Tyler Company acquired all of Jasmine Company's outstanding stock on January 1, 2011, for $206,000 in cash.
Question:
Tyler Company acquired all of Jasmine Company's outstanding stock on January 1, 2011, for $206,000 in cash. Jasmine had a book value of only $140,000 on that date. However, equipment (having an eight-year life) was undervalued by $54,400 on Jasmine's financial records. A building with a 20-year life was overvalued by $10,000. Subsequent to the acquisition, Jasmine reported the following:
_________________Net Income _____________Dividends Paid
2011 . . . . . . . . . . . . . . $50,000 . . . . . . . . . . . . . . . . . .$10,000
2012 . . . . . . . . . . . . . . . 60,000 . . . . . . . . . . . . . . . . . . 40,000
2013 . . . . . . . . . . . . . . . 30,000 . . . . . . . . . . . . . . . . . . 20,000
In accounting for this investment, Tyler has used the equity method. Selected accounts taken from the financial records of these two companies as of December 31, 2013, follow:
Determine and explain the following account balances as of December 31, 2013:
a. Investment in Jasmine Company (on Tyler's individual financial records).
b. Equity in Subsidiary Earnings (on Tyler's individual financial records).
c. Consolidated Net Income.
d. Consolidated Equipment (net).
e. Consolidated Buildings (net).
f. Consolidated Goodwill (net).
g. Consolidated Common Stock.
h. Consolidated Retained Earnings, 12/31/13.
GoodwillGoodwill is an important concept and terminology in accounting which means good reputation. The word goodwill is used at various places in accounting but it is recognized only at the time of a business combination. There are generally two types of...
Step by Step Answer:
Fundamentals of Advanced Accounting
ISBN: 978-0077667061
5th edition
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik