Homework Answers
| As per the given information Pepper acquired 80% of Halan company's outstanding | |||||
| common shares for a price of $ 5000000 in cash as on January 1, 2018 | |||||
| The fair market value Harlan's 100% shares | 6250000 | ||||
| Book value of Harlan company | 5000000 | ||||
| Less: Building - Book value | 600000 | ||||
| 4400000 | |||||
| Add: Fair value of Building | 1000000 | ||||
| Add: Fair value of Patent which not recorded | |||||
| in Harlan's books | 600000 | ||||
| 6000000 | |||||
| Fair market value of Harlan company | 6250000 | ||||
| Difference amount is Goodwill | 250000 | ||||
| Below amounts appeared in the consolidated financial statements as on December31, 2018 | |||||
| a. Harlan's Patents as on 01.01.2018 | 600000 | ||||
| Useful life of the asset | 10 years | ||||
| Amortisation for 2018 | 60000 | ||||
| Harlan's Patents as on 31.12.2018 | 540000 | ||||
| b. Harlan's Building | 1000000 | ||||
| Useful life of the asset | 10 | ||||
| Depreciation for 2018 | 100000 | ||||
| Harlan's Buildings as on 31.12.2018 | 900000 | ||||
| c. Controlling Interest in Consolidated Net Income | |||||
| Parent company (Pepper company) net income | 925000 | ||||
| Less: Dividends paid by Pepper company | 185000 | ||||
| 740000 | |||||
| Less: Dividends received by Pepper from Harlan | 100000 | ||||
| Parent company Income | 640000 | ||||
| Subsidiary Net Income | 275000 | ||||
| Less: Amortisation of Patents | 60000 | ||||
| Less: Differential depreciation | 40000 | ||||
| 175000 | |||||
| Less: Dividends paid to other shareholders | 25000 | ||||
| Subsidiary Company Income | 150000 | ||||
| Consolidated Net Income is | 790000 | ||||
| Controlling Interest- 80% | 632000 | ||||
| d. Non Controlling Interest in Consolidated Net Income | |||||
| Consolidated Net Income is | 790000 | ||||
| Non Controlling Interest- 20% | 158000 | ||||
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On January 1, 2018, Pepper Enterprise acquired 80% of Harlan Company's outstanding common shares in exchange...
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On January 1, 2018, Pepper Enterprise acquired 80% of Harlan Company’s outstanding common shares in exchange for $5,000,000 in cash. The priced paid for the 80% ownership interest was proportionately representative of the fair value of all of Harlan’s shares. At acquisition date, Harlan’s book value was $5,000,000. The recorded assets and liabilities had fair values equal to their individual book values except that a building (10-year life) with a book value of $600,000 had an appraised value of $1,000,000. Also, at acquisition...
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