Log in
Accounting
1
answer
0
watching
158
views

1. On 01/01/2013, Yaro Company owns 30% of the common stock ofDew Co. with $450,000 cash and 10,000 shares ($1 face value and $15market value) that are issued acquire the Dew’s shares. Assume thatYaro gain significance influence over Dew.

a. What counting method should Yaro use to record itsinvestment? What are the journal entries for Yaro and Dew todocument the investing decision on 01/01/2013 respectively?

Watch
1
answer
0
watching
158
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Hubert Koch
Hubert KochLv2
28 Sep 2019

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share

Related questions

Anderson acquires 10 percent of the outstanding voting shares ofBarringer on January 1, 2013, for $102,520 and categorizes theinvestment as an available-for-sale security.

Barringer has a book value of $890,000 at January 1, 2013. The bookvalues of Barringer’s asset and liability accounts are consideredas equal to fair values except for a copyright whose valueaccounted for Anderson’s excess cost in each purchase. Thecopyright had a remaining life of 16 years at January 1,2013.

An additional 20 percent of the stock is purchased on January 1,2014, for $235,900, which gives Anderson the ability tosignificantly influence Barringer.

Barringer reports net income and dividends as follows. Theseamounts are assumed to have occurred evenly throughout these years.Dividends are declared and paid in the same period. Anderson usesthe equity method.

Year NetIncome Cash Dividends
2013 $196,000 $79,000
2014 243,200 116,000
2015 322,200 116,000

Anderson sells its entire investment in Barringer stock onJanuary 1, 2016 for $472,005.

In addition, the fair value of the Barringer shares isindeterminate.

Requirements:
a.

Prepare all of the journal entries for Anderson regarding theirinvestment in Barringer stock.

1.

Record the acquisition of Barringer stock.

2.

Record Anderson's share of the income from Barringer for theyear 2013.

3.

Record the dividends received from Barringer for 2013.

4.

Record any amortization of revaluation increments and decrementsfor 2013.

5.

Record change in fair value of the investment in Barringer stockon December 31, 2013.

6.

Record any impairment of goodwill on December 31, 2013.

7.

Record the acquisition of Barringer stock.

8.

Record the restated reported figures for 2013 to the equitymethod.

9.

Record Anderson's share of the income for Barringer Company forthe year 2014.

10.

Record the dividends received from Barringer for 2014.

11.

Record any amortization of revaluation increments and decrementsfor 2014.

12.

Record change in fair value of investment in Marion Company onDecember 31, 2014.

13.

Record any impairment of goodwill on December 31, 2014.

14.

Record Anderson's share of the income for Barringer Company forthe year 2015.

15.

Record the dividends received from Barringer for 2015.

16.

Record any amortization of revaluation increments and decrementsfor 2015.

17.

Record change in fair value of the investment in Marion Companyon December 31, 2015.

18.

Record any impairment of goodwill on December 31, 2015.

19.

Record sale of Barringer stock.

b.

What is the balance in the Investment in Barringer account onDecember 31, 2013?

c.

What is the balance in the Investment in Barringer account onDecember 31, 2014?

d.

What is the balance in the Investment in Barringer account onDecember 31, 2015?

e.

What is the gain or loss on the shares of Barringer sold onJanuary 1, 2016?

Comprehensive The shareholders' equity section of SuperiorCorporation's balance sheet as of December 31, 2012, is as follows:Shareholders’ Equity Preferred stock, $100 par value; authorized,150,000 shares; issued, 15,000 shares $1,500,000 Common stock, $5par value; authorized, 1,000,000 shares; issued, 200,000 shares1,000,000 Paid-in capital in excess of par—preferred 75,000 Paid-incapital in excess of par—common 425,000 Retained earnings 3,000,000$6,000,000 The following events occurred during 2013: Jan. 5 10,000shares of authorized and unissued common stock were sold for $10per share. Jan. 16 10,000 shares of authorized and unissuedpreferred stock were sold for $108 per share. April 1 80,000 sharesof common stock were repurchased for the treasury at a price of $15per share. Superior uses the cost method to account for treasurystock. Sept. 1 4,000 shares of preferred stock are issued inexchange for a piece of land. The land has an appraised value of$439,000. The preferred stock currently trades on the New YorkStock exchange at a price of $108 per share. Dec. 1 30,000 sharesof treasury stock are reissued at a price of $20 per shareRequired: Hide 1. Prepare journal entries for each of the abovetransactions. For a compound transaction, if an amount box does notrequire an entry, leave it blank. Jan. 5 Cash 100,000 Common Stock50,000 Additional Paid-in Capital on Common Stock 50,000 Jan. 16Cash 1,080,000 Preferred Stock 1,000,000 Additional Paid-in Capitalon Preferred Stock 80,000 April 1 Treasury Stock 1,200,000 Cash1,200,000 Sept. 1 Land 432,000 Preferred Stock 400,000 AdditionalPaid-in Capital on Preferred Stock 32,000 Dec. 1 Cash 600,000Treasury Stock 450,000 Additional Paid-in Capital on Treasury Stock150,000 Hide Feedback Correct Check My Work Feedback When a companyissues common (or preferred) stock for cash, you should record thetotal par value (Number of Shares x Par Value per Share) in theCommon (or Preferred) Stock account, with any excess recorded asAdditional Paid-in Capital. Under the cost method, when thecorporation reacquires its capital stock you should debit anaccount entitled Treasury Stock (and credit Cash or otherappropriate asset accounts) for the cost paid to reacquire theshares. When the corporation reissues the treasury shares, youshould reduce (credit) the Treasury Stock account for the cost ofthe shares reissued and record the difference between the cashreceived and the cost of the reissued shares as an adjustment ofshareholders' equity. If the cash received exceeds the cost of thereissued treasury stock, you should record the excess as anincrease in additional paid-in capital from treasury stock. If thecash is less than the cost, you should record the "deficit" as areduction of additional paid-in capital from treasury stock. If theadditional paid-in capital from treasury stock is insufficient toabsorb the deficit, you should record the remainder as a reductionin retained earnings. If a company issues capital stock forservices or assets other than cash, you should record thetransaction at the fair value of the stock issued or the noncashconsideration received, whichever is more representationallyfaithful. 2. Calculate the number of authorized, issued, andoutstanding common shares as of December 31, 2013. Authorizedcommon shares: 1,000,000 shares Issued shares: 210,000 sharesOutstanding shares: 160,000 shares Hide Feedback Correct Check MyWork Feedback Authorized capital stock is the number of shares ofcapital stock (both preferred and common) that a corporation mayissue as stated in its corporate charter. Issued capital stock isthe number of shares of capital stock that a corporation has issuedto its shareholders as of a specific date. Outstanding capitalstock is the number of shares of capital stock that a corporationhas issued to shareholders and that are still being held byshareholders as of a specific date. 3. Calculate Superior's legalcapital at December 31, 2013.

Question 1

On January 2, 2013, Potter Ltd. purchased 40% ontiago Ltd. for$900,000. At the acquisition date, Santiago’s balance sheet showedtotal shareholders’ equity of $1,500,000. Any acquisitiondifferential is to be allocated to Santiago’s equipment. At theacquisition date, the equipment had a remaining useful life of 10years. For the past 5 years, Santiago has paid annual dividends of$50,000 and will continue to do so in the future.

The following information has been extracted from Santiago’sincome statement:

2014 2013

Net income (loss) before extraordinaryitems $ (90,000) $ 450,000

Extraordinary gain (net oftax) __-___ 150,000

Net income(loss) $ (90,000) $ 600,000

Required:

Assume that Potter has significant influence. Prepare Potter’sjournal entries related to its investment in Santiago for 2013 and2014.

Question 2

On September 1, 2014, Sunshine Ltd. acquired all the assets(with the exception of cash) and liabilities of Moonbeam Ltd. Underthe terms of acquisition, Moonbeam shareholders received 3 Class ASunshine Ltd. shares plus $2.00 cash for every four shares ofMoonbeam. At the acquisition date, Sunshine’s Class A shares werevalued at $2.50 per share. Sunshine had agreed to cover Moonbeam’sestimated liquidation costs of $10,000. The $1,500 of cash inMoonbeam’s bank at the acquisition date will go towards payingthese costs. The statements of financial position at theacquisition date are as follows:

Sunshine Moonbeam Ltd.

Ltd. Cost FMV

Cash $ 30,000$ 1,500 $ 1,500

Accountsreceivable 52,500 28,500 26,250

Inventory 78,000 39,750 48,000

Property and equipment(net) 449,250 224,250 248,250

Kucey Ltd. bonds(investment) _67,500 _27,000 28,500

677,250 321,000

Accountspayable 117,000 114,000 114,000

Loanpayable ___-___ _60,000 60,000

117,000 174,000

Share capital issued at$1 450,000 120,000

Retainedearnings 110,250 _27,000

560,250 147,000

$677,250 $321,000

Items not reflected in Moonbeam’s statement of financialposition:

Contingent liability related to a loan guarantee was reported inthe notes to the financial statements and has a fair value of$2,000.

Moonbeam had expensed $15,000 in research and development costsin the past year. At the acquisition date, Sunshine has determinedthat the value of the research in progress is $3,000.

