Heavy Rocks Company acquires 100% of the stock of Simple Machinery Co. on January 1, 2XX0, for$7,200,000 cash. As of that date Simple Machinery had the following account balances:Book Value Fair Value$1,890,000 $1,890,0002,325,000 2,325,0001,050,000 1,200,0003,000,0002,700,000900,000 1,200,0001,800,000 2,700,000375,000 375,0006,000,0006,150,0001,500,000750,0002,340,000CashAccounts receivableInventoryBuilding-net (10 year life)Equipment-net (5 year life)LandAccounts PayableNotes Payable (due 12/31/2XX4)Common stockAdditional paid-in capitalRetained earningsIn 2XX0 and 2XX1, Simple Machinery had net income of $750,000 and $720,000, respectively. In addition,Simple Machinery paid dividends of $48,000 in both years. Inventory is assumed to be sold in 2XX0.Assume straight line amortization/ depreciation for assets and notes payable.What amount of inventory would be added to the parent's inventory balance to get consolidatedinventory at date of acquisition?

Consolidation is an activity in which financial statements of a parent and its subsidiary should be…

Heavy Rocks Company acquires 100% of the stock of Simple Machinery Co. on January 1, 2XX0, for $7,200,000 cash. As of that date Simple Machinery had the following account balances: Book Value Fair Value $1,890,000 $1,890,000 2,325,000 2,325,000 1,050,000 1,200,000 Cash Accounts receivable Inventory

Heavy Rocks Company acquires 100% of the stock of Simple Machinery Co. on January 1, 2XX0, for $7,200,000 cash. As of that date Simple Machinery had the following account balances: Book Value Fair Value $1,890,000 $1,890,000 2,325,000 2,325,000 1,050,000 1,200,000 Cash Accounts receivable Inventory

