Question

Emily Corporation purchased all of Ace Company's common stock on January 1, 2020, for $1,000,000 cash....

Emily Corporation purchased all of Ace Company's common stock on January 1, 2020, for $1,000,000 cash. The investee's stockholders' equity amounted to $400,000. The excess of $600,000 was due to an unrecorded patent with a six-year life. In 2020, Ace reported net income of $250,000 and paid dividends of $25,000.

For 2020, what amount of Equity Income will Emily record?

  1. $150,000
  2. $125,000   
  3. $175,000   
  4. $825,000

  

  

  

Assume the facts in Question 27. What is the Equity Investment balance at December 31, 2020?

  1. $   825,000
  2. $1,100,000
  3. $1,125,000
  4. $1,175,000
0 0
Add a comment Improve this question Transcribed image text
Answer #1

1. What amount of Equity Income will Emily record?

Answer: a.$150,000

Explanation:

Ace reported net income $250,000
Amortization expense ($100,000)
Emily's Equity Income $150,000

*Given that, the excess of $600,000 was due to an unrecorded patent with a six-year life.

So, $600,000 should be amortized over the 6 years.

Hence, Amortization Expense = $600,000/6 years = $100,000.

2. What is the Equity Investment balance at December 31, 2020?

Answer: c.$1,125,000

Explanation:

Equity Investment in Ace Company, Jan 1,2020 $1,000,000
Equity income (as calculated above) $150,000
Dividends received ($25,000)
Equity Investment in Ace Company, Dec 31,2020 $1,125,000
Add a comment
Know the answer?
Add Answer to:
Emily Corporation purchased all of Ace Company's common stock on January 1, 2020, for $1,000,000 cash....
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  •    Emily Corporation purchased all of Ace Company's common stock on January 1, 2020, for $1,000,000 cash. The...

       Emily Corporation purchased all of Ace Company's common stock on January 1, 2020, for $1,000,000 cash. The investee's stockholders' equity amounted to $400,000. The excess of $600,000 was due to an unrecorded patent with a six-year life. In 2020, Ace reported net income of $250,000 and paid dividends of $25,000. For 2020, what amount of Equity Income will Emily record? How to get the answer of 1,125,000

  • snihoqsR emoani bnaibo F143 (LO 1) On January 1, 2020, Frontier Corporation had $1,000,000 of common...

    snihoqsR emoani bnaibo F143 (LO 1) On January 1, 2020, Frontier Corporation had $1,000,000 of common stock outstanding la was issued at par. It also had retained earnings of $750,000. The company issued 40,000 shares of Journ common stock at par on July 1 and earned net income of $400,000 for the vear. 0,001o ouai ni Inosn Instructions Journalize the declaration of a 15% stock dividend on December 10, 2020, for the following independent assumptions. a. Par value is $10,...

  • Huey Company acquires 100% of the stock of Solar Corporation on January 1, 2019, for $2,400,000...

    Huey Company acquires 100% of the stock of Solar Corporation on January 1, 2019, for $2,400,000 cash. As of that date Solar had the following account balances: Book Value Fair value Cash $300,000 $300,000 Accounts receivable 325,000 325,000 Inventory 350,000 $400,000 Building-net (10 year life) 1,000,000 900,000 Equipment-net (5 year life) 300,000 400,000 Land 600,000 900,000 Accounts Payable 125,000 125,000 Bonds Payable (Face amount $1,000,000; due 12/31/2023) 2,000,000 2,050,000 Common stock 700,000 Additional paid-in capital 250,000 Retained earnings 880,000 In...

  • On January 1, 2017, Parent Co., acquired 100 percent of the common stock of Sub Co...

    On January 1, 2017, Parent Co., acquired 100 percent of the common stock of Sub Co for $1,000,000 in cash. At that time, the building which had a remaining life of 20 years and was undervalued by 200,000 and they had a patent not recorded on their books of 100,000 with a remaining life of 10 years. Below is the relevant information for Parent Co. and Sub Co. Parent Co 12/31/18 Sub Co 12/31/16 Sub Co 13/31/17 Sub Co 13/31/18...

  • Problem 5: On January 1, 2020, Holt Corporation had $1,000,000 of common stock outstanding that was...

    Problem 5: On January 1, 2020, Holt Corporation had $1,000,000 of common stock outstanding that was issued at par and retained earnings of $750,000. The company issued 60,000 shares of common stock at par on July 1 and earned net income of $400,000 for the year. Instructions: Journalize the declaration of a 15% stock dividend on December 10, 2020, for the following two independent assumptions. (a) Par value is $10 and market value is $16. (b) Par value is $5...

  • On January 1, 2020, Canyon Creek Company acquired Smoltz Corporation by issuing 50,000 shares of its...

    On January 1, 2020, Canyon Creek Company acquired Smoltz Corporation by issuing 50,000 shares of its $1 par common stock with a market value of $12 per share. A building on Smoltz’s books was undervalued by $50,000, resulting in annual amortization of $5,000. Also, there was an unrecorded patent valued at $80,000, resulting in annual amortization of $8,000. The separate 2020 financial statements for Canyon Creek and Smuckerman are presented below. Canyon Creek Co. Smuckerman Corp. Sales revenue $850,000 $380,000...

  • Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2020,...

    Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2020, in exchange for $6,121,000 in cash. Allison intends to maintain Mathias as a wholly owned subsidiary. Both companies have December 31 fiscal year-ends. At the acquisition date, Mathias’s stockholders’ equity was $2,060,000 including retained earnings of $1,560,000. At the acquisition date, Allison prepared the following fair-value allocation schedule for its newly acquired subsidiary: Consideration transferred $ 6,121,000 Mathias stockholders' equity 2,060,000 Excess fair over...

  • The stockholders’ equity accounts of Bramble Corporation on January 1, 2020, were as follows. Preferred Stock (8%, $4...

    The stockholders’ equity accounts of Bramble Corporation on January 1, 2020, were as follows. Preferred Stock (8%, $48 par, 10,000 shares authorized) $  384,000 Common Stock ($1 stated value, 2,050,000 shares authorized) 1,500,000 Paid-in Capital in Excess of Par—Preferred Stock 140,000 Paid-in Capital in Excess of Stated Value—Common Stock 1,450,000 Retained Earnings 1,750,000 Treasury Stock (10,500 common shares) 52,500 During 2020, the corporation had the following transactions and events pertaining to its stockholders’ equity. Feb. 1 Issued 25,000 shares of common...

  • P11.7A (LO2,3,4) On January 1, 2020, Primo Corporation had the following stockholders' equity accounts. Common Stock...

    P11.7A (LO2,3,4) On January 1, 2020, Primo Corporation had the following stockholders' equity accounts. Common Stock ($10 par value, 75,000 shares issued and outstanding) Paid-in Capital in Excess of Par- Common Stock Retained Earnings $750,000 200,000 540,000 During the year, the following transactions ocurred. Jan. 15 Declared a $1 cash dividend per share to stockholders of record on January 31, payable February 15. Paid the dividend declared in January. Declared a 10% stock dividend to stockholders of record on April...

  • On January 1, 2020, Paloma Corporation exchanged $1,710,000 cash for 90 percent of the outstanding voting...

    On January 1, 2020, Paloma Corporation exchanged $1,710,000 cash for 90 percent of the outstanding voting stock of San Marco Company. The consideration transferred by Paloma provided a reasonable basis for assessing the total January 1, 2020, fair value of San Marco Company. At the acquisition date, San Marco reported the following owners' equity amounts in its balance sheet: Common stock Additional paid-in capital Retained earnings $400,000 60,000 265,000 In determining its acquisition offer, Paloma noted that the values for...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT