Dragon Corporation purchased 90 percent of Heart Corporation's outstanding stock for $15,200,000 cash on January 1,2020...

 

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Dragon Corporation purchased 90 percent of Heart Corporation's outstanding stock for $15,200,000 cash on January 1,2020 when Heart's stockholders' equity consisted of $7,000,000 capital stock and $4,400,000 retained earnings. The excess was allocated $3,000,000 to undervalued equipment with an eight-year remaining useful life and the remainder to Goodwill. Heart's net income and dividends for 2020 were $3,000,000 and $600,000 respectively. Dragon owed Heart 30,000 at 12-31-2020 which was recorded on Dragon's books at 12-31-2020 Comparative balance sheets at for Dragon and Heart Corporations at December 31, 2020 after they had closed out their fiscal years are as follows [In thousands.) Cash Receivables-net Dividends receivable Inventory Land Buildings-net Equipment-net Investment in Heart Total Accounts payable Dividends payable Capital stock Retained earnings Total Dragon 1,100 1,800 450 2,900 3,000 9,000 7,000 17,023 42,273 1.100 1,800 30.000 9.373 42.273 Heart 700 1.500 Preliminary Calculation Cost of 90% investment in Heart Implied total fair value Book Value of Heart Excess fair value over book value Allocation to equipment Remainder to Goodwill 3,000 3.100 5,000 3,500 16,800 2,500 500 7,000 6,800 16,800 Required 1 Perform the preliminary calculation to determine the excess of fair value over book value for the initial investment in Heart Corporation. (Including to identify any amount allocated to Goodwill. Round to the nearest dollar.) 2. Prepare an Amortization schedule for the Fair valuebook value differences to include the initial amounts determined and amortization expense for 2020 and the unamortized balances at 12-31-2020 3. Calculate the total income from Heart for 2020 4 Calculate the balance in the Investment in Heart as recorded on the books of Dragon at December 31, 2020. 5. Prepare the journal entries needed to consolidate Dragon and Heart's balance sheet 6. Prepare the consolidated balance sheet work papers for Dragon corporation and subsidiary on December 31, 2020 [1 check figure 2469 Dragon Corporation purchased 90 percent of Heart Corporation's outstanding stock for $15,200,000 cash on January 1,2020 when Heart's stockholders' equity consisted of $7,000,000 capital stock and $4,400,000 retained earnings. The excess was allocated $3,000,000 to undervalued equipment with an eight-year remaining useful life and the remainder to Goodwill. Heart's net income and dividends for 2020 were $3,000,000 and $600,000 respectively. Dragon owed Heart 30,000 at 12-31-2020 which was recorded on Dragon's books at 12-31-2020 Comparative balance sheets at for Dragon and Heart Corporations at December 31, 2020 after they had closed out their fiscal years are as follows [In thousands.) Cash Receivables-net Dividends receivable Inventory Land Buildings-net Equipment-net Investment in Heart Total Accounts payable Dividends payable Capital stock Retained earnings Total Dragon 1,100 1,800 450 2,900 3,000 9,000 7,000 17,023 42,273 1.100 1,800 30.000 9.373 42.273 Heart 700 1.500 Preliminary Calculation Cost of 90% investment in Heart Implied total fair value Book Value of Heart Excess fair value over book value Allocation to equipment Remainder to Goodwill 3,000 3.100 5,000 3,500 16,800 2,500 500 7,000 6,800 16,800 Required 1 Perform the preliminary calculation to determine the excess of fair value over book value for the initial investment in Heart Corporation. (Including to identify any amount allocated to Goodwill. Round to the nearest dollar.) 2. Prepare an Amortization schedule for the Fair valuebook value differences to include the initial amounts determined and amortization expense for 2020 and the unamortized balances at 12-31-2020 3. Calculate the total income from Heart for 2020 4 Calculate the balance in the Investment in Heart as recorded on the books of Dragon at December 31, 2020. 5. Prepare the journal entries needed to consolidate Dragon and Heart's balance sheet 6. Prepare the consolidated balance sheet work papers for Dragon corporation and subsidiary on December 31, 2020 [1 check figure 2469

Answer rating: 100% (QA)

1 Excess of fair value over book value 800000 2 Expense to be charged for 2017 375000 3 Total income ... View the full answer