Problem

Parent Company and Consolidated AmountsQuoton Corporation acquired 80 percent of Tempro Co...

Parent Company and Consolidated Amounts

Quoton Corporation acquired 80 percent of Tempro Company’s common stock on December 31, 20X5, at underlying book value. The book values and fair values of Tempro’s assets and liabilities were equal, and the fair value of the noncontrolling interest was equal to 20 percent of the total book value of Tempro. Tempro provided the following trial balance data at December 31, 20X5:

 

Debit

Credit

Cash

$ 28,000

 

Accounts Receivable

65,000

 

Inventory

90,000

 

Buildings and Equipment (net)

210,000

 

Cost of Goods Sold

105,000

 

Depreciation Expense

24,000

 

Other Operating Expenses

31,000

 

Dividends Declared

15,000

 

Accounts Payable

 

$ 33,000

Notes Payable

 

120,000

Common Stock

 

90,000

Retained Earnings

 

130,000

Sales

 

195,000

Total

$568,000

$568,000

Required

a. How much did Quoton pay to purchase its shares of Tempro?


b. If consolidated financial statements are prepared at December 31, 20X5, what amount will be assigned to the noncontrolling interest in the consolidated balance sheet?


c. If Quoton reported income of$143,000 from its separate operations for 20X5, what amount of consolidated net income will be reported for 20X5?


d. If Quoton had purchased its ownership of Tempro on January 1, 20X5, at underlying book value and Quoton reported income of $143,000 from its separate operations for 20X5, what amount of consolidated net income would be reported for 20X5?

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