Connect W5
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ConnectW5.docxRequired information Q1
Use the following information to answer questions 7 and 8
On January 1, 2016, Pride Corporation purchased 90 percent of the outstanding voting shares of Star, Inc. for $456,000 cash. The acquisition-date fair value of the noncontrolling interest was $50,600. At January 1, 2016, Star’s net assets had a total carrying amount of $354,200. Equipment (eight-year remaining life) was undervalued on Star’s financial records by $51,200. Any remaining excess fair value over book value was attributed to a customer list developed by Star (four-year remaining life), but not recorded on its books. Star recorded net income of $44,800 in 2016 and $51,200 in 2017. Each year since the acquisition, Star has declared a $12,800 dividend. At January 1, 2018, Pride’s retained earnings show a $160,000 balance.
Selected account balances for the two companies from their separate operations were as follows:
|
|
Pride |
Star |
||||
|
2018 Revenues |
$ |
318,800 |
|
$ |
182,500 |
|
|
2018 Expenses |
|
224,200 |
|
|
124,900 |
|
|
|
Problem 4-7 (LO 4-4)
What is consolidated net income for 2018?
Multiple Choice
Top of Form
·
$123,900.
·
$152,200.
·
$122,370.
·
$120,500.
Bottom of Form
Required information Q2
Use the following information to answer questions 7 and 8
On January 1, 2016, Pride Corporation purchased 90 percent of the outstanding voting shares of Star, Inc. for $456,000 cash. The acquisition-date fair value of the noncontrolling interest was $50,600. At January 1, 2016, Star’s net assets had a total carrying amount of $354,200. Equipment (eight-year remaining life) was undervalued on Star’s financial records by $51,200. Any remaining excess fair value over book value was attributed to a customer list developed by Star (four-year remaining life), but not recorded on its books. Star recorded net income of $44,800 in 2016 and $51,200 in 2017. Each year since the acquisition, Star has declared a $12,800 dividend. At January 1, 2018, Pride’s retained earnings show a $160,000 balance.
Selected account balances for the two companies from their separate operations were as follows:
|
|
Pride |
Star |
||||
|
2018 Revenues |
$ |
318,800 |
|
$ |
182,500 |
|
|
2018 Expenses |
|
224,200 |
|
|
124,900 |
|
|
|
Problem 4-8 (LO 4-4)
Assuming that Pride, in its internal records, accounts for its investment in Star using the equity method, what amount of retained earnings would Pride report on its January 1, 2018 consolidated balance sheet?
Top of Form
·
$160,000.
·
$229,500.
·
$303,600.
·
$183,500.
Bottom of Form
Required information Q3
Use the following information to answer questions 7 and 8
On January 1, 2016, Pride Corporation purchased 90 percent of the outstanding voting shares of Star, Inc. for $456,000 cash. The acquisition-date fair value of the noncontrolling interest was $50,600. At January 1, 2016, Star’s net assets had a total carrying amount of $354,200. Equipment (eight-year remaining life) was undervalued on Star’s financial records by $51,200. Any remaining excess fair value over book value was attributed to a customer list developed by Star (four-year remaining life), but not recorded on its books. Star recorded net income of $44,800 in 2016 and $51,200 in 2017. Each year since the acquisition, Star has declared a $12,800 dividend. At January 1, 2018, Pride’s retained earnings show a $160,000 balance.
Selected account balances for the two companies from their separate operations were as follows:
|
|
Pride |
Star |
||||
|
2018 Revenues |
$ |
318,800 |
|
$ |
182,500 |
|
|
2018 Expenses |
|
224,200 |
|
|
124,900 |
|
|
|
Problem 4-7 (LO 4-4)
What is consolidated net income for 2018?
Multiple Choice
Top of Form
·
$122,370.
·
$152,200.
·
$120,500.
·
$123,900.
Bottom of Form
Required information Q4
Use the following information to answer questions 7 and 8
On January 1, 2016, Pride Corporation purchased 90 percent of the outstanding voting shares of Star, Inc. for $456,000 cash. The acquisition-date fair value of the noncontrolling interest was $50,600. At January 1, 2016, Star’s net assets had a total carrying amount of $354,200. Equipment (eight-year remaining life) was undervalued on Star’s financial records by $51,200. Any remaining excess fair value over book value was attributed to a customer list developed by Star (four-year remaining life), but not recorded on its books. Star recorded net income of $44,800 in 2016 and $51,200 in 2017. Each year since the acquisition, Star has declared a $12,800 dividend. At January 1, 2018, Pride’s retained earnings show a $160,000 balance.
Selected account balances for the two companies from their separate operations were as follows:
|
|
Pride |
Star |
||||
|
2018 Revenues |
$ |
318,800 |
|
$ |
182,500 |
|
|
2018 Expenses |
|
224,200 |
|
|
124,900 |
|
|
|
Problem 4-8 (LO 4-4)
Assuming that Pride, in its internal records, accounts for its investment in Star using the equity method, what amount of retained earnings would Pride report on its January 1, 2018 consolidated balance sheet?
Top of Form
·
$183,500.
·
$160,000.
·
$229,500.
·
$303,600.
