Reeder Corp. acquired one hundred percent of O’Neill Inc. on January 1, 2019, at a price in excess of the subsidiary's fair value. On that date, Reeder’s equipment (ten-year life) had a book value of $380,000 but a fair value of $460,000. O’Neill had equipment (ten-year life) with a book value of $240,000 and a fair value of $370,000. Reeder used the partial equity method to record its investment in O’Neill. On December 31, 2021, Reeder had equipment with a book value of $270,000 and a fair value of $400,000. O’Neill had equipment with a book value of $180,000 and a fair value of $300,000. What is the consolidated balance for the Equipment account as of December 31, 2021?
Multiple Choice $531,000. $541.000. $580,000. $450,000. $567,000.
Answer | |
Consolidated Balance for the Equipment |
|
O,Neill Equipment = $370,000 - $240,000 | $ 130,000 |
Reeder Corp. Equipment Book value | $ 270,000 |
O,Neill Equipment Book Value | $ 180,000 |
Less: Excess Amortization ($130,000/10 years × 3yrs) | -$ 39,000 |
Consolidated Balance for the Equipment | $ 541,000 |
Option B is Correct | |
Reeder Corp. acquired one hundred percent of O’Neill Inc. on January 1, 2019, at a price...
On January 1, 2019, Phoenix Co. acquired 100 percent of the outstanding voting shares of Sedona Inc. for $684,000 cash. At January 1, 2019, Sedona’s net assets had a total carrying amount of $478,800. Equipment (eight-year remaining life) was undervalued on Sedona's financial records by $86,000. Any remaining excess fair over book value was attributed to a customer list developed by Sedona (four-year remaining life), but not recorded on its books. Phoenix applies the equity method to account for its...
The following are several figures reported for Allister and
Barone as of December 31, 2021:
Allister
Barone
Inventory
$
580,000
$
380,000
Sales
1,160,000
960,000
Investment income
not given
Cost of goods sold
580,000
480,000
Operating expenses
270,000
340,000
Allister acquired 90 percent of Barone in January 2020. In
allocating the newly acquired subsidiary's fair value at the
acquisition date, Allister noted that Barone had developed a
customer list worth $72,000 that was unrecorded on its accounting
records and had...
Bassett Inc. acquired all of the outstanding common stock of Brinkman Corp. on January 1, 2019, for $422,000. Equipment with a ten-year life was undervalued on Brinkman’s financial records by $48,000. Brinkman also owned an unrecorded customer list with an assessed fair value of $71,000 and an estimated remaining life of five years. Brinkman earned reported net income of $185,000 in 2019 and $226,000 in 2020. Dividends of $75,000 were paid in each of these two years. Selected account balances...
Assume that on January 1, 2018, a parent company acquired an 85% interest in a subsidiary's voting common stock. On the date of acquisition, the fair-value of the subsidiary's net assets equaled their reported book values except for machinery and equipment, which had a fair value of $780,000 and a reported book value of $325,000. the machinery and equipment had a 5-year remaining useful life and no salvage value. The following are the highly summarized pre-consolidation income statements of the...
Lowell Co. acquired 100% of Boston, Inc. on January 1, 2017. On that date, Boston had land with a book value of $42,000 and a fair value of $52,000. Also, on the date of acquisition, Boston had a building with a book value of $200,000 and a fair value of $390,000. Boston had equipment with a book value of $350,000 and a fair value of $280,000. Both companies use the same depreciation policy, that the building had a 10-year remaining...
Placid Lake Corporation acquired 90 percent of the outstanding voting stock of Scenic, Inc., on January 1, 2020, when Scenic had a net book value of $460,000. Any excess fair value was assigned to intangible assets and amortized at a rate of $4,000 per year. Placid Lake's 2021 net income before consideration of its relationship with Scenic (and before adjustments for intra-entity sales) was $360,000. Scenic reported net income of $170,000. Placid Lake declared $160,000 in dividends during this period;...
Monte Company acquired 70% of the stock of Mo Company on 1
January 2018, for $150,000. On this date, the balances of Mo’s
stockholders’ equity accounts were: Common Stock, $130,000, and
Retained Earnings, $14,000. On 1 January 2018, the market value for
the 30% of shares not purchased by Monte was $63,800. On 1 January
2018, Mo’s recorded book values were equal to fair values for all
items except: (1) accounts receivable had a book value of $40,000
and a...
Pitino acquired 90 percent of Brey's outstanding shares on January 1, 2016, in exchange for $567,000 in cash. The subsidiary's stockholders' equity accounts totaled $551,000 and the noncontrolling interest had a fair value of $63,000 on that day. However, a building (with a ten-year remaining life) in Brey's accounting records was undervalued by $38,000. Pitino assigned the rest of the excess fair value over book value to Brey's patented technology (five-year remaining life). Brey reported net income from its own operations...
EXCEL CASE 2
On January 1, 2017, Hi-Speed.com acquired 100 percent of the
common stock of Wi-Free Co. for cash of $730,000. The consideration
transferred was allocated among Wi-Free’s net assets as
follows:
Page 151
Wi-Free fair value (cash paid by Hi-Speed)
$730,000
Book value of Wi-Free:
Common stock and additional paid-in capital (APIC)
$130,000
Retained earnings
370,000
500,000
Excess fair value over book value to
230,000
In-process R&D
$ 75,000
Computer software (overvalued)
(30,000)
Internet domain name
120,000
165,000
...
EXCEL CASE 2 On January 1, 2017, Hi-Speed.com acquired 100 percent of the common stock of Wi-Free Co. for cash of $730,000. The consideration transferred was allocated among Wi-Free’s net assets as follows: Page 151 Wi-Free fair value (cash paid by Hi-Speed) $730,000 Book value of Wi-Free: Common stock and additional paid-in capital (APIC) $130,000 Retained earnings 370,000 500,000 Excess fair value over book value to 230,000 In-process R&D $ 75,000 Computer software (overvalued) (30,000) Internet domain name 120,000 165,000 ...