Park Corporation acquired the voting stock of Sequoia Company on
January 1, 2020 for $25 million in cash and stock. At the date of
acquisition, Sequoia's book value totaled $3 million, consisting of
$1.6 million in capital stock, $1.8 million in retained earnings,
and $400,000 in accumulated other comprehensive losses.
Sequoia's reported net assets at the date of acquisition were
carried at amounts approximating fair value, except its inventory
was overvalued by $500,000 (sold in 2020), its plant assets
(10-year life, straight-line) were overvalued by $3,500,000, and
its long-term debt (premium amortized over 10 years, straight-line)
is undervalued by $100,000. Sequoia also had previously unreported
identifiable intangibles (5-year life, straight-line) valued at
$5,000,000.
It is now December 31, 2020. Sequoia reports net income of
$1,200,000 and other comprehensive income of $50,000 for 2020 and
declares and pays dividends of $200,000. None of the revaluations
are impaired in 2020. Park uses the complete equity method to
account for its investment.
Eliminating entry (R) debits goodwill in the amount of:
A. |
$20,100,000 | |
B. |
$20,900,000 |
|
C. |
$19,100,000 |
|
D. |
21,100,000 |
How does eliminating entry (O) change consolidated cost of goods sold?
A. |
$500,000 credit | |
B. |
$100,000 credit |
|
C. |
No effect |
|
D. |
$500,000 debit |
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Park Corporation acquired the voting stock of Sequoia Company on January 1, 2020 for $25 million...
Park Corporation acquired the voting stock of Sequoia Company on January 1, 2020 for $25 million in cash and stock. At the date of acquisition, Sequoia's book value totaled $3 million, consisting of $1.6 million in capital stock, $1.8 million in retained earnings, and $400,000 in accumulated other comprehensive losses. Sequoia's reported net assets at the date of acquisition were carried at amounts approximating fair value, except its inventory was overvalued by $500,000 (sold in 2020), its plant assets (10-year...
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