Hobson acquires 40 percent of the outstanding voting stock of Stokes Company on January 1, 2012, for $210,000 in cash. The book value of Stokes’s net assets on t
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Hobson acquires 40 percent of the outstanding voting stock of Stokes Company on January 1, 2012, for $210,000 in cash. The book value of Stokes’s net assets on that date was $400,000, although one of the company’s buildings, with a $60,000 carrying value, was actually worth $100,000. This building had a 10-year remaining life. Stokes owned a royalty agreement with a 20-year remaining life that was undervalued by $85,000.
Stokes sold inventory with an original cost of $60,000 to Hobson during 2012 at a price of $90,000. Hobson still held $15,000 (transfer price) of this amount in inventory as of December 31, 2012. These goods are to be sold to outside parties during 2013.
Equity Method
Stokes reported a loss of $60,000 for 2012, $40,000 from continuing operations and $20,000 from an extraordinary loss. The company still manages to pay a $10,000 cash dividend during the year.
During 2013, Stokes reported a $40,000 net income and distributed a cash dividend of $12,000. It made additional inventory sales of $80,000 to Hobson during the period. The original cost of the merchandise was $50,000. All but 30 percent of this inventory had been resold to outside parties by the end of the 2013 fiscal year.A
Acquisition Price = 210,000
Book Value = ???
Payment in excess of book value = ???
Inventory remaining at end of year = 15,000
Gross profit percentage = 33% (I think)
Gross Profit remaining in inventory = ???
Ownership % = 40%
Unrealized gain to be deferred until 2013 = 2,000
Inventory remaining at end of year = 24,000
Gross profit percentage = 33%
Gross profit remaining in inventory = ???
Ownership % = 40%
Unrealized gain to be deferred until 2014 = ???
Stokes sold inventory with an original cost of $60,000 to Hobson during 2012 at a price of $90,000. Hobson still held $15,000 (transfer price) of this amount in inventory as of December 31, 2012. These goods are to be sold to outside parties during 2013.
Equity Method
Stokes reported a loss of $60,000 for 2012, $40,000 from continuing operations and $20,000 from an extraordinary loss. The company still manages to pay a $10,000 cash dividend during the year.
During 2013, Stokes reported a $40,000 net income and distributed a cash dividend of $12,000. It made additional inventory sales of $80,000 to Hobson during the period. The original cost of the merchandise was $50,000. All but 30 percent of this inventory had been resold to outside parties by the end of the 2013 fiscal year.A
Acquisition Price = 210,000
Book Value = ???
Payment in excess of book value = ???
Inventory remaining at end of year = 15,000
Gross profit percentage = 33% (I think)
Gross Profit remaining in inventory = ???
Ownership % = 40%
Unrealized gain to be deferred until 2013 = 2,000
Inventory remaining at end of year = 24,000
Gross profit percentage = 33%
Gross profit remaining in inventory = ???
Ownership % = 40%
Unrealized gain to be deferred until 2014 = ???
11 years ago
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