Sunshine’s statement of financial position does not include$5,000 in fees for valuation and accounting advice related to theacquisition of Moonbeam. Sunshine expects to pay these feesshortly.

Required:

1) Prepare the acquisition analysis and calculate thegoodwill.

2) Prepare all the journal entries in Sunshine’s books to recordthe acquisition of Moonbeam.

3) Prepare Sunshine’s statement of financial positionimmediately following the acquisition.

Question 3

On May 1, 2013, Peat Co. purchased all of Sorbet Ltd.’s issuedcommon shares for $630,000. At the acquisition date, Sorbet’sfinancial statements included the following balances:

Sharecapital $400,000

Retainedearnings 210,000

Goodwill 10,000

At the acquisition date, Sorbet’s identifiable assets andliabilities were equal to their fair values, except in the case ofinventory that had a book value of $80,000 and a fair value of$86,000, and equipment that had a book value of $360,000 and a fairvalue of $370,000. The equipment was originally purchased for$480,000. At the acquisition date, the equipment had a remaininguseful life of 5 years and was amortized using the straight-linemethod. All the inventory that Sorbet had on hand at theacquisition date was sold by October 2013. Sorbet’s goodwill hasnot shown indications of impairment. Both Peat and Sorbet haveApril 30th year-ends and did not have any intercompanysales with each other.

The financial statements for Peat and Sorbet at April 30, 2015are presented on the following pages.

Statement of Financial Position

April 30, 2015

Peat Co. SorbetLtd.

Assets:

Current assets:

Cash $ 52,000 $ 161,600

Accountsreceivable 100,000 80,000

Inventory 120,000 170,000

272,000 411,600

Non-current assets:

Equipment,net 558,000 368,000

Furniture and fixtures,net 51,000 51,600

Investment in SorbetLtd. 630,000 -

Goodwill ___-___ 10,000

1,239,000 429,600

Totalassets $1,511,000 $841,200

Liabilities and shareholders’ equity:

Current liabilities:

Accountspayable $ 69,000 $ 19,600

Non-current liabilities:

Loanpayable 22,000 32,000

Totalliabilities 91,000 51,600

Shareholders’ equity:

Sharecapital 1,000,000 400,000

Retainedearnings 420,000 389,600

1,420,000 789,600

Total liabilities and shareholders’equity $1,511,000 $841,200

Condensed Statement of Income

For the year ended April 30, 2015

Peat Co. SorbetLtd.

Sales $250,000 $180,000

Expenses 170,000 130,000

Netincome $ 80,000 $ 50,000

Statement of Changes in Equity

For the year ended April 30, 2015

Peat Co. SorbetLtd.

Sharecapital $1,000,000 $400,000

Retained earnings, May 1,2014 340,000 339.600

Netincome 80,000 50,000

Retained earnings, April 30,2015 420,000 389,600

Total shareholders’equity $1,420,000 $789,600

Required:

Prepare Peat’s consolidated financial statements for April 30,2015. Ignore income taxes.

Question 4

On June 30, 2014, Pewter Ltd. gave 28,000 shares to Sterling Co.in exchange for 70% of Sterling’s outstanding shares. At the timeof the exchange, Pewter’s shares had a fair value of $22.50 pershare. The post-acquisition statements of financial position andSterling’s fair values are shown below.

Statement of Financial Position

As of June 30, 2014

Sterling Co.______

Pewter Ltd. Book value Fair Value

Assets:

Current assets:

Cash $ 750,000 $ 37,500 $ 37,500

Accountsreceivable 1,500,000 112,500 112,500

Inventory 150,000 37,500 37,500

2,400,000 187,500

Non-current assets:

Land 750,000 225,000 300,000

Equipment 2,250,000 375,000 412,500

Accumulatedamortization (900,000) (112,500)

Investment inSterling 630,000 __ -___

2,730,000 487,500

Totalassets $5,130,000 $ 675,000

Liabilities and shareholders’ equity:

Current liabilities:

Accountspayable $ 750,000 $ 75,000 75,000

Loanpayable 300,000 _____

1,050,000 75,000

Shareholders’ equity:

Commonshares 2,580,000 150,000

Retainedearnings 1,500,000 450,000

4,080,000 600,000

Total liabilities and shareholders’equity $5,130,000 $ 675,000

Required:

a) Calculate Pewter’s consolidated goodwill.

b) Prepare Pewter’s consolidated statement of financial positionat
June 30, 2014 using the entity theory method of consolidation.

Weekly leaderboard

Home
Homework Help 3,900,000
Accounting 580,000
Start filling in the gaps now
Log in