Choco Inc. acquired all of the outstanding common stock of Allie Co. on January 1, 2017(t), for
Question:
Choco Inc. acquired all of the outstanding common stock of Allie Co. on January 1, 2017(t), for $620,000 cash. Following is the balance sheet for Allie Co. in December 31, 2016.
| Book Value | Fair Value | FV-BV |
---|---|---|---|
Current assets | $100,000 | $100,000 | |
Building (30 years) | 200,000 | 260,000 | |
Equipment (10 years) | 300,000 | 340,000 | |
Total liabilities | $(140,000) | $(140,000) | |
Net assets | $460,000 | $560,000 | |
Common stock | $(200,000) | | |
Additional paid in capital | (150,000) | | |
Retained earnings 12/31/2016 | (110,000) | | |
Total Stockholders’ equity | $(460,000) | | |
Total liabilities and Stockholders’ equity | $(600,000) | | |
| 2017(t+1) | | 2018(t+2) | |
| Net income | Dividends | Net income | Dividends |
Allie (subsidiary) | $(70,000) | $10,000 | $(60,000) | $10,000 |
After Choco’s acquisition, Allie Co. didn’t had any changes in common stock and additional paid in capital.
- Calculate goodwill on 1/1/2017(t), the acquisition date?
- Calculate annual amortization of Building and Equipment on 1/1/2017(t), the acquisition date?
- If Choco use EQUITY METHOD to report about investment in Allie.
What is the Investment in Allie Co. balance on Choco's books as of December 31, 2018(t+2)?
- What is the Equity in Allie Co. income balance on Choco's books as of December 31, 2018(t+2), if the equity method has been applied?
- What is Allie’s balance of retained earnings on 1/1/2018(t+1)?
Advanced Accounting
ISBN: 978-1934319307
2nd edition
Authors: Susan S. Hamlen, Ronald J. Huefner, James A. Largay III