Question

On January 2, 2012, Pal acquired 75% of the outstanding stock of Sim Company for $2,100,000...

On January 2, 2012, Pal acquired 75% of the outstanding stock of Sim Company for $2,100,000 cash. On that date Sim’s stockholders equity included common stock of $1,000,000 and retained earnings of $1,560,000.   As part of the merger agreement, Sim’s former management team signed a contract not to compete with Pal for the next 8-years. The difference between the cost and book value of Sim’s net assets was assigned to these noncompetition agreements.

On January 2, 2014, Pal Corporation purchased warehouse equipment from Sim Company for $150,000 when the equipment had a book value to Sim of $100,000. The equipment had a five-year useful life at the time of the intercompany sale. Both Pal and Sim depreciate equipment on the straight-line method assuming no salvage value.

Pal separate income for 2014 was $470,000 (excluding income from Sim), and Sim reported net income of $180,000.

Consolidated income for 2014 was:

$630,000

$580,000

$610,000

$570,000

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

1. Consolidated Income:

Sr No Particulars Amount ($)
a Pal Income*        490,000
b Sim's Income (200000** x75%)        150,000
c Total Income (a+b) 640,000
d Less: Depreciation on equipment (150000/5)           30,000
e Consolidated Income (c-d) 610,000
2. Working:
Particulars Pal ($) Sim ($)
Income after depreciation on equipment        470,000 180,000
Add: depreciation (100000/5)           20,000      20,000
Income before depreciation 490,000* 200,000**
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
On January 1, 2012, Aspen Company acquired 80 percent of Birch Company’s outstanding voting stock for...
On January 1, 2012, Aspen Company acquired 80 percent of Birch Company’s outstanding voting stock for $392,000. Birch reported a $355,000 book value and the fair value of the noncontrolling interest was $98,000 on that date. Also, on January 1, 2013, Birch acquired 80 percent of Cedar Company for $228,000 when Cedar had a $204,000 book value and the 20 percent noncontrolling interest was valued at $57,000. In each acquisition, the subsidiary’s excess acquisition-date fair over book value was assigned...
Placid Lake Corporation acquired 80 percent of the outstanding voting stock of Scenic, Inc., on January...
Placid Lake Corporation acquired 80 percent of the outstanding voting stock of Scenic, Inc., on January 1, 2014, when Scenic had a net book value of $400,000. Any excess fair value was assigned to intangible assets and amortized at a rate of $5,000 per year. Placid Lake’s 2015 net income before consideration of its relationship with Scenic (and before adjustments for intra-entity sales) was $300,000. Scenic reported net income of $110,000. Placid Lake declared $100,000 in dividends during this period;...
Pisa Company acquired 75% of Siena Company on January 1, 2003 at book value. During 2003,...
Pisa Company acquired 75% of Siena Company on January 1, 2003 at book value. During 2003, Siena purchased inventory for $35,000 and sold it to Pisa for $50,000. Of this amount, Pisa reported $20,000 in ending inventory in 2003 and later sold it in 2004. In 2004, Pisa sold inventory it had purchased for $40,000 to Siena for $60,000. Siena sold $45,000 of this inventory in 2004. In 2004, Pisa reported stand-alone income of $550,000 and Siena reported total net...
P Company acquired 75 percent of S Company on January 1, 2018 at book value. During...
P Company acquired 75 percent of S Company on January 1, 2018 at book value. During 2018, S purchased inventory for $40,000 and sold it to P for $60,000. Of this amount, P reported $12,000 in ending inventory in 2018 and later sold it in 2019. In 2019, P sold inventory it had purchased for $35,000 to S for $50,000. S sold $45,000 of this inventory in 2019. In 2019, P reported stand-alone income of $870,000 and S reported total...
On January 1, 2017, QuickPort Company acquired 90 percent of the outstanding voting stock of NetSpeed,...
On January 1, 2017, QuickPort Company acquired 90 percent of the outstanding voting stock of NetSpeed, Inc., for $972,000 in cash and stock options. At the acquisition date, NetSpeed had common stock of $1,020,000 and Retained Earnings of $51,000. The acquisition-date fair value of the 10 percent noncontrolling interest was $108,000. QuickPort attributed the $9,000 excess of NetSpeed's fair value over book value to a database with a five-year remaining life. During the next two years, NetSpeed reported the following:...
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, 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...
On January 1, 2017, QuickPort Company acquired 90 percent of the outstanding voting stock of NetSpeed,...
On January 1, 2017, QuickPort Company acquired 90 percent of the outstanding voting stock of NetSpeed, Inc., for $1,089,000 in cash and stock options. At the acquisition date, NetSpeed had common stock of $1,140,000 and Retained Earnings of $57,000. The acquisition-date fair value of the 10 percent noncontrolling interest was $121,000. QuickPort attributed the $13,000 excess of NetSpeed's fair value over book value to a database with a five-year remaining life. During the next two years, NetSpeed reported the following:...
Tyler Company acquired all of Jasmine Company’s outstanding stock on January 1, 2016, for $289,800 in...
Tyler Company acquired all of Jasmine Company’s outstanding stock on January 1, 2016, for $289,800 in cash. Jasmine had a book value of only $207,400 on that date. However, equipment (having an eight-year remaining life) was undervalued by $74,400 on Jasmine’s financial records. A building with a 20-year remaining life was overvalued by $13,900. Subsequent to the acquisition, Jasmine reported the following: Net Income Dividends Declared 2016 $ 62,400 $ 10,000 2017 76,500 40,000 2018 30,200 20,000 In accounting for...
Tyler Company acquired all of Jasmine Company’s outstanding stock on January 1, 2016, for $317,300 in...
Tyler Company acquired all of Jasmine Company’s outstanding stock on January 1, 2016, for $317,300 in cash. Jasmine had a book value of only $232,100 on that date. However, equipment (having an eight-year remaining life) was undervalued by $64,800 on Jasmine’s financial records. A building with a 20-year remaining life was overvalued by $11,400. Subsequent to the acquisition, Jasmine reported the following: Net Income Dividends Declared 2016 $ 78,600 $ 10,000 2017 85,500 40,000 2018 31,800 20,000 In accounting for...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT