ved Help Save & Exit 10 eBook Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2022. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired. Demers earns income and pays dividends as follows: Net income Dividends 2022 $ 100,000 40,000 2023 $ 120,000 50,000 2024 $ 130,000 60,000 Assume the equity method is applied. Compute Pell's equity income from Demers for the year ended December 31, 2023. Multiple Choice ......... 600.100. Check my

ved Help Save & Exit 10 eBook Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2022. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired. Demers earns income and pays dividends as follows: Net income Dividends 2022 $ 100,000 40,000 2023 $ 120,000 50,000 2024 $ 130,000 60,000 Assume the equity method is applied. Compute Pell's equity income from Demers for the year ended December 31, 2023. Multiple Choice ......... 600.100. Check my

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter12: Auditing Long-lived Assets And Merger And Acquisition Activity

Section: Chapter Questions

Problem 37RQSC

See similar textbooks

Similar questions

Sue Inc. acquires 80% of lan Co. for $500,000 on January 2, 2024. lan reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired. lan Co. earns income and pays dividends as follows: 2024 2025 Net income $ 100,000 $120,000 $130,000 Dividends 40,000 50,000 60,000 Assume the equity method is applied. Compute the non-controlling interest in lan at December 31, 2024. O $135,600. $137,000. O $112,000. $100,000. 2026 O $118,600.
3. Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2019. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired. Demers earns income and pays dividends as follows: 2019 2020 2021 Net income $100,000 $120,000 $130,000 Dividends 40,000 50,000 60,000 Assume the equity method is applied. 1. Compute Pell's Investment in Demers account balance at December 31, 2019. 2. Compute Pell's income from Demers for the year ended December 31, 2019. 3. Compute the noncontrolling interest in the net income of Demers at December 31, 2019.
Check my we Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2022. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired. Demers earns income and pays dividends as follows: 2022 2023 2024 Net income $ 100,000 Dividends 40,000 $ 120,000 50,000 $ 130,000 60,000 Assume the equity method is applied. Compute Pell's investment account balance in Demers at December 31, 2024. Multiple Choice $639,000 $643.200 $763,200
Darlene Company acquires 80% of Juanito Company for P250,000 on January 1, 2010. Juanito reported common stock of P150,000 and retained earnings of P100,000 on that date. Equipment was undervalued by P15,000 and buildings were undervalued by P20,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired. Juanito earn income and pays dividends as follows: 2010 2011 2012 Net income P 50,000 P 60,000 P 65,000 Dividends 20,000 25,000 30,000 Assume the initial value method (or cost method) is applied. 5.) Compute Darlene’s Investment in Juanito at December 31, 2010. A. P250,000 B.P271,200 C.P287,200 D.P312,500 6.) Using the same information above, compute…
Lance Company purchased 35% interest in Mila Company for P5,600,000 on July 15, 2020. SG already held a 25% interest purchased for P3,000,000. As of this date, the carrying value of the identifiable net assets of Mila totaled P17,000,000. The carrying value of the identifiable net assets of Mila equal their fair values except for the undervaluation of Inventories and Machineries by P400,000 and P1,000,000 respectively. Business combination is between SMEs. How much is the goodwill/(gain on bargain purchase) arising from the combination?
Matrix, Incorporated, acquired 25% of Neo Enterprises for $2,000,000 on January 1, 2024. The fair value and book value of 25% of Neo's identifiable net assets was $2,000,000 and $1,600,000 on that date, and the difference was attributable to assets that would be depreciated over 10 years. During 2024 Neo recognized net income of $500,000 and paid dividends of $400,000. Neo had a total fair value of $10,000,000 as of December 31, 2024. Required: 1. Prepare the journal entries necessary to account for the Neo investment, assuming that Matrix accounts for that investment as an equity-method investment. 2. Prepare the journal entries necessary to account for the Neo investment, assuming that Matrix elects the fair value option.
