Exam 4: Consolidated Financial Statements and Outside Ownership

McGuire company acquired 90 percent of Hogan Company on January 1, 2010, for $234,000 cash. This amount is reflective of Hogan's total 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: Book Value Fair Value Buildings (10-year life) \ 10,000 \ 8,000 Equipment (4-year life) 14,000 18,000 Land 5,000 12,000 Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years. -In consolidation at January 1,2010,what adjustment is necessary for Hogan's Equipment account?

When Jolt Co. acquired 75% of the common stock of Yelts Corp., Yelts owned land with a book value of $70,000 and a fair value of $100,000. -What is the amount of excess land allocation attributed to the noncontrolling interest at the acquisition date?

On January 1, 2010, 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 amount of goodwill to be recognized in this acquisition.

McGuire company acquired 90 percent of Hogan Company on January 1, 2010, for $234,000 cash. This amount is reflective of Hogan's total 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: Book Value Fair Value Buildings (10-year life) \ 10,000 \ 8,000 Equipment (4-year life) 14,000 18,000 Land 5,000 12,000 Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years. -The acquisition value attributable to the noncontrolling interest at January 1,2010 Is:

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2010. 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: 2010 2011 2012 Net income \ 100,000 \ 120,000 \ 130,000 Dividends 40,000 50,000 60,000 Assume the equity method is applied. -Compute the noncontrolling interest in the net income of Demers at December 31,2010.

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2010. 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: 2010 2011 2012 Net income \ 100,000 \ 120,000 \ 130,000 Dividends 40,000 50,000 60,000 Assume the partial equity method is applied. -Compute the noncontrolling interest in the net income of Demers at December 31,2010.

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2010. 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: 2010 2011 2012 Net income \ 100,000 \ 120,000 \ 130,000 Dividends 40,000 50,000 60,000 Assume the initial value method is applied. -Compute the noncontrolling interest in the net income of Demers at December 31,2010.

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2010. 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: 2010 2011 2012 Net income \ 100,000 \ 120,000 \ 130,000 Dividends 40,000 50,000 60,000 Assume the initial value method is applied. -Compute Pell's investment in Demers at December 31,2011.

Beta Corp.owns less than one hundred percent of the voting common stock of Shedds Co.Under what conditions will Beta be required to prepare consolidated financial statements?

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2010. 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: 2010 2011 2012 Net income \ 100,000 \ 120,000 \ 130,000 Dividends 40,000 50,000 60,000 Assume the partial equity method is applied. -Compute the noncontrolling interest in Demers at December 31,2011.

All of the following statements regarding the sale of subsidiary shares are true except which of the following?

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2010. 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: 2010 2011 2012 Net income \ 100,000 \ 120,000 \ 130,000 Dividends 40,000 50,000 60,000 Assume the initial value method is applied. -Compute Pell's investment in Demers at December 31,2010.

McGuire company acquired 90 percent of Hogan Company on January 1, 2010, for $234,000 cash. This amount is reflective of Hogan's total 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: Book Value Fair Value Buildings (10-year life) \ 10,000 \ 8,000 Equipment (4-year life) 14,000 18,000 Land 5,000 12,000 Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years. -In consolidation at December 31,2011,what adjustment is necessary for Hogan's Land account?

On January 1, 2010, 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 2010 and $126,000 in 2011 with dividend payments of $42,000 each year. Without regard for this investment, Jannison had income of $308,000 in 2010 and $364,000 in 2011. Use the economic unit concept to account for this acquisition. -Prepare a proper presentation of consolidated net income for 2011.

McGuire company acquired 90 percent of Hogan Company on January 1, 2010, for $234,000 cash. This amount is reflective of Hogan's total 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: Book Value Fair Value Buildings (10-year life) \ 10,000 \ 8,000 Equipment (4-year life) 14,000 18,000 Land 5,000 12,000 Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years. -In consolidation at December 31,2010,what net adjustment is necessary for Hogan's Patent account?

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2010. 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: 2010 2011 2012 Net income \ 100,000 \ 120,000 \ 130,000 Dividends 40,000 50,000 60,000 Assume the equity method is applied. -Compute the noncontrolling interest in the net income of Demers at December 31,2011.

What is preacquisition income?

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2010. 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: 2010 2011 2012 Net income \ 100,000 \ 120,000 \ 130,000 Dividends 40,000 50,000 60,000 Assume the partial equity method is applied. -How much does Pell record as income from Demers for the year ended December 31,2011?

On January 1, 2010, Palk Corp. and Spraz Corp. had condensed balance sheets as follows: Palk Corp. Spraz Corp. Current assets \ 99,000 28,000 Noncurrent assets \ 125,000 56,000 Total assets \ 224,000 84,000 Current liabilities 42,000 \ 14,000 Long-term debt 70,000 \ - Stockholders' equity \ 112,000 \ 70,000 Total liabilities and stockholders' equity \ 224,000 \ 84,000 On January 2, 2010, Palk borrowed the entire $84,000 it needed to acquire 80% of the outstanding common shares of Spraz. The loan was to be paid in ten equal annual principal payments, plus interest, beginning December 31, 2010. The excess consideration transferred over the underlying book value of the acquired net assets was allocated 60% to inventory and 40% to goodwill. -What is consolidated stockholders' equity at January 2,2010?

On January 1, 2010, Palk Corp. and Spraz Corp. had condensed balance sheets as follows: Palk Corp. Spraz Corp. Current assets \ 99,000 28,000 Noncurrent assets \ 125,000 56,000 Total assets \ 224,000 84,000 Current liabilities 42,000 \ 14,000 Long-term debt 70,000 \ - Stockholders' equity \ 112,000 \ 70,000 Total liabilities and stockholders' equity \ 224,000 \ 84,000 On January 2, 2010, Palk borrowed the entire $84,000 it needed to acquire 80% of the outstanding common shares of Spraz. The loan was to be paid in ten equal annual principal payments, plus interest, beginning December 31, 2010. The excess consideration transferred over the underlying book value of the acquired net assets was allocated 60% to inventory and 40% to goodwill. -What is consolidated current liabilities at January 2,2010?