Question 1

Carnes Co. decided to use the partial equity method to account for its investment in Domino Corp. An unamortized trademark associated with the acquisition was $30,000, and Carnes decided to amortize the trademark over ten years. For 2013, Carnes' Equity in Subsidiary Earnings was $78,000.
Required:
What balance would have been in the Equity in Subsidiary Earnings account if Carnes had used the equity method?

Accepted Answer

The answer of Carnes Co. decided to use the partial...

Question 2

Hanson Co. acquired all of the common stock of Roberts Inc. on January 1, 2012, transferring consideration in an amount slightly more than the fair value of Roberts' net assets. At that time, Roberts had buildings with a twenty-year useful life, a book value of $600,000, and a fair value of $696,000. On December 31, 2013, Roberts had buildings with a book value of $570,000 and a fair value of $648,000. On that date, Hanson had buildings with a book value of $1,878,000 and a fair value of $2,160,000.
Required:
What amount should be shown for buildings on the consolidated balance sheet dated December 31, 2013?

Accepted Answer

The answer of Hanson Co. acquired all of the common...

Question 3

Fesler Inc. acquired all of the outstanding common stock of Pickett Company on January 1, 2012. Annual amortization of $22,000 resulted from this transaction. On the date of the acquisition, Fesler reported retained earnings of $520,000 while Pickett reported a $240,000 balance for retained earnings. Fesler reported net income of $100,000 in 2012 and $68,000 in 2013, and paid dividends of $25,000 in dividends each year. Pickett reported net income of $24,000 in 2012 and $36,000 in 2013, and paid dividends of $10,000 in dividends each year.
Assume that Fesler's reported net income includes Equity in Subsidiary Income.
If the parent's net income reflected use of the initial value method, what were the consolidated retained earnings on December 31, 2013?

Accepted Answer

The answer of Fesler Inc. acquired all of the outstanding...

Question 4

Pritchett Company recently acquired three businesses, recognizing goodwill in each acquisition. Destin has allocated its acquired goodwill to its three reporting units: Apple, Banana, and Carrot. Pritchett provides the following information in performing the 2013 annual review for impairment:  
How much goodwill impairment should Pritchett report for 2013?

Accepted Answer

The answer of Pritchett Company recently acquired three businesses, recognizing...

Question 5

Matthews Co. acquired all of the common stock of Jackson Co. on January 1, 2012. As of that date, Jackson had the following trial balance:  
During 2012, Jackson reported net income of $96,000 while paying dividends of $12,000. During 2013, Jackson reported net income of $132,000 while paying dividends of $36,000.
Assume that Matthews Co. acquired the common stock of Jackson Co. for $588,000 in cash. As of January 1, 2012, Jackson's land had a fair value of $102,000, its buildings were valued at $188,000, and its equipment was appraised at $216,000. Any excess of consideration transferred over fair value of assets and liabilities acquired is due to an unamortized patent to be amortized over 10 years.
Matthews decided to use the equity method for this investment.
Required:
(A.) Prepare consolidation worksheet entries for December 31, 2012.
(B.) Prepare consolidation worksheet entries for December 31, 2013.

Accepted Answer

The answer of Matthews Co. acquired all of the common...

Question 6

On January 1, 2012, Jumper Co. acquired all of the common stock of Cable Corp. for $540,000. Annual amortization associated with the purchase amounted to $1,800. During 2012, Cable earned net income of $54,000 and paid dividends of $24,000. Cable's net income and dividends for 2013 were $86,000 and $24,000, respectively.
Required:
Assuming that Jumper decided to use the partial equity method, prepare a schedule to show the balance in the investment account at the end of 2013.

Accepted Answer

The answer of On January 1, 2012, Jumper Co. acquired...

Question 7

An acquisition transaction results in $90,000 of goodwill. Several years later a worksheet is being produced to consolidate the two companies. Describe in words at what amount goodwill will be reported at this date.

Accepted Answer

The answer of An acquisition transaction results in $90,000 of...

Question 8

Jaynes Inc. acquired all of Aaron Co.'s common stock on January 1, 2012, 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.  
What was consolidated equipment as of December 31, 2013?

Accepted Answer

The answer of Jaynes Inc. acquired all of Aaron Co.'s...

Question 9

Fesler Inc. acquired all of the outstanding common stock of Pickett Company on January 1, 2012. Annual amortization of $22,000 resulted from this transaction. On the date of the acquisition, Fesler reported retained earnings of $520,000 while Pickett reported a $240,000 balance for retained earnings. Fesler reported net income of $100,000 in 2012 and $68,000 in 2013, and paid dividends of $25,000 in dividends each year. Pickett reported net income of $24,000 in 2012 and $36,000 in 2013, and paid dividends of $10,000 in dividends each year.
Assume that Fesler's reported net income includes Equity in Subsidiary Income.
If the parent's net income reflected use of the equity method, what were the consolidated retained earnings on December 31, 2013?

Accepted Answer

The answer of Fesler Inc. acquired all of the outstanding...

