Question

LEO Inc. acquired a 60% interest in MARS Inc. on January 1, 2019 for $400,000. Unless...

LEO Inc. acquired a 60% interest in MARS Inc. on January 1, 2019 for $400,000. Unless otherwise stated, LEO uses the cost method to account for its investment in MARS Inc. On the acquisition date, MARS had common stock and retained earnings valued at $100,000 and $150,000 respectively. The acquisition differential was allocated as follows:

$80,000 to undervalued inventory.

$40,000 to undervalued equipment. (to be amortized over 20 years)

The following took place during 2019:

▪ MARS reported a net income and declared dividends of $25,000 and $5,000 respectively.
▪ LEO's December 31, 2019 inventory contained an intercompany profit of $10,000.
▪ LEO's net income was $75,000.

The following took place during 2020:

▪ MARS reported a net income and declared dividends of $36,000 and $6,000 respectively.
▪ MARS' December 31, 2020 inventory contained an intercompany profit of $5,000.
▪ LEO's net income was $48,000.

Both companies are subject to a 25% tax rate. All intercompany sales as well as sales to outsiders are priced to provide the selling company with gross margin of 20%.

Consolidated net income attributable to the shareholders of the parent for 2019 would be:

Multiple Choice

  • $53,200.

  • $12,500.

  • $36,300.

  • $33,300.

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

PLEASE LIKE THE ANSWER IF YOU FIND IT HELPFUL OR YOU CAN COMMENT IF YOU NEED CLARITY / EXPLANATION ON ANY POINT.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A subsidiary is acquired on January 1, 2019 for $10,000. The subsidiary's book value at the...
A subsidiary is acquired on January 1, 2019 for $10,000. The subsidiary's book value at the date of acquisition was $2,000. Following is revaluation information for the subsidiary's identifiable net assets at the date of acquisition: Fair Value – Book Value Inventories $ (200) FIFO, sold in 2019 Identifiable intangibles 5,000 Straight-line, 5 years Long-term debt   300 Straight-line, 2 years Goodwill recognized in the acquisition was unimpaired in 2019 but became fully impaired during 2020. The subsidiary did not declare...
Craine Company acquired an 80 percent interest in Bates Company on January 1, 2019. Craine paid...
Craine Company acquired an 80 percent interest in Bates Company on January 1, 2019. Craine paid $896,000 in cash to the owners of Bates to acquire these shares. In addition, the remaining 20 percent of Bates shares continued to trade at a total value of $224,000 both before and after Craine’s acquisition. On January 1, 2019, Bates reported a book value of $626,000 (Common Stock = $313,000; Additional Paid-In Capital = $93,900; Retained Earnings = $219,100). Several of Bates’ buildings...
Q3. During January 2019, Mindy, Inc. acquired 30% of the outstanding common stock of Milton Co....
Q3. During January 2019, Mindy, Inc. acquired 30% of the outstanding common stock of Milton Co. for $1,500,000. This investment gave Mindy the ability to exercise significant influence over Milton. Milton’s assets on that date were recorded at $6,400,000 with liabilities of $3,000,000. Any excess of cost over book value of Mindy’ investment was attributed to unrecorded patents having a remaining useful life of ten years. In 2019, Milton reported net income of $600,000. For 2020, Milton reported net income...
Vaughn Inc. acquired all of the outstanding common stock of Roberts Co. on January 1, 2020,...
Vaughn Inc. acquired all of the outstanding common stock of Roberts Co. on January 1, 2020, for $276,000. Annual amortization of $21,000 resulted from this acquisition. Vaughn reported net income of $80,000 in 2020 and $60,000 in 2021 and paid $24,000 in dividends each year. Roberts reported net income of $50,000 in 2020 and $57,000 in 2021 and paid $12,000 in dividends each year. What is the Investment in Roberts Co. balance on Vaughn's books as of December 31, 2021,...
Herbert, Inc., acquired all of Rambis Company’s outstanding stock on January 1, 2017, for $609,000 in...
Herbert, Inc., acquired all of Rambis Company’s outstanding stock on January 1, 2017, for $609,000 in cash. Annual excess amortization of $17,600 results from this transaction. On the date of the takeover, Herbert reported retained earnings of $427,000, and Rambis reported a $239,000 balance. Herbert reported internal net income of $48,000 in 2017 and $59,500 in 2018 and declared $10,000 in dividends each year. Rambis reported net income of $28,000 in 2017 and $39,500 in 2018 and declared $5,000 in...
On January 1, 2018, Alamar Corporation acquired a 43 percent interest in Burks, Inc., for $192,000....
On January 1, 2018, Alamar Corporation acquired a 43 percent interest in Burks, Inc., for $192,000. On that date, Burks's balance sheet disclosed net assets with both a fair and book value of $327,000. During 2018, Burks reported net income of $83,000 and declared and paid cash dividends of $25,000. Alamar sold inventory costing $22,000 to Burks during 2018 for $39,000. Burks used all of this merchandise in its operations during 2018. Prepare all of Alamar's 2018 journal entries to...
Goodwill, Equity Method, Eliminating Entries, First Year On January 1, 2020, Playtel Inc. acquired 75 percent...
Goodwill, Equity Method, Eliminating Entries, First Year On January 1, 2020, Playtel Inc. acquired 75 percent of the stock of San Jose Cable for $200 million in cash. At the date of acquisition, the fair value of the noncontrolling interest was $50 million, and Playtel’s shareholders’ equity accounts were as follows (in thousands): Common stock, $1 par $5,000 Additional paid-in capital 25,000 Retained deficit (1,000) Treasury stock (800) Total $28,200 Both companies have a December 31 year-end. At the date...
On January 1, 2017, Palka, Inc., acquired 70 percent of the outstanding shares of Sellinger Company...
On January 1, 2017, Palka, Inc., acquired 70 percent of the outstanding shares of Sellinger Company for $1,649,200 in cash. The price paid was proportionate to Sellinger’s total fair value, although at the acquisition date, Sellinger had a total book value of $2,100,000. All assets acquired and liabilities assumed had fair values equal to book values except for a patent (six-year remaining life) that was undervalued on Sellinger’s accounting records by $246,000. On January 1, 2018, Palka acquired an additional...
4. McGuire Company acquired 90 percent of Hogan Company on January 1, 2019, for $234,000 cash....
4. McGuire Company acquired 90 percent of Hogan Company on January 1, 2019, for $234,000 cash. This amount is reflective of Hogan’s total acquisition-date fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following: Book Value Fair Value Buildings (10-year life) $ 10,000 $ 8,000 Equipment (4-year life) 14,000 18,000 Land 5,000 12,000 Any excess consideration transferred over fair value is attributable to an unamortized...
B. On January 1, 2019, Phoenix Co. acquired 100 percent of the outstanding voting shares of...
B. On January 1, 2019, Phoenix Co. acquired 100 percent of the outstanding voting shares of Sedona Inc. for $626,000 cash. At January 1, 2019, Sedona’s net assets had a total carrying amount of $438,200. Equipment (eight-year remaining life) was undervalued on Sedona’s financial records by $86,000. Any remaining excess fair over book value was attributed to a customer list developed by Sedona (four-year remaining life), but not recorded on its books. Phoenix applies the equity method to account for...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT