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modern advanced accounting
Advanced Accounting 8th Edition Dennis M. Bline, Mary L. Fischer, Ted D. Skekel - Solutions
Exercise 4 (LO 3) Machinery sale. On January 1, 20X2, Jungle Company sold a machine to Safari Company for $30,000. The machine had an original cost of $24,000, and accumulated depreciation on the asset was $9,000 at the time of the sale. The machine has a 5-year remaining life and will be
Exercise 3 (LO 2) Distribution of income with inventory profits. Nick Company is an 80%-owned subsidiary of Van Corporation. The separate income statements of the two companies for 20X2 are as follows:The following facts apply to 20X2:a. Nick Company sold $70,000 of goods to Van Corporation. The
Exercise 2 (LO 2) Inventory profits with lower-of-cost-or-market adjustment. Hide Corporation is a wholly owned subsidiary of Seek Company. During 20X1, Hide sold all of its production to Seek Company for $400,000, a price that includes a 20% gross profit. 20X1 is the first year that such
Exercise 1 (LO 1) Gross profit: separate firms versus consolidated. Solvent is an 80%owned subsidiary of the Painter Company. The two affiliates had the following separate income statements for 20X1 and 20X2:Solvent sells at the same gross profit percentage to all customers. During 20X1, Solvent
7. Company S is an 80%-owned subsidiary of Company P. Company S needed to borrow$500,000 on January 1, 20X1. The best interest rate it could secure was 10% annual. Company P has a better credit rating and decided to borrow the funds needed from a bank at 8%annual and then loaned the money to
5. On January 1, 20X1, Company P sold a machine to its 70%-owned subsidiary, Company S, for $60,000. The book value of the machine was $40,000. The machine was depreciated straight-line, over 5 years. On December 31, 20X3, Company S sold the machine to a nonaffiliated firm for $35,000. On the
4. Subsidiary Company S is 80% owned by Company P. Company S sold a machine with a book value of $100,000 to Company P for $150,000. The asset has a 5-year life and is depreciated under the straight-line method. The president of Company S thinks it has scored a$50,000 immediate profit for the
3. Company S is 80% owned by Company P. Near the end of 20X1, Company S sold merchandise with a cost of $4,000 to Company P for $6,000. Company P sold the merchandise to a nonaffiliated firm in 20X2 for $10,000. How much total profit should be recorded on the consolidated income statements in 20X1
1. During 20X1, Company P sold $40,000 of goods to subsidiary Company S at a profit of$10,000. One-fourth of the goods remain unsold at year-end. If there were no adjustments made on the consolidated worksheet, what would be incorrect on the consolidated income statement and balance sheet?
Problem 3B-3 (LO 2, 9) Worksheet for nontaxable exchange with tax loss carryover. The trial balances of Campton Corporation and Deer Corporation as of December 31, 20X1, are as follows:
Problem 3B-2 (LO 2, 9) Worksheet for nontaxable exchange with tax loss carryover. The balance sheets of Tip Company and Kim Company as of December 31, 20X6, are as follows:Tip Kim Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,200,000 $ 50,000 Accounts
Problem 3B-1 (LO 9) D&D only, nontaxable exchange, tax loss carryover. On December 31, 20X5, Bryant Company exchanged 10,000 of its $10 par value shares for a 90% interest in Joshua Company. The purchase was recorded at the $80 per share fair value of Bryant shares. Joshua Company had the following
Problem 3A-3 (LO 5, 8) Cost method, later period, vertical worksheets. Harvard Company purchased a 90% interest in Benz Company for $740,000 on January 1, 20X1. The investment has been accounted for under the cost method. At the time of the purchase, a building owned by Benz was understated by
Problem 3A-2 (LO 2, 6, 8) Equity method, later period, vertical worksheet, several excess adjustments. Booker Enterprises purchased an 80% interest in Kobe International for $850,000 on January 1, 20X5. Booker Enterprises also paid $4,000 in direct acquisition costs. On the purchase date, Kobe
Problem 3A-1 (LO 2, 8) Equity method adjustments, vertical consolidated worksheet. (Same as Problem 3-2 except vertical format worksheet is used.) On January 1, 20X1, Peres Company purchased 80% of the common stock of Soll Company for $308,000. On this date, Soll had common stock, other paid-in
Problem 3-18 (LO 2, 5) 80%, second year, complicated excess. Refer to the preceding information for Fast Cool’s acquisition of HD Air’s common stock. Assume Fast Cool issued 35,000 shares of its $20 fair value common stock for 80% of HD Air’s common stock. Fast Cool uses the simple equity
Problem 3-16 (LO 2, 5) 100% bargain, complicated equity, second year. Refer to the preceding information for Fast Cool’s acquisition of HD Air’s common stock. Assume Fast Cool issued 25,000 shares of its $20 fair value common stock for 100% of HD Air’s common stock.Fast Cool uses the simple
Problem 3-15 (LO 2, 5) 100%, complicated excess, equity, second year. Refer to the preceding information for Fast Cool’s acquisition of HD Air’s common stock. Assume Fast Cool issued 40,000 shares of its $20 fair value common stock for 100% of HD Air’s common stock.Fast Cool uses the simple
Problem 3-14 (LO 2, 5) 100%, complicated excess, first year. Refer to the preceding information for Fast Cool’s acquisition of HD Air’s common stock. Assume Fast Cool issued 40,000 shares of its $20 fair value common stock for 100% of HD Air’s common stock. Fast Cool uses the simple equity
Problem 3-13 (LO 4, 5) 100%, sophisticated equity method, several excesses, third year. Refer to the preceding information for Pcraft’s acquisition of Sailair’s common stock. Assume that Pcraft paid $500,000 for 100% of Sailair common stock. Pcraft uses the sophisticated equity method to
Problem 3-12 (LO 3, 5) 70%, cost method worksheet, several adjustments, third year. Refer to the preceding information for Pcraft’s acquisition of Sailair’s common stock. Assume that Pcraft paid $400,000 for 70% of Sailair common stock. Pcraft uses the cost method to account for its investment
Problem 3-11 (LO 3, 5) 70%, cost method worksheet, several adjustments, first year. Refer to the preceding information for Pcraft’s acquisition of Sailair’s common stock. Assume that Pcraft paid $400,000 for 70% of Sailair common stock. Pcraft uses the cost method to account for its investment
Problem 3-10 (LO 3, 5) 100%, cost method worksheet, several adjustments, third year. Refer to the preceding information for Pcraft’s acquisition of Sailair’s common stock. Assume that Pcraft paid $500,000 for 100% of Sailair common stock. Pcraft uses the cost method to account for its
Problem 3-9 (LO 2, 5) 100%, equity method worksheet, several adjustments, third year. Refer to the preceding information for Pcraft’s acquisition of Sailair’s common stock. Assume that Pcraft paid $500,000 for 100% of Sailair common stock. Pcraft uses the simple equity method to account for its
Problem 3-8 (LO 3, 5) Cost method, 80% interest, worksheet, several adjustments.Detner International purchased 80% of the outstanding stock of Hughes Company for $1,600,000 plus $8,000 of direct acquisition costs on January 1, 20X5. At the purchase date, the inventory, the equipment, and the
Problem 3-7 (LO 6) Interperiod purchase. Jeter Corporation purchased 80% of the outstanding stock of Summer Company for $275,000 on May 1, 20X1. Summer Company had the following stockholders’ equity:Common stock ($5 par) . . . . . . . . . . . . $150,000 Retained earnings . . . . . . . . . . . . .
Problem 3-6 (LO 2) Equity method, 80% interest, worksheet, statements. Scully Company prepared the following balance sheet on January 1, 20X1:Assets Liabilities and Equity Current assets . . . . . . . . . . . . . $ 50,000 Liabilities . . . . . . . . . . . . . . . . $140,000 Land . . . . . . . . . .
Problem 3-4 (LO 3) Cost method, consolidated statements.The trial balances of Chango Company and its subsidiary, Lhasa Inc., are as follows on December 31, 20X3:Chango Lhasa Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 530,000 130,000 Depreciable Fixed
Problem 3-3 (LO 4) Sophisticated equity method adjustments, consolidated worksheet. (This is the same as Problem 3-2, except the sophisticated equity method is used.) On January 1, 20X1, Peres Company purchased 80% of the common stock of Soll Company for $308,000.On this date, Soll had common
Problem 3-2 (LO 2) Equity method adjustments, consolidated worksheet. On January 1, 20X1, Peres Company purchased 80% of the common stock of Soll Company for $308,000.On this date, Soll had common stock, other paid-in capital, and retained earnings of $50,000,$100,000, and $150,000, respectively.
Problem 3-1 (LO 1) Alternative investment account methods, effect on eliminations. On January 1, 20X1, Peter Company purchased an 80% interest in Saul Company by issuing 10,000 of its common stock shares with a par value of $10 per share and a fair value of $72 per share. The direct acquisition
Exercise B-3 (LO 9) D&D for nontaxable exchange with tax loss carryforward.Palto issued 20,000 of its $5 par value common stock shares, with a fair value of $35 each, for a 100% interest in the Sarge Company on January 1, 20X1. The balance sheet of the Sarge Company on that date was as
Exercise B-2 (LO 9) D&D and income statement for nontaxable exchange. Lucy Company issued securities with a fair value of $465,000 for a 90% interest in Desmond Company on January 1, 20X1, at which time Desmond Company had the following balance sheet:Assets Liabilities and Equity Accounts
Exercise B-1 (LO 9) D&D for nontaxable exchange. Rainman Corporation is considering the acquisition of Lamb Company through the purchase of Lamb’s common stock. Rainman Corporation will issue 20,000 shares of its $5 par common stock, with a fair value of $25 per share, in exchange for all 10,000
Exercise 11 (LO 7) Impairment loss. The Albers Company purchased an 80% interest in the Baker Company on January 1, 20X1, for $850,000. The following determination and distribution of excess schedule was prepared at the time of purchase:Price paid . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise 10 (LO 6) Purchase during the year, elimination entries, income statement. Karen Company had the following balance sheet on January 1, 20X2:Assets Liabilities and Equity Current assets . . . . . . . . . . . . . $200,000 Current liabilities . . . . . . . . . . . $100,000 Equipment (net) . .
Exercise 9 (LO 5) Amortization procedures, several years. Walt Company purchased an 80% interest in Mitchell Company common stock on January 1, 20X1. Appraisals of Mitchell’s assets and liabilities were performed, and Walt ended up paying an amount that was greater than the fair value of
Exercise 8 (LO 3) Cost method, second year, eliminations, statements. The trial balances of Pepper and Salt companies of Exercise 7 for December 31, 20X2, are presented as follows:Pepper Salt Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152,000
Exercise 7 (LO 3) Cost method, first year, eliminations, statements. (Note: Read carefully. This is not the same as Exercise 3 or 5.) Pepper Company purchased an 80% interest in Salt Company for $250,000 in cash on January 1, 20X1, when Salt Company had the following balance sheet:Assets
Exercise 6 (LO 4) Sophisticated equity method, second year, eliminations, statements. The trial balances of Pepper and Salt companies of Exercise 5 for December 31, 20X2, are presented as follows:Pepper Salt Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise 5 (LO 4) Sophisticated equity method, first year, eliminations, statements. (Note: Read carefully. This is not the same as Exercise 3.) Pepper Company purchased an 80% interest in Salt Company for $250,000 on January 1, 20X1, when Salt Company had the following balance sheet:Assets
Exercise 4 (LO 2) Equity method, second year, eliminations, statements. The trial balances of Pepper and Salt companies of Exercise 3 for December 31, 20X2, are presented as follows:Pepper Salt Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152,000
Exercise 3 (LO 2) Equity method, first year, eliminations, statements. Pepper Company purchased an 80% interest in Salt Company for $250,000 in cash on January 1, 20X1, when Salt Company had the following balance sheet:Assets Liabilities and Equity Current assets . . . . . . . . . . . . . $100,000
Exercise 2 (LO 1) Alternative investment models, more complex D&D. Mast Corporation purchased a 75% interest in the common stock of Shaw Company on January 1, 20X4, for $462,500 cash. Shaw had the following balance sheet on that date:Assets Liabilities and Equity Current assets . . . . . . . . . .
Exercise 1 (LO 1) Compare alternative methods for recording income. Cooke Company purchased an 80% interest in Hill Company common stock for $360,000 cash on January 1, 20X1. At that time, Hill Company had the following balance sheet:Assets Liabilities and Equity Current assets . . . . . . . . . .
8. How would push-down accounting simplify consolidated worksheet procedures?
7. It seems as if consolidated net income is always less than the sum of the parent’s and subsidiary’s separately calculated net incomes. Is it possible that the consolidated net income of the two affiliated companies could actually exceed the sum of their individual net incomes?
