Question

Inc.. on January 1, 2015 of 52125 oration bowemaining firemaining lif cht 100 peres has a book value of $420,000 bu915 aining life) with a book value 10 Chapter 3 investment in Kimmel 204,000 but a fair value of $44 LO 3-1 00.400 but a fair value of 5357.000 S400.000. Pament with a 190.400 bular 31, 2017? Par has a look atuount as or 5. Paar Corporation bought 100 percent of Kimmel, Inc equipment (10-year remaining life) has a book value Kimmel has equipment (10-year remainine life) $400.000. Pasar uses the equity method to record its inves Paar has exquipment with a book value of $294.000 ment with a book value of $190.400 but a fair valu for the Equipment account as of December 31, 2017 5574.IX S802.200 S612.000 $484.400 ed if the parent had applied How would the equity men....es is for internal reporting purposes only LD 3-3 LO 34 ve a higher reported balance lower reported balance, 6. How would the answer to problem (5) have been affected method rather than the equity method? No effect: The method the parent uses is for internal re on consolidated totals, The consolidated Equipment account would have a high c. The consolidated Equipment account would have a lower The balance in the consolidated Equipment account method using the information given. termined for the LO 330 cated among a firm'sidente b recognized goodwill falls plied value for goodwill LO3-30 amount for goodwill 7. Goodwill recognized in a business combination must be allocated ing units. If the fair value of a particular reporting unit with rer carrying amount, which of the following is true? a. No goodwill impairment loss is recognized unless the implied carrying amount. b. A goodwill impairment loss is recognized if the carrying amo implied value. c. A coodwill impairment loss is recognized for the excess of a reporti over its fair value, not to exceed the carrying amount of goodwill. d. The reporting unit reduces the values assigned to its long-term assets nized intangibles) to reflect its fair value. wit's carrying assets (including any LO 37 er factors limit the lifed hich of the following LO 3-7 8. If no legal, regulatory, contractual, competitive, economic, or other factors li ible asset, the asset's assigned value is allocated to expense over which of the a. 20 years. b. 20 years with an annual impairment review. c. Infinitely Indefinitely (no amortization) with an annual impairment review until its life become 9. Dosmann, Inc., bought all outstanding shares of Lizzi Corporation on January 1, 2016. forse in cash. This portion of the consideration transferred to a fair-value allocation of equipment and goodwill of $88,000. At the acquisition de Dosmann also agrees to go previous owners an additional $110,000 on January 1, 2017 f Lizzi earns a 10 percent retum fair value of its assets in 2016 and 2017. Lizzi's profits oxoved this threshold in both yeurs of the following is true? 3-7 LO 3-3, 3-4 a. The additional $110,000 payment is a reduction in consolidated retained earnings. b. The fair value of the expected contingent payment increases goodwill at the acquis c. Consolidated goodwill as of January 1, 2018, increases by $110,000. d. The $110,000 is recorded as an expense in 2018. Problems 10, 11, and 12 relate to the following: On January 1, 2016, Phoenix Co. acquired 100 percent of the outstanding Inc., for $600,000 cash. At January 1, 2016, Sedona's net assets had a to of $420,000. Equipment (eight-year remaining life) was undervace records by $80,000. Any remaining excess fair over book value was a developed by Sedona (four-year remaining life), but not recorded on its the equity method to account for its investment in Sedona. Each year Sedona has declared a $20,000 dividend. Sedona recorded net income $80,000 in 2017. standing voting shares of s had a total carrying ervalued on Sedona's for de was attributed to a custom ded on its books. Phoenit 1 year since the acous come of $70,000 in 2

Answer 1

5.
Value of assets at date of consolidation = $420000 + 400000 = $820000

Value of consolidated assets as on Dec 31, 2017 = $820000 - $82000 x 3 = $574000

Answer is a. $574000

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