1. On January 1, 20X1, Port Inc. acquired 80% of the outstanding voting shares of Salut...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
1. On January 1, 20X1, Port Inc. acquired 80% of the outstanding voting shares of Salut Inc. for total consideration of $1,200,000. On this date, Salut reported total assets of $1,800,000 and total liabilities of $800,000. All assets and liabilities had fair values equal to carrying values except for the following: Carrying value Fair value $ 90,000 200,000 Patent Bonds payable $ 150,000 The patent had a remaining useful life of 10 years as of the date of acquisition. The bonds mature on December 31, 20X4. It is now December 31, 20X2, and Port and Salut reported $140,000 and $80,000 of net income, respectively. Port uses the cost method to account for Salut in its legal entity financial statements. Salut did not declare any dividends during 20X2. For impairment testing purposes, Port evaluates Salut as a stand-alone cash- generating unit (CGU). The net asset value of the CGU was found to be impaired by $20,000 in 20X2, and the impairment loss was allocated entirely to goodwill. What is the amount of consolidated net income attributable to the shareholders of Port for the year ended December 31, 20X2, assuming that Port elected to use the fair value enterprise (FVE) method? a) $170,800 b) $186,800 c) $190,800 d) $205,200 2. PET Co. owns 80% of the common shares of SAL Corp. PET has no other investments. Goodwill associated with the investment is nil, but there is a fair value increment of $62,500 relating to SAL's patent that is being amortized over 10 years. PET's and SAL's reported net income for 20X5 is as follows: PET Co. SAL Corp. Net income $200,000 $50,000 SAL declared $25,000 in dividends in 20X5. Assuming PET uses the cost method, what amount of consolidated net income attributable to the parent (ATP) would be reported in 20X5? a) $210,000 b) $215,000 c) $223,750 d) $235,000 3. If goodwill is impaired in a given year, how does this affect consolidated net income attributable to the NCI on the consolidated statement of comprehensive income (SCI) for the year under the FVE method versus the identifiable net assets (INA) approach? a) Under the FVE method, the consolidated net income attributable to the NCI is reduced by the NCI's proportionate share in the goodwill impairment, whereas under the INA approach it is not. Thus, the amount of consolidated net income attributable to the NCI will be lower when using the FVE method than when using the INA approach. b) There is no difference in the amount reported for consolidated net income attributable to the NCI on the consolidated SCI. However, NCI on the consolidated statement of financial position (SFP) will be lower when using the FVE method than when using the INA approach. c) Under the FVE method, the NCI does not share in the goodwill impairment, whereas under the INA approach it does. Thus, the amount of consolidated net income attributable to NCI would be higher when using the INA approach. d) Under the FVE method, consolidated net income attributable to the NCI is reduced by the proportionate share of goodwill impairment based on the percentage ownership of the parent. Use the following information to answer Questions 4 and 5: PLE Corp. purchased 100% of the outstanding voting shares of SPP Inc. on December 31, 20X4. On this date, SPP reported $200,000 in common shares and $420,000 in retained earnings. The following AD schedule has been provided regarding the purchase: AD and amortization schedule Acquisition (SFP) 12/31/20X4 SCI 20X5 SFP 12/31/20X5 SCI SFP 12/31/20X6 20X6 Inventory Land $ 35,000 $ 35,000 $ $ 170,000 170,000 170,000 Building and equipment Long-term debt Goodwill 315,000 (215,000) 300,500 $ 605,500 283,500 (86,000) (129,000) 300.500 $ (19,500) $ 625,000 $ (34.000) 31,500 31,500 (86,000) 252,000 (43,000) 280.000 $ 659.000 20.500 4. Which of the following statements are true? i. The value of consideration given by PLE to acquire 100% of SPP on December 31, 20X4, was $1,225,500. ii. At acquisition, long-term debt had a fair value less than book value. i. The AD at acquisition of $605,500 represents the price paid for the net assets in excess of the book value. a) (i). (ii), and (ii b) (i) and (ii) c) (ii) and (ii) d) (i) and (iii) 5. During 20X6, in their legal entity income statements, PLE reported $140,000 of interest expense, and SPP reported $190,000. What amount would be reported as consolidated interest expense on the consolidated SCI? a) $244,000 b) $287,000 c) $296,000 d) $416,000 1. On January 1, 20X1, Port Inc. acquired 80% of the outstanding voting shares of Salut Inc. for total consideration of $1,200,000. On this date, Salut reported total assets of $1,800,000 and total liabilities of $800,000. All assets and liabilities had fair values equal to carrying values except for the following: Carrying value Fair value $ 90,000 200,000 Patent Bonds payable $ 150,000 The patent had a remaining useful life of 10 years as of the date of acquisition. The bonds mature on December 31, 20X4. It is now December 31, 20X2, and Port and Salut reported $140,000 and $80,000 of net income, respectively. Port uses the cost method to account for Salut in its legal entity financial statements. Salut did not declare any dividends during 20X2. For impairment testing purposes, Port evaluates Salut as a stand-alone cash- generating unit (CGU). The net asset value of the CGU was found to be impaired by $20,000 in 20X2, and the impairment loss was allocated entirely to goodwill. What is the amount of consolidated net income attributable to the shareholders of Port for the year ended December 31, 20X2, assuming that Port elected to use the fair value enterprise (FVE) method? a) $170,800 b) $186,800 c) $190,800 d) $205,200 2. PET Co. owns 80% of the common shares of SAL Corp. PET has no other investments. Goodwill associated with the investment is nil, but there is a fair value increment of $62,500 relating to SAL's patent that is being amortized over 10 years. PET's and SAL's reported net income for 20X5 is as follows: PET Co. SAL Corp. Net income $200,000 $50,000 SAL declared $25,000 in dividends in 20X5. Assuming PET uses the cost method, what amount of consolidated net income attributable to the parent (ATP) would be reported in 20X5? a) $210,000 b) $215,000 c) $223,750 d) $235,000 3. If goodwill is impaired in a given year, how does this affect consolidated net income attributable to the NCI on the consolidated statement of comprehensive income (SCI) for the year under the FVE method versus the identifiable net assets (INA) approach? a) Under the FVE method, the consolidated net income attributable to the NCI is reduced by the NCI's proportionate share in the goodwill impairment, whereas under the INA approach it is not. Thus, the amount of consolidated net income attributable to the NCI will be lower when using the FVE method than when using the INA approach. b) There is no difference in the amount reported for consolidated net income attributable to the NCI on the consolidated SCI. However, NCI on the consolidated statement of financial position (SFP) will be lower when using the FVE method than when using the INA approach. c) Under the FVE method, the NCI does not share in the goodwill impairment, whereas under the INA approach it does. Thus, the amount of consolidated net income attributable to NCI would be higher when using the INA approach. d) Under the FVE method, consolidated net income attributable to the NCI is reduced by the proportionate share of goodwill impairment based on the percentage ownership of the parent. Use the following information to answer Questions 4 and 5: PLE Corp. purchased 100% of the outstanding voting shares of SPP Inc. on December 31, 20X4. On this date, SPP reported $200,000 in common shares and $420,000 in retained earnings. The following AD schedule has been provided regarding the purchase: AD and amortization schedule Acquisition (SFP) 12/31/20X4 SCI 20X5 SFP 12/31/20X5 SCI SFP 12/31/20X6 20X6 Inventory Land $ 35,000 $ 35,000 $ $ 170,000 170,000 170,000 Building and equipment Long-term debt Goodwill 315,000 (215,000) 300,500 $ 605,500 283,500 (86,000) (129,000) 300.500 $ (19,500) $ 625,000 $ (34.000) 31,500 31,500 (86,000) 252,000 (43,000) 280.000 $ 659.000 20.500 4. Which of the following statements are true? i. The value of consideration given by PLE to acquire 100% of SPP on December 31, 20X4, was $1,225,500. ii. At acquisition, long-term debt had a fair value less than book value. i. The AD at acquisition of $605,500 represents the price paid for the net assets in excess of the book value. a) (i). (ii), and (ii b) (i) and (ii) c) (ii) and (ii) d) (i) and (iii) 5. During 20X6, in their legal entity income statements, PLE reported $140,000 of interest expense, and SPP reported $190,000. What amount would be reported as consolidated interest expense on the consolidated SCI? a) $244,000 b) $287,000 c) $296,000 d) $416,000
Expert Answer:
Answer rating: 100% (QA)
Question 1 Question 2 Correct 215000 Explanation Consolidated Net Income Particulars Net income Pet Co 20000 Less Dividend income from Sal Corp 2500080 20000 Net income from operations 180000 Net inco... View the full answer
Posted Date:
Students also viewed these accounting questions
-
1.Which will be relatively easier to pivot into and why?
-
The Ralston Company owns 35% of the outstanding voting shares of Purina Inc. Under what circumstances would Ralston determine that it is inappropriate to report this investment using the equity...
-
(2) In R, A point mass M moves with the velocity v (t) = (1, t cost, tsin t) and the original position r(0)= (-1,1,0). Another point mass M has the position function r(t) = (t, 2 cost, 2 sin t). (a)...
-
The comparative balance sheet of Merrick Equipment Co. for December 31, 20Y9 and 20Y8, is as follows: Dec. 31, 20Y9 Dec. 31, 20Y8 Assets Cash $70,720 $47,940 Accounts receivable (net) 207,230 188,190...
-
A client in the 39 percent marginal tax bracket is comparing a municipal bond that offers a 4.5 percent yield to maturity and a similar-risk corporate bond that offers a 6.45 percent yield. Which...
-
What are AIO statements? How are they used by marketers?
-
What is escalating commitment, and why is it important to recognize it in decision making?
-
Cole Petroleum has spent $206,000 to refine 63,000 gallons of petroleum distillate, which can be sold for $6.30 a gallon. Alternatively, Cole can process the distillate further and produce 53,000...
-
In a conjoint study for evaluating preferences for a potential new high-speed commuter rail service between downtown Pittsburgh and Pittsburgh International Airport, the attributes and unscaled...
-
In early 20X1, Mr. Carpet purchased $200,000 of common shares in a company listed on thelocal stock exchange, with an annual eligible dividend of $5,000. The current fair market value of the shares...
-
Derrick has a flask with 50 ml of LB medium and 1 x 10^9 bacteria (or Colony Forming Units - cfus). He is trying to plate between 10 and 100 colonies per plate. He must construct a dilution series....
-
Construct an 8 0 % confidence interval for the population standard deviation if a sample of size 1 7 has standard deviation s = 1 1 . 8 . Round the answers to at least two decimal places An 8 0 %...
-
Suppose your company introduces a referral incentive for existing customers. Namely, cus- tomers can get a $500 discount on their customer service subscription for each customer lead that they refer...
-
How do chromatin organization and epigenetic modifications, such as DNA methylation, histone modifications, and non-coding RNAs, regulate gene expression patterns and cellular identity, and what are...
-
6. Camel Company uses the FIFO method in its process costing system. The Assembly Department started the month with 5,000 units in its beginning work in process inventory that were 80% complete with...
-
For this nominal and interval data, which graphical methods should be chosen (for example, line, bar chart, run chart)? Why is this the best option? (Please provide reference and bibliographical...
-
An of refinery finds that it is necessary to treat the waste liquids from a new process before discharging them into a stream. The treatment will ost $30,000 the first year, but process improvements...
-
AB CORPORATION ISSUED THE FOLLOWING 850 COMMON STOCKS PAR VALUE P100 750 PARTICIPATING PREFERRED STOCKS PAR VALUE P100 AT 3% AB CORPORATION DECLARED P100,000.00 DIVIDEND IN 2022.
-
The Trapani Company had the following actual data for 2006 and 2007: The basic production data at standard unit costs for the two years were Fixed factory overhead was budgeted at $98,000 per year....
-
The Carley Company differs from the Marple Company (described in Problem 4-21) in only one respect: it has both variable and fixed manufacturing costs. Its variable costs are $0.14 per litre and its...
-
Form groups of four persons each. Each person should select one of the following four roles (if groups have between four and eight persons, two persons can play any of the roles in the exercise):...
Study smarter with the SolutionInn App