Question 10

Pritchett Company recently acquired three businesses, recognizing goodwill in each acquisition. Destin has allocated its acquired goodwill to its three reporting units: Apple, Banana, and Carrot. Pritchett provides the following information in performing the 2013 annual review for impairment:  
Which of Pritchett's reporting units require both steps to test for goodwill impairment?

Accepted Answer

The answer of Pritchett Company recently acquired three businesses, recognizing...

Question 11

On 4/1/11, Sey Mold Corporation acquired 100% of DotDot.Com for $2,000,000 cash. On the date of acquisition, DotDot's net book value was $900,000. DotDot's assets included land that was undervalued by $300,000, a building that was undervalued by $400,000, and equipment that was overvalued by $50,000. The building had a remaining useful life of 8 years and the equipment had a remaining useful life of 4 years. Any excess fair value over consideration transferred is allocated to an undervalued patent and is amortized over 5 years.
Determine the amortization expense related to the combination at the year-end date of 12/31/15.

Accepted Answer

The answer of On 4/1/11, Sey Mold Corporation acquired 100%...

Question 12

On 4/1/11, Sey Mold Corporation acquired 100% of DotDot.Com for $2,000,000 cash. On the date of acquisition, DotDot's net book value was $900,000. DotDot's assets included land that was undervalued by $300,000, a building that was undervalued by $400,000, and equipment that was overvalued by $50,000. The building had a remaining useful life of 8 years and the equipment had a remaining useful life of 4 years. Any excess fair value over consideration transferred is allocated to an undervalued patent and is amortized over 5 years.
Determine the amortization expense related to the combination at the year-end date of 12/31/11.

Accepted Answer

The answer of On 4/1/11, Sey Mold Corporation acquired 100%...

Question 13

Fesler Inc. acquired all of the outstanding common stock of Pickett Company on January 1, 2012. Annual amortization of $22,000 resulted from this transaction. On the date of the acquisition, Fesler reported retained earnings of $520,000 while Pickett reported a $240,000 balance for retained earnings. Fesler reported net income of $100,000 in 2012 and $68,000 in 2013, and paid dividends of $25,000 in dividends each year. Pickett reported net income of $24,000 in 2012 and $36,000 in 2013, and paid dividends of $10,000 in dividends each year.
Assume that Fesler's reported net income includes Equity in Subsidiary Income.
If the parent's net income reflected use of the partial equity method, what were the consolidated retained earnings on December 31, 2013?

Accepted Answer

The answer of Fesler Inc. acquired all of the outstanding...

Question 14

Jaynes Inc. acquired all of Aaron Co.'s common stock on January 1, 2012, 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.  
What was consolidated net income for the year ended December 31, 2013?

Accepted Answer

The answer of Jaynes Inc. acquired all of Aaron Co.'s...

Question 15

Why is push-down accounting a popular internal reporting technique?

Accepted Answer

The answer of Why is push-down accounting a popular internal...

Question 16

Utah Inc. acquired all of the outstanding common stock of Trimmer Corp. on January 1, 2011. At that date, Trimmer owned only three assets and had no liabilities:  
If Utah paid $300,000 in cash for Trimmer, what allocation should have been assigned to the subsidiary's Building account and its Equipment account in a December 31, 2013 consolidation?

Accepted Answer

The answer of Utah Inc. acquired all of the outstanding...

Question 17

On January 1, 2011, Rand Corp. issued shares of its common stock to acquire all of the outstanding common stock of Spaulding Inc. Spaulding's book value was only $140,000 at the time, but Rand issued 12,000 shares having a par value of $1 per share and a fair value of $20 per share. Rand was willing to convey these shares because it felt that buildings (ten-year life) were undervalued on Spaulding's records by $60,000 while equipment (five-year life) was undervalued by $25,000. Any consideration transferred over fair value of identified net assets acquired is assigned to goodwill.
Following are the individual financial records for these two companies for the year ended December 31, 2014.  
Required:
Prepare a consolidation worksheet for this business combination.

Accepted Answer

The answer of On January 1, 2011, Rand Corp. issued...

Question 18

Jaynes Inc. acquired all of Aaron Co.'s common stock on January 1, 2012, 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.  
What balance would Jaynes' Investment in Aaron Co. account have shown on December 31, 2012, when the equity method was applied for this acquisition?

Accepted Answer

The answer of Jaynes Inc. acquired all of Aaron Co.'s...

Question 19

Jaynes Inc. acquired all of Aaron Co.'s common stock on January 1, 2012, 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.  
What was the total for consolidated patents as of December 31, 2013?

Accepted Answer

The answer of Jaynes Inc. acquired all of Aaron Co.'s...

Question 20

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?

Accepted Answer

The answer of Dutch Co. has loaned $90,000 to its...

Quiz 3: Consolidations - Subsequent to the Date of Acquisition

An acquisition transaction results in $90,000 of goodwill. Several years later a worksheet is being produced to consolidate the two companies. Describe in words at what amount goodwill will be reported at this date.

Why is push-down accounting a popular internal reporting technique?

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?