Branson paid $626,400 cash for all of the outstanding common stock of Wolfpack, Inc., on January...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Branson paid $626,400 cash for all of the outstanding common stock of Wolfpack, Inc., on January 1, 2020. On that date, the subsidiary had a book value of $428,000 (common stock of $200,000 and retained earnings of $228,000), although various unrecorded royalty agreements (10-year remaining life) were assessed at a $197,000 fair value. Any remaining excess fair value was considered goodwill. In negotiating the acquisition price, Branson also promised to pay Wolfpack's former owners an additional $58,000 if Wolfpack's income exceeded $170,000 total over the first two years after the acquisition. At the acquisition date, Branson estimated the probability-adjusted present value of this contingent consideration at $40,600. On December 31, 2020, based on Wolfpack's earnings to date, Branson increased the value of the contingency to $46,400. During the subsequent two years, Wolfpack reported the following amounts for income and dividends: Dividends Declared Net Income $89, 800 2020 $25,000 35,000 2021 99,800 In keeping with the original acquisition agreement, on December 31, 2021, Branson paid the additional $58,000 performance fee to Wolfpack's previous owners. Prepare each of the following: a. Branson's entry to record the acquisition of the shares of its Wolfpack subsidiary. b. Branson's entries at the end of 2020 and 2021 to adjust its contingent performance obligation for changes in fair value and the December 31, 2021, payment. c. Prepare consolidation worksheet entries as of December 31, 2021, assuming that Branson has applied the equity method. d. Prepare consolidation worksheet entries as of December 31, 2021, assuming that Branson has applied the initial value method. Branson paid $626,400 cash for all of the outstanding common stock of Wolfpack, Inc., on January 1, 2020. On that date, the subsidiary had a book value of $428,000 (common stock of $200,000 and retained earnings of $228,000), although various unrecorded royalty agreements (10-year remaining life) were assessed at a $197,000 fair value. Any remaining excess fair value was considered goodwill. In negotiating the acquisition price, Branson also promised to pay Wolfpack's former owners an additional $58,000 if Wolfpack's income exceeded $170,000 total over the first two years after the acquisition. At the acquisition date, Branson estimated the probability-adjusted present value of this contingent consideration at $40,600. On December 31, 2020, based on Wolfpack's earnings to date, Branson increased the value of the contingency to $46,400. During the subsequent two years, Wolfpack reported the following amounts for income and dividends: Dividends Declared Net Income $89, 800 2020 $25,000 35,000 2021 99,800 In keeping with the original acquisition agreement, on December 31, 2021, Branson paid the additional $58,000 performance fee to Wolfpack's previous owners. Prepare each of the following: a. Branson's entry to record the acquisition of the shares of its Wolfpack subsidiary. b. Branson's entries at the end of 2020 and 2021 to adjust its contingent performance obligation for changes in fair value and the December 31, 2021, payment. c. Prepare consolidation worksheet entries as of December 31, 2021, assuming that Branson has applied the equity method. d. Prepare consolidation worksheet entries as of December 31, 2021, assuming that Branson has applied the initial value method.
Expert Answer:
Answer rating: 100% (QA)
a Account Title explanation Investment in wolf pack inc Contingent performance obligat... View the full answer
Related Book For
Advanced Accounting
ISBN: 9781260247824
14th Edition
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik
Posted Date:
Students also viewed these accounting questions
-
Branson paid $465,000 cash for all of the outstanding common stock of Wolfpack, Inc., on January 1, 2020. On that date, the subsidiary had a book value of $340,000 (common stock of $200,000 and...
-
Branson paid $492,000 cash for all of the outstanding common stock of Wolfpack, Inc., on January 1, 2017. On that date, the subsidiary had a book value of $371,000 (common stock of $200,000 and...
-
A value-driven car manufacturer, Concord, started its business more than 50 years ago, making and selling a sedan body style. Sedans were popular at the time, and this one drove the success of...
-
On July 1, 2021, Katrina purchased tax-exempt bonds (face value of $75,000) for $82,000. The bonds mature in five years, and the annual interest rate is 3%. a. How much interest income and/or...
-
An assembly line with 17 tasks is to be balanced. The longest task is 2.4 minutes, and the total time for all tasks is 18 minutes. The line will operate for 450 minutes per day. a. What are the...
-
Estimate the order of magnitude of the number of times the letter d occurs in this text.
-
Consider atmospheric air at \(20^{\circ} \mathrm{C}\) and a velocity of \(30 \mathrm{~m} / \mathrm{s}\) flowing over both surfaces of a 1-m-long flat plate that is maintained at \(130^{\circ}...
-
Profit margins and turnover ratios vary from one industry to another. What differences would you expect to find between a grocery chain such as Safeway and a steel company? Think particularly about...
-
Sure Tool Company is expected to pay a dividend of $2 in the upcoming year. The risk-free rate of return is 4%, and the expected return on the market portfolio is 14%. Analysts expect the price of...
-
The Excel worksheet form that appears below is to be used to recreate the Review Problem related to Mynor Corporation. Download the workbook containing this form from Connect, where you will also...
-
What is the best AWS features/tools to use for application scaling for ones cloud architecture. This would be for an online voting PHP web application hosted on AWS. Also, in terms of the above that...
-
In order to have money available for replacing their family vehicle, a couple plans to have $38,000 available 5 years from now by investing in a global mutual fund. If they plan to increase their...
-
Using an economic and market perspective how would you argue the removal of state restrictions that stop nurses from practicing to the full extent of their preparation?
-
Should we ban or advance the usage of Artificial Intelligence (AI) in the Creative Industry (drawing, voice, script writing, etc)? If there is a middle ground, how should this look like? Please use...
-
The manufacturing operations of Wildhorse, Inc. had the following balances for the month of January: Inventories January 1 January 31 Raw Materials $15,600 $16,900 Work in Process 27,300 29,900...
-
Using the Hazen-Williams approach, find the headloss of water flowing through 1,000-ft of 6-ft diameter concrete pipe (C=120) at a flow rate (Q) of 80 ft/sec.
-
Dispensing 'the less orthodox inducements'BAE Systems and the global defence industry This case is concerned with a series of major scandals that have rocked the defence industry, most notably...
-
The area of square PQRS is 100 ft2, and A, B, C, and D are the midpoints of the sides. Find the area of square ABCD. B A
-
How has the dual system of financial statements affected the financial reporting of state and local governments?
-
What is covered by Regulation S-X?
-
The consolidation process applicable when intra-entity land transfers have occurred differs somewhat from that used for intra-entity inventory sales. What differences should be noted?
-
To what amount will the following investments accumulate? a. $6,000 invested for 12 years at 12 percent compounded annually b. $7,500 invested for 8 years at 8 percent compounded annually c. $6,400...
-
What is the present value of the following future amounts? a. $805 to be received 10 years from now discounted back to the present at 10 percent b. $376 to be received 5 years from now discounted...
-
At what annual rate would the following have to be invested? a. \($820\) to grow to \($1,988.12\) in 13 years b. \($320\) to grow to \($423.10\) in 6 years c. \($57\) to grow to \($290.30\) in 18...
Porths Pathophysiology Concepts Of Altered Health States 10th Edition - ISBN: 1496377559 - Free Book
Study smarter with the SolutionInn App