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.
The balance for acquired identifiable intangibles on the December
31, 2020 consolidated balance sheet is:
A. |
$5,000,000 |
|
B. |
$1,000,000 |
|
C. |
$4,500,000 |
|
D. |
$4,000,000 |
What is the December 31, 2020 balance for Investment in Sequoia, reported on Park's books?
A. |
$25,860,000 |
|
B. |
$26,000,000 |
|
C. |
$26,060,000 |
|
D. |
$25,910,000 |
Eliminating entry (R) debits goodwill in the amount of:
A. |
$19,100,000 |
|
B. |
$20,900,000 |
|
C. |
$20,100,000 |
|
D. |
$21,100,000 |
Eliminating entry (E) credits Investment in Sequoia by:
A. |
$1,500,000 |
|
B. |
$3,300,000 |
|
C. |
$3,000,000 |
|
D. |
$3,600,000 |
Requirement 1 | |||
Transaction | General Journal | Debit | Credit |
1 | Bad debt expense | $ 1,35,560.00 | |
Allowance for Doubtful Accounts | $ 1,35,560.00 | ||
(To Record Adjusting Entry at Year end) | |||
2 | Bad debt expense | $ 1,62,279 | |
Allowance for Doubtful Accounts | $ 1,62,279 | ||
(To Record Adjusting Entry at Year end) | |||
3 | Bad debt expense | $ 87,131 | |
Allowance for Doubtful Accounts | $ 87,131 | ||
(To Record Adjusting Entry at Year end) | |||
Working : | |||
1 | Bad debts are estimated @ 4% of Credit sales | ||
$3389000*4% | $ 1,35,560.00 | ||
2 | Bad debts are estimated 3% of total sales | ||
[$2020300+$3389000 ]*3% | $ 1,62,279 | ||
3 | Allowance is 7% of Accounts Receivable | ||
unadjusted Balance | $ 15,250 | Debit | |
Estimated Balance ( $1026867*7%) | $ 71,881 | Credit | |
$ 87,131 | Credit | ||
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