Jims Place. acquires Pams PR Corporation on January 1, 2019 by issuing 50,000 shares of $1 par
Question:
Jims Place. acquires Pams PR Corporation on January 1, 2019 by issuing 50,000 shares of $1 par common stock with a market price of $30 per share on the acquisition date and paying $250,000 cash. The assets and liabilities on Pams PR’s balance sheet were valued at fair values except equipment that was undervalued by $225,000 (9-year life), an unrecorded patent of $100,000 (10-year life), and an unrecorded trademark of $240,000 (10-year life). All depreciation/ amortization is straight-line and Jims Place uses the equity method to account for the investment.
The pre-consolidated 2019 financial statements are below.
12/31/19 Financial Statements | ||
Jims Place. | Pams PR Corporation | |
Income Statement: | ||
Sales | $ 1,750,000 | $ 750,000 |
CoGS | (600,000) | (400,000) |
Gross Profit | 1,150,000 | 350,000 |
Equity Income | 166,000 | |
Operating Expenses | (200,000) | (125,000) |
Net Income | $ 1,116,000 | $ 225,000 |
Statement of Retained Earnings: | ||
Beginning Retained Earnings | $ 901,900 | $ 149,800 |
Net Income | 1,116,000 | 225,000 |
Dividends | (100,000) | (25,000) |
Ending Retained Earnings | $ 1,917,900 | $ 349,800 |
Balance Sheet: | ||
Assets | ||
Cash | $ 100,600 | $ 75,400 |
Accounts Receivable | 195,000 | 132,000 |
Inventory | 131,000 | 201,000 |
PPE | 2,003,500 | 406,500 |
Equity Investment | 1,916,000 | |
Total Assets | $ 4,346,100 | $ 814,900 |
Liabs and SE | ||
Accounts Payable | $ 40,500 | $ 32,700 |
Salaries and Taxes Payable | 37,600 | 45,900 |
Notes Payables | 510,100 | 220,000 |
Common Stock | 260,000 | 60,000 |
APIC | 1,580,000 | 106,500 |
Retained Earnings | 1,917,900 | 349,800 |
Total Liabs and SE | $ 4,346,100 | $ 814,900 |
1) What amount of the AAP is allocated to Goodwill?
2) Which of the following equity method journal entries does Jims Place make in 2019?
3) Assume during 2020, Pams PR records net income of $300,000 and pays dividends of $70,000. What is Jims Place.'s total equity income in 2020?
College Accounting Chapters 1-30
ISBN: 978-1259631115
15th edition
Authors: John Price, M. David Haddock, Michael Farina