Question

Resolver los siguientes problemas:
1. Pursley, Inc. acquires 10% of Ritz Corporation on January 3, 2012, for $80,000 when the book value of Ritz was $800,000. During 2012 Ritz reported net income of $125,000 and paid dividends of $30,000. On January 1, 2013, Pursley purchased an additional 20% of Ritz for $325,000, giving Pursley the ability to significantly influence the operating policies of Ritz. Any excess of cost over book value is attributable to goodwill with an indefinite life. What journal entry(ies) is(are) required on January 1, 2013?   

2. On January 1, 2013, Jolley Corp. paid $250,000 for 25% of the voting common stock of Tige Co. On that date, the book value of Tige was $850,000. A building with a carrying value of $160,000 was actually worth $220,000. The building had a remaining life of twenty years. Tige owned a trademark valued at $90,000 over cost that was to be amortized over 20 years.

During 2013, Tige sold to Jolley inventory costing $60,000, at a markup of 50% on cost. At the end of the year, Jolley still owned some of these goods with a transfer price of $33,000. Jolly uses a perpetual inventory system. Tige reported net income of $200,000 during 2013. This amount included an extraordinary gain of $35,000. Tige paid dividends totaling $40,000.
Required:
Prepare all of Jolley's journal entries for 2013 in relation to Tige Co. Assume the equity method is appropriate for use.   

Required journal entries:

3. On January 1, 2013, Anderson Company purchased 40% of the voting common stock of Barney Company for $2,000,000, which approximated book value. During 2013, Barney paid dividends of $30,000 and reported a net loss of $70,000.

What amount of equity income would Anderson recognize in 2013 from its ownership interest in Barney?   

A. $12,000 income.
B. $12,000 loss.
C. $16,000 loss.
D. $28,000 income.
E. $28,000 loss.


4. After allocating cost in excess of book value, which asset or liability would not be amortized over a useful life?   

A. Cost of goods sold.
B. Property, plant, & equipment.
C. Patents.
D. Goodwill.
E. Bonds payable.
5. On January 3, 2013, Roberts Company purchased 30% of the 100,000 shares of common stock of Thomas Corporation, paying $1,500,000. There was no goodwill or other cost allocation associated with the investment. Roberts has significant influence over Thomas. During 2013, Thomas reported income of $300,000 and paid dividends of $100,000. On January 4, 2014, Roberts sold 15,000 shares for $800,000.

What is the appropriate journal entry to record the sale of the 15,000 shares?

Answer 1

Journal entry for 2013 in relation to Tige co. as follows: Credit Date Account Titles and Explanations Year 2013 Investment in Tige Co Debit $250,000 Cash $250,000 $90,000 Inventory Cash ($60,000*150% $90,000 $50,000 $41.250 Investment in Tige Co Equity in Tige Co. Income [($200,000-$35,000)*25%] Extraordinary Gain of Tige Co. $8,750 $10,000 Cash Investment in Tige Co $10,000 $1.875 Equity in Tige Co.'s income (Working Note) Investment in Tige Co $1,875 $2.750 Equity in Tige Co. (Working note) Investment in Tige Co Working notes as follows:

Calculate Amortization: Building [($220,000-$160,000)/20]*25% Trademark[(S90,000*25%)/20 Total Amortization $750 $1.125 $1.875 Calculate Unrealized profit in inventory as follows: Selling price of inventory($60,000*150%) Less: Cost of inventory Gross profit $90,000 ($60,000) $30,000 Gross profit ratio (30000/90000) Residual Inventory $33,000 Profit in Residual inventory ($33,000/3) $11,000 Jolley's Ownership 25% Unrealized profit in remaining inventory ($11,000*25%)| $2,750

Net Loss reported by the Barney company Voting power held by the Anderson Company Loss share shown by the Anderson company (70,000*40%) $70,000 40% $28.000 Hence the correct option is E i.e $28,000 loss. 4.

After allocating costs in excess of book value Goodwill would not be amotized over the useful life. 5. Robert Company purchase 30% shares in Thomas Corporation which has a substantial influence over Thomas. Therefore Equity method should be followed: Credit Debit $800,000 Date Account Titles and Explanations Cash Investment in Thomas (1560000*15000/30000 Gain on sale of investment $ 780,000 $20,000 Calculate value of investment of 30,000 shares = 1500000+90000-30000 =1560000