Pop Co. acquired on the open market 80 percent of the outstanding common stock of Star...

          

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Pop Co. acquired on the open market 80 percent of the outstanding common stock of Star Co. on January 1, 2018, for $1,416,000. An independent appraisal indicated that the remaining 20% interest in Star is worth $354,000. The fair values of the identifiable net assets of Star are equal to their book values except for the following: ● Additional Information · ● ● ● Account Inventories ● Land Patents Long-term notes payable ● Book Value $ 350,000 388,000 160,000 (100,000) Fair Value $ 260,000 408,000 210,000 (90,000) The transactions qualified as a taxable acquisition. Both companies use the FIFO inventory method and sell all of their inventories at least once per year. Star's long-term notes payable are interest bearing and are due in full on December 31, 2027. Premiums and discounts are amortized using the straight-line method. The patents have a 10-year remaining useful life. Both companies depreciate and amortize their depreciable assets using the straight-line method. On January 1, 2018, Star sold equipment with an original cost of $100,000 and a carrying value of $57,000 to Pop for $36,000. The equipment had a remaining life of three years During 2018, Pop sold merchandise to Star for $50,000. Star sold all of these goods to non-affiliates during 2018. At December 31, 2018, Star still owed Pop payment for half of the intercompany purchases that occurred during 2018. No shares were issued by Pop and Star in 2018. In its separate financial statements Pop accounts for its investment in Star using the cost method. The separate financial statements of Pop and Star on December 31, 2018 are presented on page 2. During 2018, Star sold merchandise to Pop for $60,000, which included profit of $20,000. At December 31, 2018, half of this merchandise remained in Pop's inventory. Income Statement Sales Cost of Goods Sold Depreciation and amortization expense Interest Expense Other Income & (Expenses) Dividend Income Consolidated Net Income NCI's share of Net Income Controlling interest share of Net Income Retained Earnings Statement Retained Earnings 1/1/2018 Net Income in 2018 Dividends Declared Ending Retained Earnings Balance Sheet Cash Short-term receivables Inventories Buildings and equipment, net Land Patents Other assets Goodwill Investment in Star Total Assets Accounts payable Long-Term Notes payable Common stock Additional paid in capital Retained earnings Noncontrolling interest Total Liabilities and Equity Pop 525,000 Star 475,000 (225,000) (410,000) (45,000) (25,000) (67,500) (8,000) (75,000) (20,000) 42,000 5,000 154,500 17,000 154,500 312,000 154,500 (36,000) 430,500 50,000 34,000 350,000 310,000 200,000 375,000 1,416,000 2,735,000 273,500 1,225,000 306,000 500,000 430,500 2,735,000 17,000 375,000 17,000 (15,000) 377,000 100,000 50,000 320,000 519,000 388,000 144,000 100,000 1,621,000 144,000 100,000 200,000 800,000 377,000 1,621,000 Dr Cr Consolidated F-S (1) Calculate the goodwill that was recognized on the acquisition of Star. (2) Prepare the amortization table of accounting acquisition premium (AAP). Inventories Land Patents Long-term notes payable Goodwill Initial Allocation Intercompany equipment transaction: Amortization of AAP in 2018 Remaining AAP on December 31, 2018 (3) Determine the consolidated balances on 12/31/2018 for the following selected accounts. Sales: Cost of Sales: Depreciation and Amortization expense: Interest Income: Other Income & Expenses: Dividend Income: Noncontrolling Interest Share of Net income: Dividends declared: Accounts Receivable: Inventories: Building and Equipment, net Land: Patents: Investment in Star: Goodwill: Accounts Payable: Long-Term Notes Payable: Common Stock: Additional Paid in Capital: Noncontrolling Interest: Retained earnings 1/1/2018: (4) Complete the consolidated spreadsheet and record the consolidation journal entry on 12/31/2018. Pop Co. acquired on the open market 80 percent