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 11MCQ

See similar textbooks

Similar questions

South Company acquires a 90% interest in West Company for $585,000 cash on January 1, 20X0, when West Company had the following balance sheet: Assets Liabilities and Equity Current assets $ 200,000 Current liabilities $100,000 Depreciable fixed assets (net) 400,000 Common Stock ($10 par) 200,000 Retained earnings 300,000 Total assets $ 600,000 Total liabilities & equity $600,000 The excess of the price paid over book value is attributable to the fixed assets, which have a fair value of $500,000, and to goodwill. The fixed assets have a 10-year remaining life. South Company uses the simple equity method to record its investment in West Company. For the year ending December 31, 20X0, the following information for West Company is available: West total net income: $50,000 West total dividends declared: $10,000 For the year ending December 31, 20X1, the following information for West Company is available: Retained Earnings January 1, 20X1 $340,000 Total Net Income $ 30,000 Total…
Abby Co. acquired all of the outstanding stock of Agnes Co. by issuing 100,000 shares of its P1 par value stock. The shares have a fair value of P15 per share. Abby Co. also paid P25,000 in direct acquisition costs. Prior to the transaction, the companies have the following balance sheets: Assets Abby Co. Agnes Co. Cash P 150,000 P 50,000 Accounts receivable 500,000 350,000 Inventory 900,000 600,000 Property, plant, and equipment (net) 1,850,000 900,000 Total assets P3,400,000 P1,900,000 Liabilities and Stockholders' Equity Current liabilities P 300,000 P 100,000 Bonds payable 1,000,000 600,000 Common stock (P1 par) 300,000 100,000 Paid-in capital in excess of par 800,000 900,000 Retained earnings 1,000,000 200,000 Total liabilities and equity P3,400,000 P1,900,000 The fair values of Agnes…
Pineapple Company acquired an 80% interest in Samsung Company for $272,000 cash on January 1, 2018. Samsung had the following Balance Sheet on the date of acquisition: Assets $ Liabilities $ Accounts receivable 90,000 Accounts payable 50,000 Depreciable fixed asstes 200,000 Bonds payable 50,000 Land 50,000 Discount on bonds payable (1,620) Goodwill 10,000 Comm stock ($10 par) 100,000 Retained Earnings 151,620 Total Asstes 350,000 Total liabilities & Equity 350,000 The excess of the price paid over book value is attributable to the Depreciable Fixed Assets, which have a fairvalue of $260,000. The Depreciable Assets have a 10 year remaining life.Samsung sold a piece of Land to Pineapple for $60,000 on January 1, 2019. It cost Samsung $50,000 to purchasethe land.On January 1, 2020, Samsung held merchandise acquired from Pineapple for $20,000. This beginning inventoryhad an applicable gross profit of 40%. During 2020, Pineapple sold $60,000 worth of merchandise…
Huey Company acquires 100% of the stock of Solar Corporation on January 1, 2019, for $2,400,000 cash. As of that date Solar had the following account balances: Book Value Fair value Cash $630,000 $630,000 Accounts receivable 775,000 775,000 Inventory 350,000 400,000 Building-net (10 year life) 1,000,000 900,000 Equipment-net (5 year life) 300,000 400,000 Land 600,000 900,000 Accounts Payable 125,000 125,000 Bonds Payable (Face amount $1,000,000, due 12/31/2023) 2,000,000 2,050,000 Common stock 500,000 Additional paid-in capital 250,000 Retained earnings 780,000 In 2019 and 2020, Solar had net income of $250,000 and $240,000, respectively. In addition, Solar paid dividends of $16,000 in both years. Inventory is assumed to be sold in 2019. Assume straight line amortization/ depreciation for assets and bonds payable. What amount of Solar's Bonds Payable would appear on the consolidated balance sheet at December 31, 2019? Select one: A. $2,050,000 B.$2,040,000 C. $2,000,000 D. $2,010,000
Pawn Corporation purchased 30 percent of Shop Company’s common stock on January 1, 20X5, by issuing preferred stock with a par value of $50,000 and a market price of $120,000. The following amounts relate to Shop's balance sheet items at that date: Book Value Fair Value Assets Cash & Receivables $ 200,000 $ 200,000 Buildings & Equipment 400,000 360,000 Less: Accumulated Depreciation (100,000) Total Assets $ 500,000 Liabilities & Equities Accounts Payable $ 50,000 50,000 Bonds Payable 200,000 200,000 Common Stock 100,000 Retained Earnings 150,000 Total Liabilities & Equities $ 500,000 Shop purchased buildings and equipment on January 1, 20X0, with an expected economic life of 20 years. No change in overall expected economic life occurred as a result of the acquisition of Pawn's stock. The amount paid in excess of the fair value of Shop's reported net assets is attributed to unrecorded copyrights with a remaining useful…
Huey Company acquires 100% of the stock of Solar Corporation on january 1, 2019, for $2.400,000 cash. As of that date Solor had the following account balances: Book Value Eair value Cash $630.000 $630,000 Accounts receivable 775.000 775,000 Inventory 350.000 400,000 Building-net (10 year life) 1,000,000 900,.000 Equipment-net (5 year life) 300.000 400.000 Land 600,000 900,000 Accounts Payable 125.000 125,000 Bonds Payable (Face amount S1,000,000. due 12/31/2023) 2.000.000 2,050,000 Common stock 500,000 Additional paid-in capital Retained earnings 250.000 780.000 in 2019 and 2020, Solar had net income of $250,000 and $240,000, respectively In addition, Solar paid dividends of $16,000 in both years, Inventory is assumed to be sold in 2019. Assume straight line amortization/ depreciation for assets and bonds payable. What amount of Solars single legat entity stockholders' equity will be included in the consolidated balance sheet at date of acquisition? Select one A $2.064.000 B $3,350,000…
Pencil Company acquired 70 percent of Stylus Corporation’s stock on January 2, 20X3, for $85,400 cash. Summarized balance sheet data for the companies on December 31, 20X2, follow: Pencil Company Stylus Corporation Book Value Fair Value Book Value Fair Value Cash $ 202,000 $ 202,000 $ 65,000 $ 65,000 Other Assets 401,000 401,000 124,000 124,000 Total Debits $ 603,000 $ 189,000 Current Liabilities $ 87,000 87,000 $ 67,000 67,000 Common Stock 287,000 65,000 Retained Earnings 229,000 57,000 Total Credits $ 603,000 $ 189,000 Required: Prepare a consolidated balance sheet immediately following the acquisition.
1. Winston Corporation purchases all of Harley Company’s stock on June 1 for P1,200,000. At that date, Harley had the following book and market values: Book Value Market Value Cash and Receivables P80,000 P80,000 Inventory 230,000 270,000 Plant Assets (net) 900,000 1,230,000 Cost of Goods Sold 750,000 Operating Expenses 170,000 Dividends 20,000 Liabilities 600,000 600,000 Common Stock 25,000 Retained Earnings 525,000 Sales 1,000,000 What amount of retained earnings is eliminated in the acquisition date worksheet elimination? 2. Banana Company purchases 80 percent of Mango. At the date…
1. Winston Corporation purchases all of Harley Company’s stock on June 1 for P1,200,000. At that date, Harley had the following book and market values: Book Value Market Value Cash and Receivables P80,000 P80,000 Inventory 230,000 270,000 Plant Assets (net) 900,000 1,230,000 Cost of Goods Sold 750,000 Operating Expenses 170,000 Dividends 20,000 Liabilities 600,000 600,000 Common Stock 25,000 Retained Earnings 525,000 Sales 1,000,000 What amount of retained earnings is eliminated in the acquisition date worksheet elimination? Please explain step by step with conclusion. Thank You
On January 2, 20Y7, Mikedes Company acquired 30% of the outstanding stock of Violet Company for $720,000. For the year ended December 31, 20Y7, Violet Company earned income of $190,000 and paid dividends of $40,000. On January 31, 20Y8, Mikedes Company sold all of its investment in Violet Company stock for $770,000. Required: Journalize the entries for Mikedes Company for the purchase of the stock, the share of Violet income, the dividends received from Violet Company, and the sale of the Violet Company stock. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.
On January 1, 2021, P Corporation purchases from an unrelated person all the outstanding stock of S Corporation for $90,000. S’s balance sheet on the purchase date is as follows: Assets Basis Fair Market Value Cash $ 5,000 $ 5,000 Accounts Receivable 20,000 20,000 Inventory (LIFO) 20,000 40,000 Equipment (accumulated depreciation of $10,000) 30,000 45,000 Total Assets $75,000 $110,000 Liabilities Accounts payable $20,000 $ 20,000 Equity 55,000 90,000 Total liabilities and equity $75,000 $110,000 P properly elects § 338. S’s tax rate is 21 percent. a. What is the aggregate basis of S’s assets after this transaction? b. What is the basis for each individual asset?
1. Winston Corporation purchases all of Harley Company's stock on June 1 for P1,200,000. At that date, Harley had the following book and market values: Book Value Market Value Cash and Receivables P80,000 P80.000 Inventory 230,000 270,000 Plant Assets (net) 900,000 1.230,000 Cost of Goods Sold 750,000 Operating Expenses 170,000 Dividends 20,000 Liabilities 600,000 600,000 Common Stock 25,000 Retained Earnings 525,000 Sales 1,000,000 What amount of retained earnings is eliminated in the acquisition date worksheet elimination?