On January 1, Year 4, Place Inc. acquired an 80 percent interest in Setting Co. for...

  
 
 

Transcribed Image Text:

On January 1, Year 4, Place Inc. acquired an 80 percent interest in Setting Co. for $800,000 cash. At that time, Setting's assets and liabilities had carrying amounts equal to fair values, except for the following: Undervalued by $75,000 Undervalued by $50,000 Overvalued by $40,000 Turns over 6 times a year Inventory Planet and equipment Bonds payable Remaining useful life: 1e years Maturity date: December 31, Year 8 The premium/discount on bonds payable is amortized on a straight-line basis. At January 1, Year 4, Setting had 100,000 common shares outstanding with a carrying amount of $550,000 and retained earnings of $50,000. The abbreviated financial statements of Place and Setting on December 31, Year 6, are as follows: STATEMENTS OF FINANCIAL POSITION Setting $1,250,000 $1,555,000 Place Plant and equipment (net) Investment in Setting 800,000 Current assets 950,000 800,000 $3,000, е00 $2, 355, 000 Common shares $1,000,000 $ 550,000 Retained earnings 10% bonds payable 1,500,000 725,000 800,000 Current liabilities 280,000 $3,000,000 $2,355,000 500,000 COMBINED INCOME AND RETAINED EARNINGS STATEMENTS Place Setting $2,500,000 $900,000 1,200,000 Sales Cost of goods sold 330,000 220,000 550,000 350,000 Expenses 400,000 1,600,000 Net operating income Dividends received from Setting 900,000 100, ө0ө Profit 1,000,000 350,000 Retained earnings, Jan. 1, Year 6 800,000 500,000 1,800,000 850,000 Dividends declared and paid 125,000 $1,500,000 $725,000 300,000 Retained earnings, Dec. 31, Year 6 How many years' worth of acquisition differential (fair value increment) amortizations must be used to calculate consolidated retained earnings at January 1, Year 6, from Place's cost-basis accounting records? Multiple Choice 3 On January 1, Year 4, Place Inc. acquired an 80 percent interest in Setting Co. for $800,000 cash. At that time, Setting's assets and liabilities had carrying amounts equal to fair values, except for the following: Undervalued by $75,000 Undervalued by $50,000 Overvalued by $40,000 Turns over 6 times a year Inventory Planet and equipment Bonds payable Remaining useful life: 1e years Maturity date: December 31, Year 8 The premium/discount on bonds payable is amortized on a straight-line basis. At January 1, Year 4, Setting had 100,000 common shares outstanding with a carrying amount of $550,000 and retained earnings of $50,000. The abbreviated financial statements of Place and Setting on December 31, Year 6, are as follows: STATEMENTS OF FINANCIAL POSITION Setting $1,250,000 $1,555,000 Place Plant and equipment (net) Investment in Setting 800,000 Current assets 950,000 800,000 $3,000, е00 $2, 355, 000 Common shares $1,000,000 $ 550,000 Retained earnings 10% bonds payable 1,500,000 725,000 800,000 Current liabilities 280,000 $3,000,000 $2,355,000 500,000 COMBINED INCOME AND RETAINED EARNINGS STATEMENTS Place Setting $2,500,000 $900,000 1,200,000 Sales Cost of goods sold 330,000 220,000 550,000 350,000 Expenses 400,000 1,600,000 Net operating income Dividends received from Setting 900,000 100, ө0ө Profit 1,000,000 350,000 Retained earnings, Jan. 1, Year 6 800,000 500,000 1,800,000 850,000 Dividends declared and paid 125,000 $1,500,000 $725,000 300,000 Retained earnings, Dec. 31, Year 6 How many years' worth of acquisition differential (fair value increment) amortizations must be used to calculate consolidated retained earnings at January 1, Year 6, from Place's cost-basis accounting records? Multiple Choice 3 On January 1, Year 4, Place Inc. acquired an 80 percent interest in Setting Co. for $800,000 cash. At that time, Setting's assets and liabilities had carrying amounts equal to fair values, except for the following: Undervalued by $75,000 Undervalued by $50,000 Overvalued by $40,000 Turns over 6 times a year Inventory Planet and equipment Bonds payable Remaining useful life: 1e years Maturity date: December 31, Year 8 The premium/discount on bonds payable is amortized on a straight-line basis. At January 1, Year 4, Setting had 100,000 common shares outstanding with a carrying amount of $550,000 and retained earnings of $50,000. The abbreviated financial statements of Place and Setting on December 31, Year 6, are as follows: STATEMENTS OF FINANCIAL POSITION Setting $1,250,000 $1,555,000 Place Plant and equipment (net) Investment in Setting 800,000 Current assets 950,000 800,000 $3,000, е00 $2, 355, 000 Common shares $1,000,000 $ 550,000 Retained earnings 10% bonds payable 1,500,000 725,000 800,000 Current liabilities 280,000 $3,000,000 $2,355,000 500,000 COMBINED INCOME AND RETAINED EARNINGS STATEMENTS Place Setting $2,500,000 $900,000 1,200,000 Sales Cost of goods sold 330,000 220,000 550,000 350,000 Expenses 400,000 1,600,000 Net operating income Dividends received from Setting 900,000 100, ө0ө Profit 1,000,000 350,000 Retained earnings, Jan. 1, Year 6 800,000 500,000 1,800,000 850,000 Dividends declared and paid 125,000 $1,500,000 $725,000 300,000 Retained earnings, Dec. 31, Year 6 How many years' worth of acquisition differential (fair value increment) amortizations must be used to calculate consolidated retained earnings at January 1, Year 6, from Place's cost-basis accounting records? Multiple