Question

Part A (questions 1 through 25) The following information and table pertain to questions 1 through...

Part A (questions 1 through 25)

The following information and table pertain to questions 1 through 25.

On January 1, 2010, Apple Company acquired 75% of the outstanding common stock of Orange Company for $600,000 in cash. On the date of the acquisition, the fair value of the 25% noncontrolling interest in the Orange Company was $200,000. The book value of Orange Company’s net assets on January 1, 2010, was $500,000 and consisted of common stock of $150,000 and retained earnings of $350,000.

Some of Orange Company assets were internally developed and were not reported on its books or had fair value that differed from it carrying value on the date of the acquisition as follows:

Book Values

Fair Values

Patented Technologies (10 years of remaining life)

50,000

150,000

Customer List (5 years of remaining life)

-0-

75,000

Any remaining excess acquisition-date fair value was assigned to goodwill. Since acquisition, Apple has not had any goodwill impairments.

Intra-entity inventory sales between the two companies have been made as follows:

Year

Cost to Apple

Transfer Price to Orange

Ending Balance(at transfer price)

2010

130,000

180,000

45,000

2011

150,000

210,000

70,000

Presented below are the financial statements for these two companies as of December 31, 2011, prepared from their separately maintained accounting systems. Credit balances are indicated by parentheses.

Question 1

What is the amount of goodwill, if any, that Apple Company should recognize on its consolidated financial statements?

0

125,000

93,750

300,000

None of the answers is correct

Homework Answers

Answer #1
Computation of Goodwill Total Apple (75%) NCI (25%)
Consideration paid to acquire 75% stock $600,000
Fair value of 25% noncontrolling interest $200,000
Total fair value $800,000 $600,000 $200,000
Less: Book Value
Common Stock $150,000 $112,500 $37,500
Retained Earnings $350,000 $262,500 $87,500
Total Book value $500,000 $375,000 $125,000
Excess of fair value over book value $300,000 $225,000 $75,000
Excess allocated to:
Patented technologies $100,000 $75,000 $25,000
Customer list $75,000 $56,250 $18,750
Goodwill $125,000 $93,750 $31,250
B $125,000
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Use the following information to answer questions 7 and 8 On January 1, 2016, Pride Corporation...
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 $481,000 cash. The acquisition-date fair value of the noncontrolling interest was $53,500. At January 1, 2016, Star’s net assets had a total carrying amount of $374,500. Equipment (eight-year remaining life) was undervalued on Star’s financial records by $72,000. Any remaining excess fair value over book value was attributed to a customer list...
On January 1, 2020, French Company acquired 60 percent of K-Tech Company for $300,000 when K-Tech’s...
On January 1, 2020, French Company acquired 60 percent of K-Tech Company for $300,000 when K-Tech’s book value was $400,000. The fair value of the newly comprised 40 percent noncontrolling interest was assessed at $200,000. At the acquisition date, K-Tech's trademark (10-year remaining life) was undervalued in its financial records by $60,000. Also, patented technology (5-year remaining life) was undervalued by $40,000. In 2020, K-Tech reports $30,000 net income and declares no dividends. At the end of 2021, the two...
Pell Company purchased 75% of the stock of Silk Company on January 1, 2007, for $1,860,000,...
Pell Company purchased 75% of the stock of Silk Company on January 1, 2007, for $1,860,000, an amount equal to $60,000 in excess of the book value of equity acquired. All book values were equal to fair values at the time of purchase (i.e., any excess payment relates to subsidiary goodwill). On the date of purchase, Silk Company's retained earnings balance was $200,000. The remainder of the stockholders' equity consists of no-par common stock. In 2011, Silk Company declared dividends...
On August 1, Year 1, A Co. acquired 70 percent of the common shares of B...
On August 1, Year 1, A Co. acquired 70 percent of the common shares of B co. for $700,000 in cash. On that date, the fair value of A’s identifiable net assets was $ 2,000,000 and the book value of its shareholders’ equity was 8,000,000. On that date, the fair value of B’s identifiable net assets was $ 6,000,000 and the book value of its shareholders’ equity was 500,000. For both companies, the fair value of all liabilities is equal...
On January 1, 2021, Ackerman Company acquires 80% of Seidel Company for $1,797,600 in cash consideration....
On January 1, 2021, Ackerman Company acquires 80% of Seidel Company for $1,797,600 in cash consideration. The remaining 20 percent noncontrolling interest shares had an acquisition-date estimated fair value of $449,400. Seidel’s acquisition-date total book value was $1,785,000. The fair value of Seidel’s recorded assets and liabilities equaled their carrying amounts. However, Seidel had two unrecorded assets—a trademark with an indefinite life and estimated fair value of $257,250 and several customer relationships estimated to be worth $189,000 with four-year remaining...
On January 1, 2021, Ackerman Company acquires 80% of Seidel Company for $1,746,240 in cash consideration....
On January 1, 2021, Ackerman Company acquires 80% of Seidel Company for $1,746,240 in cash consideration. The remaining 20 percent noncontrolling interest shares had an acquisition-date estimated fair value of $436,560. Seidel’s acquisition-date total book value was $1,734,000. The fair value of Seidel’s recorded assets and liabilities equaled their carrying amounts. However, Seidel had two unrecorded assets—a trademark with an indefinite life and estimated fair value of $249,900 and several customer relationships estimated to be worth $183,600 with four-year remaining...
Parent Corporation acquired 80% of the common stock of Subs, Inc. on January 1, 2017 for...
Parent Corporation acquired 80% of the common stock of Subs, Inc. on January 1, 2017 for $310,000. The total book value of Subs, Inc. stock on the date of combinations was $300,000. On the date of combination, all assets and liabilities of Subs, Inc. had fair values equal exceeded their book values, except that the fair value of inventory, land, and building and equipment each exceeded their book value by $5,000, $10,000, and $60,000 respectively. Any remaining differential is to...
On January 1, 2020, Jordan Inc. purchased 25% of the outstanding common stock of Melody Corporation...
On January 1, 2020, Jordan Inc. purchased 25% of the outstanding common stock of Melody Corporation at a cost of $450,000. Melody Corporation had 400,000 shares of common stock outstanding. At the date of purchase, the book value of Melody’s net assets was $1,500,000. Book value and fair value of net assets were the same for all balance sheet items except for machinery and inventory. The fair value exceeded the book value by $100,000 for machinery and $20,000 for the...
On January 1, Year 1, Jacklin Corporation (JC) acquired 60 percent (60,000 shares of $2 par...
On January 1, Year 1, Jacklin Corporation (JC) acquired 60 percent (60,000 shares of $2 par common stock) of Mantz Corporation (MC) for $2,500,000 in cash. The acquisition date fair value of the noncontrolling interest’s shares (40 percent) was $40 per share. JC uses the Initial Value Method for its internal accounting. At the time of the acquisition MC has the following asset and liability accounts: Book Value Fair Value Difference Current Assets $ 500,000 $ 500,000 $ 0 PPE...
Prepare a consolidated workpapers and journal enteries for the following scenarios: Include calculations Parent Corporation acquired...
Prepare a consolidated workpapers and journal enteries for the following scenarios: Include calculations Parent Corporation acquired a 70 percent interest in Subsidiary Corporation’s outstanding voting common stock on January 1, 2011, for $735,000 cash. The stockholders’ equity of Subsidiary on this date consisted of $750,000 capital stock and $150,000 retained earnings. The difference between the fair value of Subsidiary and the underlying equity acquired in Subsidiary was assigned $7,500 to Subsidiary’s undervalued inventory, $21,000 to undervalued buildings, $31,500 to undervalued...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT