Madre Inc buys 80 percent of the outstanding common stock of Niels Corporation on January 1, 2019, for $802,720 cash. At the acquisition date, Niels' total fair value, including the non controlling interest, was assessed at $1,003,400 although Niels' book value was only $690,000. Also, several individual items on Niels' financial records had fair values that differed from their book values as follows:

	Book Value	Fair Value
Land	$65,000	$290,000
Buildings and Equipment (10 yrs. remaining life)	287,000	263,000
Copyright (20 yrs. remaining life)	122,000	216,000
Notes Payable (due in 8 years)	(176,000)	(157,600)

For internal reporting purposes, Madre Inc., employs the equity method to account for this investment. The following account balances are for the year ending December 31, 2019, for both companies.

Prepare consolidated journal entries for next year DECEMBER 31, 2020 (NOT 2019. I have figured that one out already), assuming Niels were to report a net income of 200,000 and paid dividends of 70,000

Show all calculations on the values of the net income and dividends for the year 2020. 

Transcribed Image Text:

A B C Madre Niels Revenues -$1,394,980 -$684,900 Cost of goods sold 774,000 432,000 Depreciation Expense 274,000 11,600 Amortization Expense 6,100 Interest Expense 52,100 9,200 Equity in Income of Niels -177,120 Net Income -472,000 -$226,000 Retained Earnings 1/1/19 -$1,275,000 -$530,000 Net Income -472,000 -226,000 Dividends Declared 260,000 65,000 Retained Earnings 12/31/19 -$1,487,000 -$691,000 Current Assets $856,160 $764,700 Invesment in Niels 927,840 Land 360,000 65,000 Buildings and Equipment (net) 909,000 275,400 Copyright -0- 115,900 Total Assets $3,053,000 $1,221,000 Accounts payable -$275,000 -$194,000 Notes payable -541,000 -176,000 Common Stock -300,000 -100,000 Additional Paid-In Capital -450,000 -60,000 Retained Earnings (above) -1,487,000 -691,000 Total liabilities and equities -$3,053,000 -$1,221,000 A B C Madre Niels Revenues -$1,394,980 -$684,900 Cost of goods sold 774,000 432,000 Depreciation Expense 274,000 11,600 Amortization Expense 6,100 Interest Expense 52,100 9,200 Equity in Income of Niels -177,120 Net Income -472,000 -$226,000 Retained Earnings 1/1/19 -$1,275,000 -$530,000 Net Income -472,000 -226,000 Dividends Declared 260,000 65,000 Retained Earnings 12/31/19 -$1,487,000 -$691,000 Current Assets $856,160 $764,700 Invesment in Niels 927,840 Land 360,000 65,000 Buildings and Equipment (net) 909,000 275,400 Copyright -0- 115,900 Total Assets $3,053,000 $1,221,000 Accounts payable -$275,000 -$194,000 Notes payable -541,000 -176,000 Common Stock -300,000 -100,000 Additional Paid-In Capital -450,000 -60,000 Retained Earnings (above) -1,487,000 -691,000 Total liabilities and equities -$3,053,000 -$1,221,000

Answer rating: 100% (QA)

Consideration transferred 80272000 Fair value of NCI on acquisition date 20068000 Total 100340000 Bo... View the full answer