Exam 4: Consolidated Financial Statements and Outside Ownership

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2019. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.Demers earns income and pays dividends as follows: Assume the initial value method is applied.How much does Pell record as Income from Demers for the year ended December 31, 2020?

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2019. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.Demers earns income and pays dividends as follows: Assume the initial value method is applied.Compute the noncontrolling interest in the net income of Demers at December 31, 2021.

LaFevor Co. acquired 70% of the common stock of Dean Corp. on August 1, 2022. For 2022, Dean reported revenues of $960,000 and expenses of $780,000, all reflected evenly throughout the year. The annual amount of amortization related to this acquisition was $21,000.What is the effect of including Dean in consolidated net income for 2022?

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2019. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.Demers earns income and pays dividends as follows: Assume the equity method is applied.Compute the noncontrolling interest in the net income of Demers at December 31, 2020.

When a parent uses the initial value method throughout the year to account for its 80% investment in an acquired subsidiary, which of the following statements is true at the date immediately preceding the date on which adjustments are made on the consolidated worksheet?

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2019. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.Demers earns income and pays dividends as follows: Assume the partial equity method is applied.Compute the noncontrolling interest in Demers at December 31, 2021.

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2019. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.Demers earns income and pays dividends as follows: Assume the partial equity method is applied.Compute Pell's Investment in Demers at December 31, 2021.

International financial reporting standards (IFRS) allow an option to value the noncontrolling interest with goodwill or to value the noncontrolling interest without goodwill

When Valley Co. acquired 80% of the common stock of Coleman Corp., Coleman owned land with a book value of $75,000 and a fair value of $125,000.What amount should have been reported for the land in a consolidated balance sheet at the acquisition date?

On January 1, 2020, John Doe Enterprises (JDE) acquired a 55% interest in Bubba Manufacturing, Inc. (BMI). JDE paid for the transaction with $3 million cash and 500,000 shares of JDE common stock (par value $1.00 per share). At the time of the acquisition, BMI's book value was $16,970,000.On January 1, JDE stock had a market value of $14.90 per share and there was no control premium in this transaction. Any consideration transferred over book value is assigned to goodwill. BMI had the following balances on January 1, 2020. For internal reporting purposes, JDE employed the equity method to account for this investment.The following account balances are for the year ending December 31, 2020 for both companies. Required:Prepare a consolidation worksheet for this business combination. Assume goodwill has been reviewed and there is no goodwill impairment.

Which of the following methods is not used to value a noncontrolling interest under circumstances where a control premium is applied to determine the appropriate value for such interest?

Renz Co. acquired 80% of the voting common stock of Sogers Corp. on January 1, 2022. During 2022, Sogers had revenues of $2,700,000 and expenses of $2,100,000. The amortization of fair value allocations totaled $65,000 in 2022. Not including its investment in Sogers, Renz Co. had its own revenues of $4,800,000 and expenses of $3,600,000 for the year 2022.What amount of consolidated net income for 2022 should be allocated to Renz's controlling interest in Sogers?

When Valley Co. acquired 80% of the common stock of Coleman Corp., Coleman owned land with a book value of $75,000 and a fair value of $125,000.What is the total amount of excess land allocation at the acquisition date?

On January 1, 2019, Jannison Inc. acquired 90% of Techron Co. by paying $477,000 cash. There is no active trading market for Techron stock. Techron Co. reported a Common Stock account balance of $140,000 and Retained Earnings of $280,000 at that date. The fair value of Techron Co. was appraised at $530,000. The total annual amortization was $11,000 as a result of this transaction. The subsidiary earned $98,000 in 2019 and $126,000 in 2020 with dividend payments of $42,000 each year. Without regard for this investment, Jannison had income of $308,000 in 2019 and $364,000 in 2020.Prepare a proper presentation of consolidated net income and its allocation for 2020.

On January 1, 2019, Palk Corp. and Spraz Corp. had condensed balance sheets as follows: On January 2, 2019, Palk borrowed the entire $84,000 it needed to acquire 80% of the outstanding common shares of Spraz. Shares of Spraz are not actively traded on the market. The loan was to be paid in ten equal annual principal payments, plus interest, beginning December 31, 2019. The excess consideration transferred over the underlying book value of the acquired net assets was allocated 60% to inventory and 40% to goodwill.What are the total consolidated current liabilities at January 2, 2019?

Dodd Co. acquired 75% of the common stock of Wallace Corp. for $1,800,000. The fair value of Wallace's net assets was $2,100,000, and the book value was $1,900,000. The noncontrolling interest shares of Wallace Corp. are not actively traded.What amount of goodwill should be attributed to Dodd at the date of acquisition?

McGuire Company acquired 90 percent of Hogan Company on January 1, 2019, for $234,000 cash. This amount is reflective of Hogan's total acquisition-date fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following: Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years.In consolidation at December 31, 2020, what net adjustment is necessary for Hogan's Patent account?

Caldwell Inc. acquired 65% of Club Corp. for $2,600,000. There was no active market for the shares of Club Corp. Club owned a building and equipment with ten-year useful lives. The combined book value of these assets was $830,000, and the fair value was $950,000. For Club's other assets and liabilities, book value was equal to fair value. The total acquisition-date fair value of Club's net assets was $3,500,000.Using the acquisition method, determine the amount of goodwill associated with Caldwell's purchase of Club.

When a parent uses the partial equity method throughout the year to account for its 80% investment in an acquired subsidiary, which of the following statements is true at the date immediately preceding the date on which adjustments are made on the consolidated worksheet?

On January 1, 2019, Glenville Co. acquired an 80% interest in Acron Corp. for $500,000. There is no active trading market for Acron's stock. The fair value of Acron's net assets was $600,000 and Glenville accounts for its interest using the acquisition method.Determine the value assigned to the noncontrolling interest as of the date of the acquisition.