Question

Renner Company sold land to Bethany Enterprises, its parent, on June 1, 2020. The sale price...

Renner Company sold land to Bethany Enterprises, its parent, on June 1, 2020. The sale price was $218,000. The land originally cost Renner $239,000. Renner reported net income of $400,000 and

$496,000 for 2020 and 2021, respectively. Bethany sold the land it purchased from Renner for $228,000 in 2022.

19.        What is the consolidated amount of gain or loss on sale of land for 2022?

a. $10,000 gain

b.   $10,000 loss

c.    $11,000 loss

d. $21,000 loss

The following information pertains to the following 2 Questions.

On January 1, 2021, Gooch Company acquires 80% of the outstanding common stock of House Inc., for a purchase price of $12,400,000. It was determined that the fair value of the noncontrolling interest in the subsidiary is $3,100,000. The book value of the House’s stockholders’ equity on the date of acquisition is $10,000,000 and its fair value of net assets is $11,000,000. The acquisition-date acquisition accounting premium (AAP) is allocated $600,000 to equipment with a remaining useful life of 10 years, and $250,000 to a patent with a remaining useful life of 5 years.

20.       The [A] consolidating journal entry (on Gooch’s books) to recognize the acquisition date AAP and allocate the ownership interest in those assets to the parent and noncontrolling interests includes:

a.   Equity investment, credit, $5,350,000

b.   Noncontrolling interest, credit, $3,100,000

c.   House’s retained earnings, debit, $2,00,000

d.   Noncontrolling interest, credit, $1,070,000

21.        What is the acquisition accounting premium (AAP)?

a. $5,500,000

b. $4,650,000

c. $2,400,000

d. $4,400,000

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

19.

Consolidated Amount of Gain or Loss on Sale of Land for 2022:

Companies usually at the time of consolidation of accounts eliminate Gain or loss from inter-company transaction. Here in this problem Bethany Enterprises., is the Parent Company of Renner co.,. So while consolidation of accounts, the sale of land between these companies should have been eliminated.

The Cost Price of the Land would remain as $239,000 ( the initial cost of Land ).

Now, to Caslculate the consolidated Gain or loss on sale of Land

S.no Particulars Amount ($)
1

Sale Price of the Land (sold by Bethany Enterprises)

 228,000
2 Cost Price of the Land (Purchased by Renner co.,) 239,000
3 Loss on Sale of Land 11,000

ANSWER: Option C - $11,000 Loss

21.

ACQUISITION ACCOUNTING PREMIUM:

Acquisition accounting Premium (AAP) = Actual price Paid to acquire the company - Estimated Real Value of the company

Here Gooch Company Acquires 80% of House Inc., Outstanding Shares.

Book Value of House Inc., equity = $10,000,000

80% of Book Value of Equity of House Inc., = $8,000,000

Actual Price Paid by Gooch Company   = $12,400,000

Acquisition accounting Premium (AAP) = $12,400,000 - $8,000,000

AAP = $4,400,000

ANSWER: Option D - $4,400,000

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
The following information pertains to the following 2 Questions. On January 1, 2021, Gooch Company acquires...
The following information pertains to the following 2 Questions. On January 1, 2021, Gooch Company acquires 80% of the outstanding common stock of House Inc., for a purchase price of $12,400,000. It was determined that the fair value of the noncontrolling interest in the subsidiary is $3,100,000. The book value of the House’s stockholders’ equity on the date of acquisition is $10,000,000 and its fair value of net assets is $11,000,000. The acquisition-date acquisition accounting premium (AAP) is allocated $600,000...
On January 1, 2021, Gooch Company acquires 80% of the outstanding common stock of House Inc.,...
On January 1, 2021, Gooch Company acquires 80% of the outstanding common stock of House Inc., for a purchase price of $12,400,000. It was determined that the fair value of the noncontrolling interest in the subsidiary is $3,100,000. The book value of the House’s stockholders’ equity on the date of acquisition is $10,000,000 and its fair value of identifiable net assets is $10,850,000. The acquisition-date acquisition accounting premium (AAP) is allocated $600,000 to equipment with a remaining useful life of...
On April 1, 2020, Republic Company sold equipment to its wholly owned subsidiary, Barre Corporation, for...
On April 1, 2020, Republic Company sold equipment to its wholly owned subsidiary, Barre Corporation, for $40,000. At the time of the transfer, the asset had an original cost (to Republic) of $60,000 and accumulated depreciation of $25,000. The equipment has a five year estimated remaining life.Barre reported net income of $250,000, $270,000 and $310,000 in 2020, 2021, and 2022, respectively. Republic received dividends from Barre of $90,000, $105,000 and $120,000 for 2020, 2021, and 2022, respectively. 17.        What...
On April 1, 2020, Republic Company sold equipment to its wholly owned subsidiary, Barre Corporation, for...
On April 1, 2020, Republic Company sold equipment to its wholly owned subsidiary, Barre Corporation, for $40,000. At the time of the transfer, the asset had an original cost (to Republic) of $60,000 and accumulated depreciation of $25,000. The equipment has a five year estimated remaining life. Barre reported net income of $250,000, $270,000 and $310,000 in 2020, 2021, and 2022, respectively. Republic received dividends from Barre of $90,000, $105,000 and $120,000 for 2020, 2021, and 2022, respectively. 17. What...
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...
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...
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...
On January 1, 2020, French Company acquired 60 percent of K-Tech Company for $310,500 when K-Tech’s...
On January 1, 2020, French Company acquired 60 percent of K-Tech Company for $310,500 when K-Tech’s book value was $410,500. The fair value of the newly comprised 40 percent noncontrolling interest was assessed at $207,000. At the acquisition date, K-Tech's trademark (10-year remaining life) was undervalued in its financial records by $80,000. Also, patented technology (5-year remaining life) was undervalued by $27,000. In 2020, K-Tech reports $26,500 net income and declares no dividends. At the end of 2021, the two...
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...
On June 30, 2021, Plaster, Inc., paid $980,000 for 80 percent of Stucco Company's outstanding stock....
On June 30, 2021, Plaster, Inc., paid $980,000 for 80 percent of Stucco Company's outstanding stock. Plaster assessed the acquisition-date fair value of the 20 percent noncontrolling interest at $245,000. At acquisition date, Stucco reported the following book values for its assets and liabilities: Cash $ 64,000 Accounts receivable 135,800 Inventory 217,400 Land 69,800 Buildings 187,800 Equipment 321,600 Accounts payable (37,400 ) (Parentheses indicate credit balances.) On June 30, Plaster allocated the excess acquisition-date fair value over book value to...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT