Davis acquires 100% of Ramos on January 1st, 2009. Ramos will be operated as a separate...
Davis acquires 100% of Ramos on January 1st, 2009. Ramos will be operated as a separate subsidiary. Davis will use the equity method to account for its investment in Ramos. In 2013, Davis has net income of $400,000 and pays dividends of $100,000. Ramos has NI of $200,000 and pays dividends of $75,000. At acquisition date, Davis has a building with a. BV of $800,000 and FV of $900,000. Both buildings have a remaining useful life of 10 years (assume straight line depreciation). At December 31, 2013 Davis had book value (BV) of Building of 5,000,000 and fair value (FV) of 6,000,000. Ramos had BV of Building of 2,000,000 and FV of 1,500,000.
a. Prepare consolidation worksheet "D" to reflect the necessary adjustments for dividends
b. How much consolidation dividends for 2013
c. Prepare worksheet entry "A" at December 31,2019 (assume no GW)
d. How much is consolidated buildings at December 31, 2013?
Homework Answers
C is not answered.Post separately.
a Prepare the consolidation worksheet D to reflect the necessary adjustment for Dividend:
Davis Net Income of $400000 and pays dividends of $100000.
Ramos Net Income of $200000 and pays dividends of $75000.
100000 dividend on 400000 Profit ie 25%.
Total Income of Davis =$400000 +$75000=$475000
So dividend =$475000 *.25 =$118750
b.How much are consolidated dividends of 2013:
Consolidated Dividends for 2013 is $118750.
Becuase dividend issued by Ramos is like income of Davis and its
include in Ramos income statement.
d)how much is consolidated building at 12/31/2013.
At acquisition date Davis has a building = $800,000
At acquisition date Ramos has a buidling = $2000,000
Useful life of 5 years
Straight line method
From 1/1/2009 to 12/31/2013 total 5 years completed. so end of 12/31/2013 value of Building is Zero.
Now,
At 12/31/2013,
Davis has BV building of $5000,000.
Ramos has BV building of $2000,000.
So this is the consolidated building at 12/31/2013.$ 70,00,000.
Add Answer to:
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