Question

The trial balance of Garner Company at January 1, 2015 is as follows, along with estimated...

The trial balance of Garner Company at January 1, 2015 is as follows, along with estimated fair values of its assets and liabilities: Book Value Dr (Cr) Fair Value Dr (Cr) Current assets $ 200,000 $ 300,000 Plant & equipment, net 28,000,000 35,000,000 Investment in HTM securities 1,000,000 3,000,000 Client contracts 0 5,000,000 Liabilities (15,000,000) (15,200,000) Capital stock (14,000,000) -- Retained earnings (200,000) -- Total $ 0 Information on the revalued assets and liabilities is as follows: Revaluation Remaining Life as of January 1, 2015 Current assets (inventory) FIFO Plant & equipment 20 years, straight-line Investment in securities Sold in 2018 Client contracts 5 years, straight-line Liabilities 3 years, straight-line Goodwill No impairment Brown Corporation paid $80,000,000 in cash to acquire 90% of the voting stock of Garner Company on January 1, 2015. Goodwill generated from the acquisition equaled $58,900,000. The noncontrolling interest was valued at $7,000,000 at the date of acquisition. It is now December 31, 2018, four years after the acquisition. Garner reported net income of $4,000,000 in 2018 and declared no dividends. Garner’s January 1, 2018 retained earnings balance is $6,200,000. Brown uses the complete equity method to account for the investment in Garner on its own books

Required a) Calculate 2018 equity in net income

b) Calculate 2018 noncontrolling interest in net income.

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1
Fair value of 90% voting stock $80,000,000
Fair value of 10% voting stock $7,000,000
Total fair value $87,000,000
Less: Common Stock $14,000,000
           Retained earnings $200,000
Excess fair value over cost $72,800,000
Excess allocated to:
Plant $7,000,000
Inventory $100,000
Investment $2,000,000
Client contracts $5,000,000
Liabilities $200,000
Goodwill $58,900,000
Depreciation on Plant per year (7000000/20) $350,000
Amortization of Client contracts(5000000/5) $1,000,000
Garners reported net profit in 2018 $4,000,000
Less: Depreciation of plant $350,000
           Amortization of client contract $1,000,000
Net income after adjustment $2,650,000
Equity in net income (90%) $2,385,000
Non controlling interest in net income $265,000
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
Pratt Company acquired all of the voting stock of Swank Company on January 1, 2016 for...
Pratt Company acquired all of the voting stock of Swank Company on January 1, 2016 for $60,000. Swank Company’s book value at the date of acquisition totaled $8,000. Swank had previously unrecorded identifiable intangibles with a total fair value of $20,000, and plant assets were overvalued by $15,000. All of Swank’s other identifiable net assets had book values that approximated fair value at the date of acquisition. Goodwill arising from this acquisition equaled $47,000. The identifiable intangibles have an estimated...
On January 1, 2017, Portland Company acquired all of Salem Company’s voting stock for $16,000,000 in...
On January 1, 2017, Portland Company acquired all of Salem Company’s voting stock for $16,000,000 in cash. Some of Salem’s assets and liabilities at the date of purchase had fair values that differed from reported values, as follows:    Book value Fair value Buildings and equipment, net (20 years, straight-line) $11,000,000 $ 3,000,000 Identifiable intangibles (5 years, straight-line) 0 10,000,000 Salem’s total shareholders’ equity at January 1, 2017, was $4,000,000. It is now December 31, 2020 (four years later). Salem’s...
A subsidiary, Boston Corp., is wholely acquired by Massachusetts Co. on January 1, 2015 for $10...
A subsidiary, Boston Corp., is wholely acquired by Massachusetts Co. on January 1, 2015 for $10 million. The subsidiary’s book value at the date of acquisition was $2 million. Following is the information for the subsidiary’s identifiable net assets at the date of acquisition: Fair Value Excess Inventories is overvalued (i.e., book value > fair value): $ 200,000 FIFO Identifiable intangibles is undervalued: $ 5,000,000 Straight-line, 5 years Long-term debt is undervalued: $ 300,000 Straight-line, 2 years Inventories (based on...
Sam Company purchased all of the shares of Johns Company for $5,000,000 in cash on January...
Sam Company purchased all of the shares of Johns Company for $5,000,000 in cash on January 1, 2015. At the date of acquisition, fair values of John's current assets totaled $350,000, fair values of Johns long-term assets totaled $2,800,000, and fair values of Johns liabilities were the same as reported values. John's has no previously unreported assets or liabilities. The balance sheets of Sam and John’s just after the acquisition appear below. Sam Co......... John's Co.            ...
On July 1, 2018, Truman Company acquired a 70 percent interest in Atlanta Company in exchange...
On July 1, 2018, Truman Company acquired a 70 percent interest in Atlanta Company in exchange for consideration of $788,900 in cash and equity securities. The remaining 30 percent of Atlanta’s shares traded closely near an average price that totaled $338,100 both before and after Truman’s acquisition. In reviewing its acquisition, Truman assigned a $129,500 fair value to a patent recently developed by Atlanta, even though it was not recorded within the financial records of the subsidiary. This patent is...
Consolidation Eliminations Several Years after Acquisition Paramount Corporation acquired its 75 percent investment in Sun Corporation...
Consolidation Eliminations Several Years after Acquisition Paramount Corporation acquired its 75 percent investment in Sun Corporation in January 2012, for $1,455,000 and accounts for its investment internally using the complete equity method. At the acquisition date, total book value of Sun was $750,000 including $400,000 of retained earnings, and the estimated fair value of the 25 percent noncontrolling interest was $395,000. The fair values of Sun's assets and liabilities were equal to their carrying values, except for the following items:...
On January 1, 2015, Panther Incorporated purchased 80% of the Staffer Company’s outstanding voting stock for...
On January 1, 2015, Panther Incorporated purchased 80% of the Staffer Company’s outstanding voting stock for $840,000 in cash and other considerations. On that date, Panther assessed the net fair value of Staffer’s identifiable liabilities and assets at $1,050,000. The 20% noncontrolling interest was assessed at a fair value of $210,000. Amortization of excess fair value over book value was not part of the acquisition. On December 31, 2016, each company’s financial records included the account balances shown below in...
Intercompany sale of depreciable assets Assume on January 1, 2015, a parent company a 75% interest...
Intercompany sale of depreciable assets Assume on January 1, 2015, a parent company a 75% interest in a subsidiary's voting common stock. On the date of acquisition, the fair value of the subsidiary's net assets equaled their reported book values. On January 1, 2017, the subsidiary purchased a building for $576,000. The building has a useful life of 8 years and is depreciated on a straight-line basis with no salvage value. On January 1, 2019, the subsidiary sold the building...
Assume that on January 1, 2009, a parent company acquired a 90% interest in a subsidiary's...
Assume that on January 1, 2009, a parent company acquired a 90% interest in a subsidiary's voting common stock. On the date of acquisition, the fair value of the subsidiary's net assets equaled their reported book values. On January 1, 2011, the subsidiary purchased a building for $486,000. The building has a useful life of 10 years and is depreciated on a straight-line basis with no salvage value. On January 1, 2013, the subsidiary sold the building to the parent...
8)On May 1, 2017, Pepper Company issues 30,000 shares of its $12 par value ($25 fair...
8)On May 1, 2017, Pepper Company issues 30,000 shares of its $12 par value ($25 fair value) common stock in exchange for all of the shares of Salt's common stock. Pepper paid $10,000 for costs to issue the new shares of stock. Before the acquisition, Pepper has $700,000 in its common stock account and $300,000 in its additional paid-in capital account (APIC). What entries would Pepper use to record this acquisition? A. Dr. Expenses and Cr. Cash. B. Dr. Common...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT