Exam 3: Consolidations-Subsequent to the Date of Acquisition

For an acquisition when the subsidiary maintains its incorporation,under the partial equity method,what adjustments are made to the balance of the investment account?

Cashen Co. paid $2,400,000 to acquire all of the common stock of Janex Corp. on January 1, 2010. Janex's reported earnings for 2010 totaled $432,000, and it paid $120,000 in dividends during the year. The amortization of allocations related to the investment was $24,000. Cashen's net income, not including the investment, was $3,180,000, and it paid dividends of $900,000. -On the consolidated financial statements for 2010,what amount should have been shown for Equity in Subsidiary Earnings?

When a company applies the initial value method in accounting for its investment in a subsidiary and the subsidiary reports income less than dividends paid,what entry would be made for a consolidation worksheet? A. Retained earnings Investment in subsidiary B. Investment in subsidiary Retained earnings C. Investment in subsidiary Equity in subsidiary's income D. Equity in subsidiary's income Investment in subsidiary E. Retained earnings Additional paid-in capital

Dutch Co.has loaned $90,000 to its subsidiary,Hans Corp. ,which retains separate incorporation.How would this loan be treated on a consolidated balance sheet?

Perry Company acquires 100% of the stock of Hurley Corporation on January 1, 2010, for $3,800 cash. As of that date Hurley has the following trial balance; Debit Credit Cash \ 500 Accounts receivable 600 Inventory 800 Buildings (net) (5 year life) 1,500 Equipment (net) (2 year life) 1,000 Land 900 Accounts Payable \ 400 Long-term liabilities (due 12/31/13) 1,800 Common stock 1,000 Additional paid-in capital 600 Retained earnings 1,500 Total \ 5,300 \ 5.300 $\text { Net income and dividends reported by Hurley for } 2010 \text { and } 2011 \text { follow: }$ 2010 2011 Net income \ 100 \ 120 Dividends 30 40 The fair value of Hurley's net assets that differ from their book values are listed below Fair Value Inventory \ 900 Buildings 1,200 Equipment 1,250 Land 1,300 Long-term liabilities 1,700 Any excess of consideration transferred over fair value of net assets acquired is considered goodwill with an indefinite life. FIFO inventory valuation method is used. -Compute the amount of Hurley's inventory that would be reported in a January 1,2010,consolidated balance sheet.

Watkins, Inc. acquires all of the outstanding stock of Glen Corporation on January 1, 2010. At that date, Glen owns only three assets and has no liabilities: Book Fair Value Value Inventory (FIFO method) \ 40,000 \ 50,000 Equipment (10-year life) 80,000 75,000 Building (20-year life) 200,000 300,000 -If Watkins pays $300,000 in cash for Glen,at what amount would the subsidiary's Building be represented in a January 2,2010 consolidation?

Jaynes Inc.acquired all of Aaron Co.'s common stock on January 1,2010,by issuing 11,000 shares of $1 par value common stock.Jaynes' shares had a $17 per share fair value.On that date,Aaron reported a net book value of $120,000.However,its equipment (with a five-year remaining life)was undervalued by $6,000 in the company's accounting records.Any excess of consideration transferred over fair value of assets and liabilities is assigned to an unrecorded patent to be amortized over ten years. $\text {The following figures came from the individual accounting records of these two companies of December 31, 2010}$ Jaynes Inc. Aaron Co. Revenues \ 720,000 \ 276,000 Expenses 528,000 144,000 Investment income Not given - Dividends paid 100,000 60,000 The following figures came from the individual accounting records of these two companies of December 31,2011 Jaynes Inc. Aaron Co. Revenues \ 840,000 \ 336,000 Expenses 552,000 180,000 Investment income Not given - Dividends paid 110,000 50,000 Equipment 600,000 360,000 Retained earnings, 12/31/11 balance 960,000 216,000 -What was consolidated patents as of December 31,2011?

On January 1, 2010, Cale Corp. paid $1,020,000 to acquire Kaltop Co. Kaltop maintained separate incorporation. Cale used the equity method to account for the investment. The following information is available for Kaltop's assets, liabilities, and stockholders' equity accounts: Book Fair Value Value Current assets \ 120,000 \ 120,000 Land 72,000 192,000 Building (twenty year life) 240,000 268,000 Equipment (ten year life) 540,000 516,000 Current liabilities 24,000 24,000 Long-term liabilities 120,000 120,000 Common stock 228,000 Additional paid-in capital 384,000 Retained earnings 216,000 Kaltop earned net income for 2010 of $126,000 and paid dividends of $48,000 during the year. -The 2010 total amortization of allocations is calculated to be

Which one of the following accounts would not appear in the consolidated financial statements at the end of the first fiscal period of the combination?

Hoyt Corporation agreed to the following terms in order to acquire the net assets of Brown Company on January 1,2011: (1. )To issue 400 shares of common stock ($10 par)with a fair value of $45 per share. (2) )To assume Brown's liabilities which have a fair value of $1,500. On the date of acquisition,the consideration transferred for Hoyt's acquisition of Brown would be

Velway Corp.acquired Joker Inc.on January 1,2010.The parent paid more than the fair value of the subsidiary's net assets.On that date,Velway had equipment with a book value of $500,000 and a fair value of $640,000.Joker had equipment with a book value of $400,000 and a fair value of $470,000.Joker decided to use push-down accounting.Immediately after the acquisition,what Equipment amount would appear on Joker's separate balance sheet and on Velway's consolidated balance sheet,respectively?

Paperless Co.acquired Sheetless Co.and in effecting this business combination,there was a cash-flow performance contingency to be paid in cash,and a market-price performance contingency to be paid in additional shares of stock.In what accounts and in what section(s)of a consolidated balance sheet are these contingent consideration items shown?

Following are selected accounts for Green Corporation and Vega Company as of December 31, 2013. Several of Green's accounts have been omitted. Revenues Green Vega Cost of goods sold \ 900,000 \ 500,000 Depreciation expense 360,000 200,000 Other expenses 140,000 40,000 Equity in Vega's income 100,000 60,000 Retained earnings, 1/1/13 ? Dividends 1,350,000 1,200,000 Current assets 195,000 80,000 Land 300,000 1,380,000 Building (net) 450,000 180,000 Equipment (net) 750,000 280,000 Liabilities 300,000 500,000 Common stock 600,000 620,000 Additional paid-in capital 450,000 80,000 75,000 320,000 Green acquired 100% of Vega on January 1, 2009, by issuing 10,500 shares of its $10 par value common stock with a fair value of $95 per share. On January 1, 2009, Vega's land was undervalued by $40,000, its buildings were overvalued by $30,000, and equipment was undervalued by $80,000. The buildings have a 20-year life and the equipment has a 10-year life. $50,000 was attributed to an unrecorded trademark with a 16-year remaining life. There was no goodwill associated with this investment. -Compute the December 31,2013,consolidated revenues.

Watkins, Inc. acquires all of the outstanding stock of Glen Corporation on January 1, 2010. At that date, Glen owns only three assets and has no liabilities: Book Fair Value Value Inventory (FIFO method) \ 40,000 \ 50,000 Equipment (10-year life) 80,000 75,000 Building (20-year life) 200,000 300,000 -If Watkins pays $450,000 in cash for Glen,what amount would be represented as the subsidiary's Building in a consolidation at December 31,2012,assuming the book value of the building at that date is still $200,000?

Jaynes Inc.acquired all of Aaron Co.'s common stock on January 1,2010,by issuing 11,000 shares of $1 par value common stock.Jaynes' shares had a $17 per share fair value.On that date,Aaron reported a net book value of $120,000.However,its equipment (with a five-year remaining life)was undervalued by $6,000 in the company's accounting records.Any excess of consideration transferred over fair value of assets and liabilities is assigned to an unrecorded patent to be amortized over ten years. $\text {The following figures came from the individual accounting records of these two companies of December 31, 2010}$ Jaynes Inc. Aaron Co. Revenues \ 720,000 \ 276,000 Expenses 528,000 144,000 Investment income Not given - Dividends paid 100,000 60,000 The following figures came from the individual accounting records of these two companies of December 31,2011 Jaynes Inc. Aaron Co. Revenues \ 840,000 \ 336,000 Expenses 552,000 180,000 Investment income Not given - Dividends paid 110,000 50,000 Equipment 600,000 360,000 Retained earnings, 12/31/11 balance 960,000 216,000 -What balance would Jaynes' Investment in Aaron Co.account have shown on December 31,2010,when the equity method was applied for this acquisition? An allocation of the acquisition value (based on the fair value of the shares issued)must first be made.

When a company applies the partial equity method in accounting for its investment in a subsidiary and the subsidiary's equipment has a fair value greater than its book value,what consolidation worksheet entry is made in a year subsequent to the initial acquisition of the subsidiary? A) Retained earnings Investment in subsidiary B) Investment in subsidiary Retained earnings C) Investment in subsidiary Equity in subsidiary's income D) Equity in subsidiary's income Investment in subsidiary E) Retained earnings Additional paid-in capital

On January 1, 2010, Cale Corp. paid $1,020,000 to acquire Kaltop Co. Kaltop maintained separate incorporation. Cale used the equity method to account for the investment. The following information is available for Kaltop's assets, liabilities, and stockholders' equity accounts: Book Fair Value Value Current assets \ 120,000 \ 120,000 Land 72,000 192,000 Building (twenty year life) 240,000 268,000 Equipment (ten year life) 540,000 516,000 Current liabilities 24,000 24,000 Long-term liabilities 120,000 120,000 Common stock 228,000 Additional paid-in capital 384,000 Retained earnings 216,000 Kaltop earned net income for 2010 of $126,000 and paid dividends of $48,000 during the year. -At the end of 2010,the consolidation entry to eliminate Cale's accrual of Kaltop's earnings would include a credit to Investment in Kaltop Co.for

Perry Company acquires 100% of the stock of Hurley Corporation on January 1, 2010, for $3,800 cash. As of that date Hurley has the following trial balance; Debit Credit Cash \ 500 Accounts receivable 600 Inventory 800 Buildings (net) (5 year life) 1,500 Equipment (net) (2 year life) 1,000 Land 900 Accounts Payable \ 400 Long-term liabilities (due 12/31/13) 1,800 Common stock 1,000 Additional paid-in capital 600 Retained earnings 1,500 Total \ 5,300 \ 5.300 $\text { Net income and dividends reported by Hurley for } 2010 \text { and } 2011 \text { follow: }$ 2010 2011 Net income \ 100 \ 120 Dividends 30 40 The fair value of Hurley's net assets that differ from their book values are listed below Fair Value Inventory \ 900 Buildings 1,200 Equipment 1,250 Land 1,300 Long-term liabilities 1,700 Any excess of consideration transferred over fair value of net assets acquired is considered goodwill with an indefinite life. FIFO inventory valuation method is used. -Compute goodwill,if any,at January 1,2010.

Under the partial equity method,the parent recognizes income when

On January 1, 2010, Franel Co. acquired all of the common stock of Hurlem Corp. For 2010, Hurlem earned net income of $360,000 and paid dividends of $190,000. Amortization of the patent allocation that was included in the acquisition was $6,000. -How much difference would there have been in Franel's income with regard to the effect of the investment,between using the equity method or using the initial value method of internal recordkeeping?