Choice 3 On January 1, Year 4, Place Inc. acquired an 80 percent interest in Setting Co. for $800,000 cash. At that time, Setting's assets and liabilities had carrying amounts equal to fair values, except for the following: Undervalued by $75,000 Undervalued by $50,000 Overvalued by $40,000 Turns over 6 times a year Inventory Planet and equipment Bonds payable Remaining useful life: 1e years Maturity date: December 31, Year 8 The premium/discount on bonds payable is amortized on a straight-line basis. At January 1, Year 4, Setting had 100,000 common shares outstanding with a carrying amount of $550,000 and retained earnings of $50,000. The abbreviated financial statements of Place and Setting on December 31, Year 6, are as follows: STATEMENTS OF FINANCIAL POSITION Setting $1,250,000 $1,555,000 Place Plant and equipment (net) Investment in Setting 800,000 Current assets 950,000 800,000 $3,000, е00 $2, 355, 000 Common shares $1,000,000 $ 550,000 Retained earnings 10% bonds payable 1,500,000 725,000 800,000 Current liabilities 280,000 $3,000,000 $2,355,000 500,000 COMBINED INCOME AND RETAINED EARNINGS STATEMENTS Place Setting $2,500,000 $900,000 1,200,000 Sales Cost of goods sold 330,000 220,000 550,000 350,000 Expenses 400,000 1,600,000 Net operating income Dividends received from Setting 900,000 100, ө0ө Profit 1,000,000 350,000 Retained earnings, Jan. 1, Year 6 800,000 500,000 1,800,000 850,000 Dividends declared and paid 125,000 $1,500,000 $725,000 300,000 Retained earnings, Dec. 31, Year 6 How many years' worth of acquisition differential (fair value increment) amortizations must be used to calculate consolidated retained earnings at January 1, Year 6, from Place's cost-basis accounting records? Multiple Choice 3 On January 1, Year 4, Place Inc. acquired an 80 percent interest in Setting Co. for $800,000 cash. At that time, Setting's assets and liabilities had carrying amounts equal to fair values, except for the following: Undervalued by $75,000 Undervalued by $50,000 Overvalued by $40,000 Turns over 6 times a year Inventory Planet and equipment Bonds payable Remaining useful life: 1e years Maturity date: December 31, Year 8 The premium/discount on bonds payable is amortized on a straight-line basis. At January 1, Year 4, Setting had 100,000 common shares outstanding with a carrying amount of $550,000 and retained earnings of $50,000. The abbreviated financial statements of Place and Setting on December 31, Year 6, are as follows: STATEMENTS OF FINANCIAL POSITION Setting $1,250,000 $1,555,000 Place Plant and equipment (net) Investment in Setting 800,000 Current assets 950,000 800,000 $3,000, е00 $2, 355, 000 Common shares $1,000,000 $ 550,000 Retained earnings 10% bonds payable 1,500,000 725,000 800,000 Current liabilities 280,000 $3,000,000 $2,355,000 500,000 COMBINED INCOME AND RETAINED EARNINGS STATEMENTS Place Setting $2,500,000 $900,000 1,200,000 Sales Cost of goods sold 330,000 220,000 550,000 350,000 Expenses 400,000 1,600,000 Net operating income Dividends received from Setting 900,000 100, ө0ө Profit 1,000,000 350,000 Retained earnings, Jan. 1, Year 6 800,000 500,000 1,800,000 850,000 Dividends declared and paid 125,000 $1,500,000 $725,000 300,000 Retained earnings, Dec. 31, Year 6 How many years' worth of acquisition differential (fair value increment) amortizations must be used to calculate consolidated retained earnings at January 1, Year 6, from Place's cost-basis accounting records? Multiple Choice 3 On January 1, Year 4, Place Inc. acquired an 80 percent interest in Setting Co. for $800,000 cash. At that time, Setting's assets and liabilities had carrying amounts equal to fair values, except for the following: Undervalued by $75,000 Undervalued by $50,000 Overvalued by $40,000 Turns over 6 times a year Inventory Planet and equipment Bonds payable Remaining useful life: 1e years Maturity date: December 31, Year 8 The premium/discount on bonds payable is amortized on a straight-line basis. At January 1, Year 4, Setting had 100,000 common shares outstanding with a carrying amount of $550,000 and retained earnings of $50,000. The abbreviated financial statements of Place and Setting on December 31, Year 6, are as follows: STATEMENTS OF FINANCIAL POSITION Setting $1,250,000 $1,555,000 Place Plant and equipment (net) Investment in Setting 800,000 Current assets 950,000 800,000 $3,000, е00 $2, 355, 000 Common shares $1,000,000 $ 550,000 Retained earnings 10% bonds payable 1,500,000 725,000 800,000 Current liabilities 280,000 $3,000,000 $2,355,000 500,000 COMBINED INCOME AND RETAINED EARNINGS STATEMENTS Place Setting $2,500,000 $900,000 1,200,000 Sales Cost of goods sold 330,000 220,000 550,000 350,000 Expenses 400,000 1,600,000 Net operating income Dividends received from Setting 900,000 100, ө0ө Profit 1,000,000 350,000 Retained earnings, Jan. 1, Year 6 800,000 500,000 1,800,000 850,000 Dividends declared and paid 125,000 $1,500,000 $725,000 300,000 Retained earnings, Dec. 31, Year 6 How many years' worth of acquisition differential (fair value increment) amortizations must be used to calculate consolidated retained earnings at January 1, Year 6, from Place's cost-basis accounting records? Multiple Choice 3

Answer rating: 100% (QA)

Consolidation of an 80Owned SubsidiaryDi... View the full answer