5. A parent company purchased an 80% interest in a subsidiary on January 1, 20X1, at a price high enough to result in goodwill. Included in the assets of the subsidiary are inventory with a book value of $50,000 and a fair value of $60,000 and equipment with a book value of$100,000 and a fair value
4. A parent company purchased an 80% interest in a subsidiary on July 1, 20X1. The subsidiary reported net income of $60,000 for 20X1, earned evenly during the year. The parent’s net income, exclusive of any income of the subsidiary, was $140,000. The price paid for the subsidiary exceeded book
3. What is the noncontrolling share of consolidated net income? Does it reflect adjustments based on fair values at the purchase date? How has it been displayed in income statements in the past, and how should it be displayed?
1. A parent company paid $400,000 for a 100% interest in a subsidiary. At the end of the first year, the subsidiary reported net income of $30,000 and paid $5,000 in dividends. The price paid reflected understated equipment of $50,000, which will be amortized over 10 years. What would be the
Problem 2-13 (LO 4, 5, 6, 7, 8, 9) 80% purchase, goodwill, several adjustments, worksheet. Use the preceding information for Purnell’s purchase of Soma common stock. Assume Purnell exchanged 19,000 shares of its own stock for 80% of the common stock of Soma.The stock had a market value of $50 per
Problem 2-12 (LO 4, 5, 6, 7, 9) 100% purchase, bargain, several adjustments, worksheet. Use the preceding information for Purnell’s purchase of Soma common stock. Assume Purnell exchanged 16,000 shares of its own stock for 100% of the common stock of Soma. The stock had a market value of $50 per
Problem 2-11 (LO 4, 5, 6, 7, 9) 100% purchase, goodwill, several adjustments, worksheet. Use the preceding information for Purnell’s purchase of Soma common stock. Assume Purnell exchanged 24,000 shares of its own stock for 100% of the common stock of Soma. The stock had a market value of $50 per
Problem 2-10 (LO 4, 5, 6, 7, 8) 80% purchase, bargain, limited adjustments, worksheet. Use the preceding information for Pantera’s purchase of Sader common stock. Assume Pantera purchased 80% of the common stock for $200,000. Pantera had the following balance sheet immediately after the purchase:
Problem 2-9 (LO 4, 5, 6, 7, 8) 80% purchase, goodwill, limited adjustments, worksheet. Use the preceding information for Pantera’s purchase of Sader common stock. Assume Pantera purchased 80% of the common stock for $360,000. Pantera had the following balance sheet immediately after the
Problem 2-8 (LO 4, 5, 6, 7) 100% purchase, bargain, limited adjustments, worksheet. Use the preceding information for Pantera’s purchase of Sader common stock. Assume Pantera purchased 100% of the common stock for $250,000. Pantera had the following balance sheet immediately after the purchase:
Problem 2-7 (LO 4, 5, 6, 7) 100% purchase, goodwill, limited adjustments, worksheet. Use the preceding information for Pantera’s purchase of Sader common stock. Assume Pantera purchased 100% of the common stock for $410,000. Pantera had the following balance sheet immediately after the
Problem 2-5 (LO 4, 5, 6, 7) 100% purchase, goodwill, worksheet. On December 31, 20X1, Adam Company purchased 100% of the common stock of Scott Company for $475,000.On this date, any excess of cost over book value was attributed to accounts with fair values that differed from book values. These
Problem 2-4 (LO 6, 7, 10) 100% purchase, goodwill, push-down accounting. On March 1, 20X5, Collier Enterprises purchased a 100% interest in Robby Corporation for $480,000.It was decided that Robby Corporation will apply push-down accounting principles to account for this acquisition.Robby
Problem 2-3 (LO 4, 5, 6, 7) 100% purchase, bargain, elimination entries only. On March 1, 20X5, Carlson Enterprises purchased a 100% interest in Express Corporation for$400,000.Express Corporation had the following balance sheet on February 28, 20X5:Carlson Enterprises received an independent
Problem 2-2 (LO 4, 5, 6, 7, 8) 80% purchase, goodwill, consolidated balance sheet.Using the data given in Problem 2-1, assume that Rose Company exchanged 18,000 of its $35 fair value ($10 par value) shares for 16,000 of the outstanding shares of Daisy Company.1. Record the investment in Daisy
Problem 2-1 (LO 4, 5, 6, 7) 100% purchase, goodwill, consolidated balance sheet.On July 1, 20X6, Rose Company exchanged 18,000 of its $35 fair value ($10 par value) shares for all the outstanding shares of Daisy Company. Rose paid direct acquisition costs of $20,000 and $5,000 in stock issuance
Exercise 9 (LO 10) Push-down accounting. On January 1, 20X7, Knight Corporation purchased all the outstanding shares of Craig Company for $950,000. It has been decided that Craig Company will use push-down accounting principles to account for this transaction. The current balance sheet is stated at
Exercise 8 (LO 6, 7, 8) 80% purchase, alternative prices. Venus Company purchased 8,000 shares of Saturn Company for $82 per share. Just prior to the purchase, Saturn Company had the following balance sheet:Venus Company believes that the inventory has a fair value of $400,000 and that the
Exercise 7 (LO 6, 7, 8) 80% purchase, goodwill. Quincy Company purchased 80% of the common stock of Cooker Company for $700,000 plus direct acquisition costs of $30,000. At the time of the purchase, Cooker Company had the following balance sheet:Based on the preceding facts, 1. Prepare a zone
Exercise 6 (LO 6, 7, 9) Bargain purchase, allocation. Lancaster Company is purchasing 100% of the outstanding common stock of Villard Company for $600,000 plus $20,000 of direct acquisition costs. The following balance sheet was prepared for Villard on the date of the purchase:Based on the
Exercise 5 (LO 6, 7) Purchase at alternative prices. Libra Company is purchasing 100%of the outstanding stock of Gemini Company, which has the following balance sheet on the date of acquisition:Appraisals indicate that the following fair values should be acknowledged:Inventory . . . . . . . . . . .
Exercise 4 (LO 6, 7) Recording purchase with goodwill. Wood’n Wares Inc. purchased all the outstanding stock of Pine Inc. for $950,000. Wood’n Wares also paid $10,000 in direct acquisition costs and $3,000 for indirect acquisition costs. Just before the investment, the two companies had the
Exercise 3 (LO 6) Simple price zone analysis. Flower Company is considering the cash purchase of 100% of the outstanding stock of Vase Company. The terms are not set, and alternative prices are being considered for negotiation. The balance sheet of Vase Company shows the following values:Appraisals
Exercise 2 (LO 4) Asset compared to stock purchase. Glass Company is thinking about acquiring Plastic Company. Glass Company is considering two methods of accomplishing control and is wondering how the accounting treatment will differ under each method. Glass Company has estimated that the fair
Exercise 1 (LO 1) Investment recording methods. Solara Corporation is considering investing in Focus Corporation, but is unsure about what level of ownership should be undertaken.Solara and Focus have the following reported incomes:Focus paid $15,000 in cash dividends to its investors. Prepare a
7. Pillow Company is purchasing an 80% interest in the common stock of Sleep Company.Sleep’s balance sheet amounts at book and fair value are as follows:What will be the amount of the noncontrolling interest in the consolidated balance sheet, and how will it be displayed in the consolidated
6. Pillow Company is purchasing an 80% interest in the common stock of Sleep Company.Sleep’s balance sheet amounts at book and fair value are as follows:What adjustments to recorded values of Sleep Company’s accounts will be made in the consolidation process (including the creation of new
5. Pillow Company is purchasing a 100% interest in the common stock of Sleep Company.Sleep’s balance sheet amounts at book and fair value are as follows:What adjustments to recorded values of Sleep Company’s accounts will be made in the consolidation process (including the creation of new
4. Padro Company purchases a controlling interest in Salto Company. Salto had identifiable net assets with a cost of $400,000 and a fair value of $600,000. It was agreed that the total fair value of Salto’s common stock was $900,000. What adjustments will be made to Salto’s accounts, and what
3. What does the elimination process accomplish?
2. A parent must normally consolidate a company if it owns over 50% of the outstanding voting common stock of that company. In your own words, explain how a parent could gain control without an over 50% interest in a company.
1. Johnson Company is considering an investment in the common stock of Bickler Company.What are the accounting issues surrounding the recording of income in future periods if Johnson purchases:a. 10% of Bickler’s outstanding shares.b. 30% of Bickler’s outstanding shares.c. 100% of Bickler’s
Assume, instead, that New Company has 50,000 shares of $16 par value common stock outstanding. Record the pooling of interests on the books of New Company if it then issues 60,000 shares to acquire Thompson. All other equity items remain unchanged.
Assume, instead, that New Company has 100,000 shares of $8 par value common stock outstanding. Record the pooling of interests on the books of New Company if it issues 100,000 new shares.
Record the pooling of interests on the books of New Company.
Using the values derived in Requirement 1, record the purchase on the Caswell books.Problem 1B-1 (LO 11) Recording a pooling with acquisition costs. Grant Corporation has been looking to expand its operations and has decided to acquire the assets of Turner Company and Murray Company. Grant will
Provide an estimate of fair value for the bonds and for goodwill.
Record payment (if any) of contingent consideration on January 1, 20X3, assuming that the quoted value of the stock is $57.50. (Round shares to nearest whole share.)Problem 1A-1 (LO 9) Estimate goodwill, record purchase. Caswell Company is contemplating the purchase of LaBelle Company as of January
Indicate the disclosure that would be necessary in the financial statements of Dodd Corporation on December 31, 20X1, assuming the quoted value of the stock is $62 per share.
Record the purchase on the books of Dodd Corporation on January 1, 20X1. Include support for calculations used to arrive at the values assigned to the assets and liabilities. Use price zone analysis to aid your solution.
(LO 8) Contingent consideration. Dodd Corporation is purchasing the net assets, exclusive of cash, of Walsh Company as of January 1, 20X1, at which time Walsh Company’s balance sheet is as follows:Dodd will issue 20,000 shares of its common stock with a $2 par value and a quoted fair value of $60
(LO 8) Tax-free exchange, tax loss carryover. Gusty Company issued 10,000 shares of $10 par common stock for the net assets of Marco Incorporated on December 31, 20X2. The stock has a fair value of $60 per share. Direct acquisition costs were $10,000, and the cost of issuing the stock was $3,000.
(LO 8) Revaluation of leases. Sentry Inc. purchased for $2,300,000 in cash the net assets of New Equipment Leasing Company. The purchase was made on December 31, 20X1, at which time New Equipment had prepared the following balance sheet:
(LO 5, 7) Issue stock, several of each priority accounts, goodwill, purchase entry and pro forma income.Part A. Garden International has been looking to expand its operations and has decided to acquire the net assets of Iris Company. Garden will be issuing 10,000 shares of its $5 par value common
(LO 6) Pro forma income after purchase. On January 1, 20X1, Arthur Enterprises acquired Ann’s Tool Company. Prior to the merger of the two companies, each company had prepared an estimate of its income for the year ended December 31, 20X1. These estimates are as follows:Management believes the
(LO 5, 7) Stock purchase, goodwill. HT Corporation is contemplating the acquisition of the net assets of Smith Company on December 31, 20X1. It is considering making an offer, which would include a cash payout of $290,000 along with giving 10,000 shares of its $2 par value common stock that is
(LO 7) Cash purchase, several of each priority, with goodwill. Tweedy Corporation is contemplating the purchase of the net assets of Sylvester Corporation in anticipation of expanding its operations. The balance sheet of Sylvester Corporation on December 31, 20X1, is as follows:The agreed-upon
(LO 4, 7) Revaluation of assets. Jansen Company is a corporation that was organized on July 1, 20X1. The June 30, 20X6 balance sheet for Jansen is as follows:Machinery was purchased in fiscal years 20X2, 20X4, and 20X5 for $500,000, $850,000, and $660,000, respectively. The straight-line method of
(LO 7) Alternate consideration, bargain. Kent Corporation is considering the purchase of Williams Incorporated. Kent has asked you, its accountant, to evaluate the various offers it might make to Williams Incorporated. The December 31, 20X1 balance sheet of Williams is as follows:
Prepare a pro forma income statement for the combined firm for 20X1. Show supporting calculations for consolidated income. Ignore tax issues.
Prepare a zone analysis for the purchase, and record the purchase.
(LO 4, 7) Pro forma income after a purchase. Molitor Company is contemplating the acquisition of Yount Inc. on January 1, 20X1. If Molitor proceeded to acquire Yount, it would pay $730,000 in cash to Yount and direct acquisition costs of $20,000.The January 1, 20X1 balance sheet of Yount Inc. is
(LO 3) Purchase of two companies with goodwill. Barker Corporation has been looking to expand its operations and has decided to acquire the assets of Verk Company and Kent Company. Barker will issue 30,000 shares of its $10 par common stock to acquire the net assets of Verk Company and will issue
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