Adv accounting unit 3

For this assignment, use your Fundamentals of Advanced Accounting text to complete the following:

· Problem 14 on page 131. This problem tests your ability to apply acquisition accounting methods to reporting consolidated retained earnings.

· Problem 17 on page 133. This problem tests your ability to determine the amount of goodwill impairment.

14. Herbert, Inc., acquired all of Rambis Company’s outstanding stock on January 1, 2017, for $574,000 in cash. Annual excess amortization of $12,000 results from this transaction. On the date of the takeover, Herbert reported retained earnings of $400,000, and Rambis reported a $200,000 balance. Herbert reported internal net income of $40,000 in 2017 and $50,000 in 2018 and declared $10,000 in dividends each year. Rambis reported net income of $20,000 in 2017 and $30,000 in 2018 and declared $5,000 in dividends each year.

Assume that Herbert’s internal net income figures above do not include any income from the subsidiary.

If the parent uses the equity method, what is the amount reported as consolidated retained earnings on December 31, 2018?

Would the amount of consolidated retained earnings change if the parent had applied either the initial value or partial equity method for internal accounting purposes?

Under each of the following situations, what is the Investment in Rambis account balance on Herbert’s books on January 1, 2018?

The parent uses the equity method.

The parent uses the partial equity method.

The parent uses the initial value method.

page 132Under each of the following situations, what is Entry *C on a 2018 consolidation worksheet?

The parent uses the equity method.

The parent uses the partial equity method.

The parent uses the initial value method

17. Alomar Co., a consolidated enterprise, conducted an impairment review for each of its reporting units. In its qualitative assessment, one particular reporting unit, Sellers, emerged as a candidate for possible goodwill impairment. Sellers has recognized net assets of $1,094, including goodwill of $755. Seller’s fair value is assessed at $1,028 and includes two internally developed unrecognized intangible assets (a patent and a customer list with fair values of $199 and $56, respectively). The following table summarizes current financial information for the Sellers reporting unit:

	Carrying Amounts	Fair Values
Tangible assets, net	$ 84	$ 137
Recognized intangible assets, net	255	326
Goodwill	755	?
Unrecognized intangible assets	0	255
Total	$1,094	$1,028

Determine the amount of any goodwill impairment for Alomar’s Sellers reporting unit.

After recognition of any goodwill impairment loss, what are the reported carrying amounts for the following assets of Alomar’s reporting unit Sellers?

Tangible assets, net.

Goodwill.

Patent.

Customer list.