On the 2014 consolidation working paper, eliminating entry R reduces the Investment in Starfruit by a. $ 3,600,000 b. $64,800,000
a. $ 3,600,000
Use the following information to answer questions l - 7 below:
On January l, 2012, Pomegranate Company acquired 90% of the voting stock of Starfruit Company for $91,700,000 in cash. The fair value of the noncontrolling interest in Starfruit at the date of acquisition was $6,300,000. Starfruit's book value was $13,000,000 at the date of acquisition. Starfruit's assets and liabilities were reported on its books at values approximating fair value, except its plant and equipment (10-year life, straight-line) was overvalued by $25,000,000. Starfruit Company had previously unreported intangible assets, with a market value of $40,000,000 and 5-year life, straight-line, which were capitalized following GAAP
Use the following additional information to answer questions 2 and 3 below:
Pomegranate uses the complete equity method to account for its investment in Starfruit on its own books. Goodwill recognized in this acquisition was impaired by a total of $2,000,000 in 2012 and 2013, and by $500,000 in 2014. It is now December 31,2014, the accounting year-end. Here is Starfruit Company's trial balance at December 31,2014:
Current assets$ 28,100,000
Plant & equipment, net188,000,000
Retained earnings, January 1(30,000,000)
Cost of goods sold10,000,000
$ 0 Goodwill
Goodwill 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... Intangible Assets
An intangible asset is a resource controlled by an entity without physical substance. Unlike other assets, an intangible asset has no physical existence and you cannot touch it.Types of Intangible Assets and ExamplesSome examples are patented... GAAP
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Question Posted: April 30, 2016 12:02:25