of the outstanding common stock of Star Co. on January 1, 2018, for $1,416,000. An independent appraisal indicated that the remaining 20% interest in Star is worth $354,000. The fair values of the identifiable net assets of Star are equal to their book values except for the following: ● Additional Information · ● ● ● Account Inventories ● Land Patents Long-term notes payable ● Book Value $ 350,000 388,000 160,000 (100,000) Fair Value $ 260,000 408,000 210,000 (90,000) The transactions qualified as a taxable acquisition. Both companies use the FIFO inventory method and sell all of their inventories at least once per year. Star's long-term notes payable are interest bearing and are due in full on December 31, 2027. Premiums and discounts are amortized using the straight-line method. The patents have a 10-year remaining useful life. Both companies depreciate and amortize their depreciable assets using the straight-line method. On January 1, 2018, Star sold equipment with an original cost of $100,000 and a carrying value of $57,000 to Pop for $36,000. The equipment had a remaining life of three years During 2018, Pop sold merchandise to Star for $50,000. Star sold all of these goods to non-affiliates during 2018. At December 31, 2018, Star still owed Pop payment for half of the intercompany purchases that occurred during 2018. No shares were issued by Pop and Star in 2018. In its separate financial statements Pop accounts for its investment in Star using the cost method. The separate financial statements of Pop and Star on December 31, 2018 are presented on page 2. During 2018, Star sold merchandise to Pop for $60,000, which included profit of $20,000. At December 31, 2018, half of this merchandise remained in Pop's inventory. Income Statement Sales Cost of Goods Sold Depreciation and amortization expense Interest Expense Other Income & (Expenses) Dividend Income Consolidated Net Income NCI's share of Net Income Controlling interest share of Net Income Retained Earnings Statement Retained Earnings 1/1/2018 Net Income in 2018 Dividends Declared Ending Retained Earnings Balance Sheet Cash Short-term receivables Inventories Buildings and equipment, net Land Patents Other assets Goodwill Investment in Star Total Assets Accounts payable Long-Term Notes payable Common stock Additional paid in capital Retained earnings Noncontrolling interest Total Liabilities and Equity Pop 525,000 Star 475,000 (225,000) (410,000) (45,000) (25,000) (67,500) (8,000) (75,000) (20,000) 42,000 5,000 154,500 17,000 154,500 312,000 154,500 (36,000) 430,500 50,000 34,000 350,000 310,000 200,000 375,000 1,416,000 2,735,000 273,500 1,225,000 306,000 500,000 430,500 2,735,000 17,000 375,000 17,000 (15,000) 377,000 100,000 50,000 320,000 519,000 388,000 144,000 100,000 1,621,000 144,000 100,000 200,000 800,000 377,000 1,621,000 Dr Cr Consolidated F-S (1) Calculate the goodwill that was recognized on the acquisition of Star. (2) Prepare the amortization table of accounting acquisition premium (AAP). Inventories Land Patents Long-term notes payable Goodwill Initial Allocation Intercompany equipment transaction: Amortization of AAP in 2018 Remaining AAP on December 31, 2018 (3) Determine the consolidated balances on 12/31/2018 for the following selected accounts. Sales: Cost of Sales: Depreciation and Amortization expense: Interest Income: Other Income & Expenses: Dividend Income: Noncontrolling Interest Share of Net income: Dividends declared: Accounts Receivable: Inventories: Building and Equipment, net Land: Patents: Investment in Star: Goodwill: Accounts Payable: Long-Term Notes Payable: Common Stock: Additional Paid in Capital: Noncontrolling Interest: Retained earnings 1/1/2018: (4) Complete the consolidated spreadsheet and record the consolidation journal entry on 12/31/2018.

Answer rating: 100% (QA)

Intercompany equipment transaction Equipment64000 Loss on sale21000 Accumulated depreciation43000 To eliminate the unrealized gain on the sale of equipment Depreciation expense7000 Accumulated depreci... View the full answer