Question

Small-Town Retail owns 70 percent of Supplier Corporation's common stock. For the current financial year, Small-Town and Supplier reported sales of $450,000 and $300,000 and expenses of $290,000 and $240,000, respectively.

16. Based on the preceding information, what is the amount of net income to be reported in the consolidated income statement for the year under the proprietary theory approach?
A. $210,000
B. $202,000

C. $160,000

D. $200,000

*I know the answer is $202,000 but if you can please show computations for that answer.

17. Based on the preceding information, what is the amount of net income to be reported in the consolidated income statement for the year under the entity theory approach?
A. $210,000
B. $202,000

C. $160,000

D. $220,000

*I know the answer is $220,000 but if you can please show computations for that answer.

18.Quid Corporation acquired 75 percent of Pro Company's common stock on December 31, 20X6. Goodwill (attributable to Quid's acquisition of Pro shares) of $300,000 was reported in the consolidated financial statements at December 31, 20X6. Parent company approach was used in determining this amount. What is the amount of goodwill to be reported under proprietary theory approach?

A. $300,000 B. $400,000 C. $150,000 D. $100,000

*I know the answer is $300,000 but if you can please show computations for that answer.

19.Quid Corporation acquired 60 percent of Pro Company's common stock on December 31, 20X4. Goodwill (attributable to Quid's acquisition of Pro shares) of $150,000 was calculated under the proprietary theory approach. What is the amount of goodwill that should be reported under entity theory approach?

A. $150,000 B. $200,000 C. $250,000 D. $100,000

*I know the answer is $250,000 but if you can please show computations for that answer.

On January 1, 20X9, Heathcliff Corporation acquired 80 percent of Garfield Corporation's voting common stock. Garfield's buildings and equipment had a book value of $300,000 and a fair value of $350,000 at the time of acquisition.

20. Based on the preceding information, what will be the amount at which Garfield's buildings and equipment will be reported in consolidated statements using the parent company approach?
A. $350,000
B. $340,000

C. $280,000

D. $300,000

*I know the answer is $340,000 but if you can please show computations for that answer.

21. Based on the preceding information, what will be the amount at which Garfield's buildings and equipment will be reported in consolidated statements using the current accounting practice?
A. $350,000
B. $340,000

C. $280,000

D. $300,000

*I know the answer is $350,000 but if you can please show computations for that answer.

Answer 1

ou Omron 16 proprietary theory approach Small town owns For of co- of suppler.co. Given Small town hakes = $ 450,000 Small town Cupens = $ (290,000) O :. Net Income - $ 160,000 Giver Supplies to. sales = $ 300,000 Less: Supplier Srpence = $(240,000) $ 60,000 Since Small bown owns 10% of common Chole The Total Income in = $ 160,000 + (80,000) * B04. - $ 160,000+ $42,000 $ 200,000 -7) Gnibly throng approach. . Net Income Consolidates Small hown Income &= 160,000 Ald" Supplier Income & = 60,000 $ 1,20,000

18) Quid Corporation acquired Ist of pro.co. $ 300,000 Shares in financial Statut Since, under proprietary theory. Quadro a parent company acquired the - Shares $ 300,000 19) $ 150,000 under proprietory approach Equity theory approach = ? Goodwill = $150,000 7 of Shau in compay A $150,000 GOT: Glw = $ 250,006 2) Far market Value of Building - $ 350,000 Book Value of Building - $ 300,000 Since the parent company is Health Cliff corporation. The Book valu should be considered - $ 300,000

21) yel under Garfields building approach it should be recorded under the Fair market valu ie $350,000