The DeBlois Family Co. acquired 40% of Orange Beach Co. with a $500,000 payment on January 1, 2023. The equivalent net book value (40% share) of Orange Beach on the date of acquisition was $425,000. $50,000 of the excess payment was attributable to equipment with a 10-year remaining life. The remainder of the excess payment was not attributable to any identifiable item. Orange Beach Co. Reported net income of $40,000 in 2023. No dividends were paid out. On January 1, 2024, DeBlois Family Co. Acquired an additional 50% ownership share in Orange Beach Co. With a cash payment of $700,000. The fair value of the noncontrolling interest was determined to be $140,000 on the date of acquisition. The total fair value of Orange Beach's identifiable assets and liabilities on January 1, 2024, was $1,000,000. The trading value of stock shares remained the same as acquisition date prices for several months after January 1, 2024. What amount should be reported as consolidated goodwill on January 1,…
1. On January 1, 2018, Koehn Company bought 25% outstanding ordinary shares of Cosby Company for P1 million. The book value of the net asset acquired was P3 million. The difference was attributable to the fair value of Cosby's machinery exceeding book value. The machinery has a remaining life of 10 years. 0n January 3, 2018, Koehn Company sold an equipment costing P600,000 to Cosby Company for P800,000. The equipment has a remaining life of five years. In 2018, Cosby Company reported net income of P1,000,000. Cash dividends of P100,000 were declared and paid by Cosby Company on December 31, 2018. How much is the carrying amount of the investment in associate on December 31, 2018?
Matrix, Inc., acquired 25% of Neo Enterprises for $2,000,000 on January 1,2021. The fair value and book value of 25% of Neo's identifiable net assets was$2,000,000 and $1,600,000 on that date, and the difference was attributable toassets that would be depreciated over 10 years. During 2021 Neo recognized netincome of $500,000 and paid dividends of $400,000. Neo had a total fair value of$10,000,000 as of December 31, 2021.Required:Prepare the journal entries necessary to account for the Neo investment, assuming thatMatrix accounts for that investment as an equity method investment.2. Prepare the journal entries necessary to account for the Neo investment, assuming thatMatrix elects the fair-value option.
Nascent, Inc., acquires 60 percent of Sea-Breeze Corporation for $414,000 cash on January 1, 2018. The remaining 40 percent of the Sea-Breeze shares traded near a total value of $276,000 both before and after the acquisition date. On January 1, 2018, Sea-Breeze had the following assets and liabilities: Book Value Fair Value Current assets $ 150,000 $ 150,000 Land 200,000 200,000 Buildings (net) (6-year remaining life) 300,000 360,000 Equipment (net) (4-year remaining life) 300,000 280,000 Patent (10-year remaining life) 0 100,000 Liabilities (400,000 ) (400,000 ) The companies’ financial statements for the year ending December 31, 2021, follow: Nascent Sea-Breeze Revenues $ (600,000 ) $ (300,000 ) Operating expenses 410,000 210,000 Investment income (42,000 ) 0 Net income $ (232,000 ) $ (90,000 ) Retained earnings, 1/1/21 $ (700,000 ) $ (300,000 ) Net income…
Nascent, Inc., acquires 60 percent of Sea-Breeze Corporation for $414,000 cash on January 1, 2018. The remaining 40 percent of the Sea-Breeze shares traded near a total value of $276,000 both before and after the acquisition date. On January 1, 2018, Sea-Breeze had the following assets and liabilities: Book Value Fair Value Current assets $ 150,000 $ 150,000 Land 200,000 200,000 Buildings (net) (6-year remaining life) 300,000 360,000 Equipment (net) (4-year remaining life) 300,000 280,000 Patent (10-year remaining life) 0 100,000 Liabilities (400,000 ) (400,000 ) The companies’ financial statements for the year ending December 31, 2021, follow: Nascent Sea-Breeze Revenues $ (600,000 ) $ (300,000 ) Operating expenses 410,000 210,000 Investment income (42,000 ) 0 Net income $ (232,000 ) $ (90,000 ) Retained earnings, 1/1/21 $ (700,000 ) $ (300,000 ) Net income…
On January 1, 2021, Herwin Company acquired 40%of GIC Company by purchasing 8,000 shares for P1,440,000. On the date of acquisition, Herwin calculated that its share of the excess of the fair value over the book value of GIC's depreciable assets was P150,000 and that the purchased goodwill was P120,000. At the end of 2021, GIC reported profit of P450,000 and paid dividends of P7.00 per share. Herwin depreciates its depreciable assets over 12-year remaining life. What is the amount of income Herwin Company would report from its investment in GIC for the year ended December 31, 2021? A P105,500 в) Р56,000 P167,500 D P172,600