,000 cash. The price paid for the 80 percent ownership interest was proportionately representative of the fair value of all of Stayer’s shares.At acquisition date, Stayer’s books showed assets of $4,200,000 and liabilities of $1,600,000. The recorded assets and liabilities had fair values equal to their individual book values except that a building (10-year remaining life) with book value of $195,000 had an appraised fair value of $345,000. Stayer’s books showed a $175,500 carrying amount for this building at the end of 2018.Also, at acquisition date Stayer possessed unrecorded technology processes (zero book value) with an estimated fair value of $1,000,000 and a 20-year remaining life. For 2018 Johnsonville reported net income of $650,000 (before recognition of Stayer’s income), and Stayer separately reported earnings of $350,000. During 2018,…
Parent Inc. purchased 60,000 of the outstanding (specified below) voting shares of Sub, for $625,000 (the total number of outstanding shares varies in the questions below) on January 1, 2021. On the date of acquisition, Sub's common shares and retained earnings were valued at $235,000 and $280,000, respectively. Subs book values approximated its fair values on the acquisition date with the exception of a patent, for which the fair value of the patent was $40,000 greater than book value. Q: Assume that the total number of outstanding shares for Sub was, 78,000 (remember Parent purchased 60,000). On January 2, 2021, Parent sold 12,000 shares of Sub on the open market for $108,000. What would be the amount of the gain or loss on the sale of these shares?
On January 1, 2021, Johnsonville Enterprises, Inc., acquired 80 percent of Stayer Company's outstanding common shares in exchange for $3,000,000 cash. The price paid for the 80 percent ownership interest was proportionately representative of the fair value of all of Stayer's shares. At acquisition date, Stayer's books showed assets of $4,200,000 and liabilities of $1,600,000. The recorded assets and liabilities had fair values equal to their individual book values except that a building (10-year remaining life) with book value of $195,000 had an appraised fair value of $345,000. Stayer's books showed a $175,500 carrying amount for this building at the end of 2021. Also, at acquisition date Stayer possessed unrecorded technology processes (zero book value) with an estimated fair value of $1,000,000 and a 20-year remaining life. For 2021, Johnsonville reported net income of $650,000 (before recognition of Stayer's income), and Stayer separately reported earnings of $350,000. During 2021,…
On 1 July 2022, Dean Ltd acquired the remaining 80% of the issued shares of Lewis Ltd for shares in Dean Ltd with a fair value of $1 000 000. At that date, the financial statements of Lewis Ltd showed the following information. All the assets and liabilities of Lewis Ltd were recorded at amounts equal to their fair values at the acquisition date, except some equipment recorded at $50 000 below its fair value with a related accumulated depreciation of $80 000. Assume the equipment has not been revalued in the subsidiaries accounts. Also, Dean Ltd identified at acquisition date a contingent liability related to a lawsuit where Lewis Ltd was sued by a former supplier and attached a fair value of $40 000 to that liability. The previous held interest by Dean Ltd in Lewis Ltd (ie 20% of the issued shares) was recognised by in Dean Ltd.’s accounts at the fair value at acquisition date of $250 000. Dean Ltd incurred $15 000 in acquisition related costs including $10 000 in share issue costs.…