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 equity method is applied.What is the consolidated balance of the Equity in Demers Earnings account at December 31, 2021.

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, 2019, what adjustment is necessary for Hogan's Equipment 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.Determine the amount of the noncontrolling interest as of the date of the acquisition.

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.How much does Pell record as Income from Demers for the year ended December 31, 2019?

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 Pell's Investment in Demers account balance at December 31, 2019.

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 amount of Dean's net income attributable to the controlling interest for 2022?

Which of the following statements is true regarding the sale of subsidiary shares when using the acquisition method for accounting for business combinations?

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 Demers at December 31, 2020.

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.The noncontrolling interest's share of the earnings of Sogers Corp. for 2022 is calculated to be

Dunne Inc. bought 65% of the outstanding common stock of Hardy Inc. in an acquisition that resulted in the recognition of goodwill. Hardy owned a piece of land that cost $375,000 but was worth $700,000 at the date of acquisition. What value would be attributed to this land in a consolidated balance sheet at the date of acquisition?

What is pre-acquisition income?

Parsons Company acquired 90% of Roxy Company several years ago for which the consideration transferred included an amount paid for goodwill of $200,000 at that date. During 2020 an analysis of the fair value of Roxy's assets determined an impairment of goodwill in the amount of $50,000.At what amount would consolidated goodwill be reported for 2020?

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 the noncontrolling interest at the date of acquisition?

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 Pell's investment account balance in Demers at December 31, 2020.

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?

Brady, Inc., a calendar-year corporation, acquires 75% of Austin Company on September 1, 2019, and an additional 10% on January 1, 2020. Total annual amortization of $8,000 relates to the first acquisition. Austin reports the following figures for 2020: Without regard for this investment, Brady independently earns $375,000 in net income during 2020.All net income is earned evenly throughout the year.What is the controlling interest in consolidated net income for 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 Pell's Investment in Demers at 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 Pell's Investment in Demers at December 31, 2021.

McLaughlin, Inc. acquires 70% of Ellis Corporation on September 1, 2019, and an additional 10 percent on November 1, 2020. Annual amortization of $12,000 relates to the first acquisition. Ellis reports the following figures for 2020: Without regard for this investment, McLaughlin earns $480,000 in net income ($840,000 revenues less $360,000 expenses; incurred evenly through the year)during 2020.Required:Prepare a schedule of consolidated net income and apportionment to noncontrolling and controlling interests for 2020.

How does a parent company account for the sale of a portion of an investment in a subsidiary?