Gomez Corporation paid $12,600 for a 70% interest in Kodak Corporation on January 1, 2020, when Kodak's
Question:
Gomez Corporation paid $12,600 for a 70% interest in Kodak Corporation on January 1, 2020, when Kodak's stockholders' equity consisted of $7,000 Capital Stock, APIC of $3,000 and $3,000 of Retained Earnings. The excess cost over book value was attributable to trademark, which has not been impaired since acquisition date.
Additional information:
1. Gomez's sells merchandise to Kodak at 120% of Gomez cost. During 2020, Gomez's sales to Kodak were $4,800, of which half of the merchandise remained in Kodak's inventory at December 31, 2020. (The 2020 ending inventory was sold in 2021.) During 2021, Gomez's sales to Kodak were $6,000 of which 60% remained in Kodak's inventory at December 31, 2021.
At year-end 2021, Kodak owed Gomez $ $3,000 for the inventory purchased during 2021.
2. Gomez Corporation sold equipment with a book value of $2,000 and a remaining useful life of four years and no salvage value to Kodak Corporation on January 1, 2021 for $2,800. Straight-line depreciation is used.
3. During 2021, Kodak sold to Gomez land for $50,000 that had a book value of $20,000. Gomez still owns the land at 12/31/21.
4. Separate company financial statements for Gomez Corporation and Kodak at December 31, 2021 are summarized in the first two columns of the consolidation working papers. See Spreadsheet Tab.
| 1. Prepare the acquisition analysis as of acquisition date. Compute the |
| unamortized differential as of 1/1/2021. |
| 2. Analyze each intercompany transaction. Label as either upstream |
| downstream. |
| 3. SEPARATELY Calculate Net income to the controlling interest for the year 2021 |
| 4. Verify the calculation of the balance in the account equity in sub |
| earnings and record the parent company entries with respect to its investment during 2021 |
| 5. Prepare all elimination entries for 2021 |
| 1. Prepare the acquisition analysis as of acquisition date. Compute the |
| unamortized differential as of 1/1/2021. |
| 2. Analyze each intercompany transaction. Label as either upstream |
| downstream. |
| 3. SEPARATELY Calculate Net income to the controlling interest for the year 2021 |
| 4. Verify the calculation of the balance in the account equity in sub |
| earnings and record the parent company entries with respect to its investment during 2021 |
| 5. Prepare all elimination entries for 2021 |
Expert Answer:
1 Gomez paid 12600 for a 70 interest in Kodak on 1120 when Kodaks stockholders equity consisted of 7... View the full answer