Bottom of Form
Problem 4-34 (LO 4-2, 4-3, 4-5) Q5
Miller Company acquired an 80 percent interest in Taylor Company on January 1, 2016. Miller paid $896,000 in cash to the owners of Taylor to acquire these shares. In addition, the remaining 20 percent of Taylor shares continued to trade at a total value of $224,000 both before and after Miller’s acquisition.
On January 1, 2016, Taylor reported a book value of $582,000 (Common Stock = $291,000; Additional Paid-In Capital = $87,300; Retained Earnings = $203,700). Several of Taylor’s buildings that had a remaining life of 20 years were undervalued by a total of $77,700.
During the next three years, Taylor reports income and declares dividends as follows:
|
Year |
Net Income |
Dividends |
||||
|
2016 |
$ |
68,400 |
|
$ |
9,900 |
|
|
2017 |
|
89,100 |
|
|
14,900 |
|
|
2018 |
|
99,300 |
|
|
19,900 |
|
|
|
Determine the appropriate answers for each of the following questions:
a. What amount of excess depreciation expense should be recognized in the consolidated financial statements for the initial years following this acquisition?
b. If a consolidated balance sheet is prepared as of January 1, 2016, what amount of goodwill should be recognized?
c. If a consolidation worksheet is prepared as of January 1, 2016, what Entry S and Entry A should be included?
d. On the separate financial records of the parent company, what amount of investment income would be reported for 2016 under each of the following accounting methods?
· The equity method.
· The partial equity method.
· The initial value method.
e. On the parent company’s separate financial records, what would be the December 31, 2018, balance for the Investment in Taylor Company account under each of the following accounting methods?
· The equity method.
· The partial equity method.
· The initial value method.
f. As of December 31, 2017, Miller’s Buildings account on its separate records has a balance of $796,000 and Taylor has a similar account with a $298,500 balance. What is the consolidated balance for the Buildings account?
g. What is the balance of consolidated goodwill as of December 31, 2018?
h. Assume that the parent company has been applying the equity method to this investment. On December 31, 2018, the separate financial statements for the two companies present the following information:
|
|
Miller Company |
|
Taylor Company |
||||
|
Common stock |
$ |
497,500 |
|
|
$ |
291,000 |
|
|
Additional paid-in capital |
|
278,600 |
|
|
|
87,300 |
|
|
Retained earnings, 12/31/18 |
|
616,900 |
|
|
|
415,800 |
|
|
|
What will be the consolidated balance of each of these accounts? Q5a
Q5b
Q5c
Q5d
Q5e
Problem 4-2 (LO 4-2) Q6
Mittelstaedt Inc., buys 60 percent of the outstanding stock of Sherry, Inc. Sherry owns a piece of land that cost $220,000 but had a fair value of $537,000 at the acquisition date. What value should be attributed to this land in a consolidated balance sheet at the date of takeover?
Multiple Choice
Top of Form
·
$132,000.
·
$317,000.
·
$405,000.
·
$537,000.
Bottom of Form
Required information Q7
SB Femur Co. acquired 70% of the voting common...
Femur Co. acquired 70% of the voting common stock of Harbor Corp. on January 1, 2019. During 2019, Harbor had revenues of $2,500,000 and expenses of $2,000,000. The amortization of fair value allocations totaled $60,000 in 2019. Not including its investment in Harbor, Femur Co. had its own revenues of $4,500,000 and expenses of $3,000,000 for the year 2019.
MC Qu. 13 The noncontrolling interest's share...
The noncontrolling interest's share of the earnings of Harbor Corp. for 2019 is calculated to be:
Multiple Choice
Top of Form
·
$168,000.
·
$132,000.
·
$160,000.
·
$150,000.
·
$0.
Bottom of Form
Required information Q8
SB Femur Co. acquired 70% of the voting common...
Femur Co. acquired 70% of the voting common stock of Harbor Corp. on January 1, 2019. During 2019, Harbor had revenues of $2,500,000 and expenses of $2,000,000. The amortization of fair value allocations totaled $60,000 in 2019. Not including its investment in Harbor, Femur Co. had its own revenues of $4,500,000 and expenses of $3,000,000 for the year 2019.
MC Qu. 14 What amount would Femur Co. report...
What amount would Femur Co. report as consolidated net income for 2019?
Multiple Choice
Top of Form
·
$1,940,000.
·
$1,500,000.
·
$440,000.
·
$2,000,000.
·
$500,000.
Bottom of Form
Required information Q9
SB Femur Co. acquired 70% of the voting common...
Femur Co. acquired 70% of the voting common stock of Harbor Corp. on January 1, 2019. During 2019, Harbor had revenues of $2,500,000 and expenses of $2,000,000. The amortization of fair value allocations totaled $60,000 in 2019. Not including its investment in Harbor, Femur Co. had its own revenues of $4,500,000 and expenses of $3,000,000 for the year 2019.
MC Qu. 15 What amount of consolidated net income...
What amount of consolidated net income for 2019 should be allocated to Femur’s controlling interest in Harbor?
Multiple Choice
Top of Form
·
$1,050,000.
·
$1,808,000.
·
$1,358,000.
·
$582,000.
·
$2,140,000.
Bottom of Form
