Placid Lake Corporation acquired 70 percent of the outstanding voting stock of Scenic, Incorporated, on January 1, 2023, when Scenic had a net book value of $470,000. Any excess fair value was assigned to intangible assets and amortized at a rate of $5,000 per year. Placid Lake's 2024 net income before consideration of its relationship with Scenic (and before adjustments for intra-entity sales) was $370,000. Scenic reported net income of $180,000. Placid Lake declared $170,000 in dividends during this period: Scenic paid $47,000. At the end of 2024, selected figures from the two companies' balance sheets were as follows: Items Inventory Land Equipment (net) Placid Lake $ 210,000 670,000 470,000 Scenic $ 97,000 270,000 370,000
Placid Lake Corporation acquired 70 percent of the outstanding voting stock of Scenic, Incorporated, on January 1, 2023, when Scenic had a net book value of $470,000. Any excess fair value was assigned to intangible assets and amortized at a rate of $5,000 per year. Placid Lake's 2024 net income before consideration of its relationship with Scenic (and before adjustments for intra-entity sales) was $370,000. Scenic reported net income of $180,000. Placid Lake declared $170,000 in dividends during this period: Scenic paid $47,000. At the end of 2024, selected figures from the two companies' balance sheets were as follows: Items Inventory Land Equipment (net) Placid Lake $ 210,000 670,000 470,000 Scenic $ 97,000 270,000 370,000
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 8MC
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Step 1: Introduction:
VIEWStep 2: (a) Determine the consolidated net income for Placid Lake and its subsidiary:
VIEWStep 3: (b) Determine the allocation of consolidated net income assuming upstream intra-entity sales:
VIEWStep 4: (c) Determine the allocation of consolidated net income assuming downstream intra-entity sales:
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