Palm company aquired 100per of storm companys voting stock onJan 120xx.by issuing 10,000 shares of its 10 par value common sotck(fv of 14 per share). as of that date storm had STOCKHOLDERS EQUITYTOTALING 105000. Land shown on record was undervalued by 10,000.Equipment (WITH 5YR REMAIN LIFE) was undervalued by 5000. A secretformula developed by storm was appraised at 20,000 with a estimated20yr life. computation of good will(if any)
Fair value of consideration (10000 * 14) = ?
Book value of S comp. = ?
Allocated to land = ?
Allocated to equipment = ?
Allocated to secret formula =?
Good will = ?
Accounts Palm Co. Storm Co. Income Statement Revenues (485,000) (190,000) Cost of goods sold 160,000 70,000 Depreciation expense 130,000 52,000 Amortization expense Equity in subsidiary earnings (66,000) Net Income (261,000) (68,000) Statement of Retained Earnings Retained earnings 1/1 (659,000) (98,000) Net income (above) (261,000) (68,000) Dividends paid 175,500 40,000 Retained earnings12/31 (744,500) (126,000) Balance Sheet Current assets 268,000 75,000 Investment in Storm Co. 216,000 Land 427,500 58,000 Buildings and equipment (net) 713,000 161,000 Formula Total assets 1,624,500 294,000 Current liabilities (110,000) (19,000) Long-term liabilities (80,000) (84,000) Common stock (600,000) (60,000) Additional paid-in capital (90,000) (5,000) Retained earnings 12/31 (744,500) (126,000) Total Liabilities andEquity (1,624,500) (294,000) Parentheses indicate a credit balance
Palm company aquired 100per of storm companys voting stock onJan 120xx.by issuing 10,000 shares of its 10 par value common sotck(fv of 14 per share). as of that date storm had STOCKHOLDERS EQUITYTOTALING 105000. Land shown on record was undervalued by 10,000.Equipment (WITH 5YR REMAIN LIFE) was undervalued by 5000. A secretformula developed by storm was appraised at 20,000 with a estimated20yr life. computation of good will(if any)
Fair value of consideration (10000 * 14) = ?
Book value of S comp. = ?
Allocated to land = ?
Allocated to equipment = ?
Allocated to secret formula =?
Good will = ?
| Accounts | Palm Co. | Storm Co. |
| Income Statement | ||
| Revenues | (485,000) | (190,000) |
| Cost of goods sold | 160,000 | 70,000 |
| Depreciation expense | 130,000 | 52,000 |
| Amortization expense | ||
| Equity in subsidiary earnings | (66,000) | |
| Net Income | (261,000) | (68,000) |
| Statement of Retained Earnings | ||
| Retained earnings 1/1 | (659,000) | (98,000) |
| Net income (above) | (261,000) | (68,000) |
| Dividends paid | 175,500 | 40,000 |
| Retained earnings12/31 | (744,500) | (126,000) |
| Balance Sheet | ||
| Current assets | 268,000 | 75,000 |
| Investment in Storm Co. | 216,000 | |
| Land | 427,500 | 58,000 |
| Buildings and equipment (net) | 713,000 | 161,000 |
| Formula | ||
| Total assets | 1,624,500 | 294,000 |
| Current liabilities | (110,000) | (19,000) |
| Long-term liabilities | (80,000) | (84,000) |
| Common stock | (600,000) | (60,000) |
| Additional paid-in capital | (90,000) | (5,000) |
| Retained earnings 12/31 | (744,500) | (126,000) |
| Total Liabilities andEquity | (1,624,500) | (294,000) |
| Parentheses indicate a credit | ||
| balance |
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Related questions
Allison Corporation acquired all of the outstanding voting stockof Mathias, Inc., on January 1, 2017, in exchange for $6,162,000 incash. Allison intends to maintain Mathias as a wholly ownedsubsidiary. Both companies have December 31 fiscal year-ends. Atthe acquisition date, Mathiasâs stockholdersâ equity was $2,070,000including retained earnings of $1,570,000.
At the acquisition date, Allison prepared the following fairvalue allocation schedule for its newly acquired subsidiary:
| Consideration transferred | $ | 6,162,000 | |||||
| Mathias stockholders'equity | 2,070,000 | ||||||
| Excess fair over bookvalue | $ | 4,092,000 | |||||
| to unpatented technology(8-year remaining life) | $ | 912,000 | |||||
| to patents (10-year remaininglife) | 2,640,000 | ||||||
| to increase long-term debt(undervalued, 5-year remaining life) | (170,000 | ) | 3,382,000 | ||||
| Goodwill | $ | 710,000 | |||||
Post-acquisition, Allison employs the equity method to accountfor its investment in Mathias. During the two years following thebusiness combination, Mathias reports the following income anddividends:
| Income | Dividends | |||
| 2017 | $ | 453,750 | $ | 25,000 |
| 2018 | 907,500 | 50,000 | ||
No asset impairments have occurred since the acquisitiondate.
Individual financial statements for each company as of December31, 2018, appear below. Parentheses indicate credit balances.Dividends declared were paid in the same period.
| Allison | Mathias | ||||||
| IncomeStatement | |||||||
| Sales | $ | (6,680,000 | ) | $ | (3,970,000 | ) | |
| Cost of goods sold | 4,696,000 | 2,545,500 | |||||
| Depreciation expense | 945,000 | 319,000 | |||||
| Amortization expense | 465,000 | 124,000 | |||||
| Interest expense | 83,000 | 74,000 | |||||
| Equity earnings in Mathias | (563,500 | ) | 0 | ||||
| Net income | $ | (1,054,500 | ) | $ | (907,500 | ) | |
| Statement of RetainedEarnings | |||||||
| Retained earnings 1/1 | $ | (5,480,000 | ) | $ | (1,998,750 | ) | |
| Net income (above) | (1,054,500 | ) | (907,500 | ) | |||
| Dividends declared | 560,000 | 50,000 | |||||
| Retained earnings 12/31 | $ | (5,974,500 | ) | $ | (2,856,250 | ) | |
| BalanceSheet | |||||||
| Cash | $ | 96,000 | $ | 164,000 | |||
| Accounts receivable | 1,020,000 | 260,000 | |||||
| Inventory | 1,840,000 | 855,000 | |||||
| Investment in Mathias | 6,760,250 | 0 | |||||
| Equipment (net) | 3,840,000 | 2,101,000 | |||||
| Patents | 130,000 | 0 | |||||
| Unpatented technology | 2,195,000 | 1,520,000 | |||||
| Goodwill | 474,000 | 0 | |||||
| Total assets | $ | 16,355,250 | $ | 4,900,000 | |||
| Accounts payable | $ | (1,180,750 | ) | $ | (343,750 | ) | |
| Long-term debt | $ | (1,000,000 | ) | $ | (1,200,000 | ) | |
| Common stock | (8,200,000 | ) | (500,000 | ) | |||
| Retained earnings 12/31 | (5,974,500 | ) | (2,856,250 | ) | |||
| Total liabilities andequity | $ | (16,355,250 | ) | $ | (4,900,000 | ) | |
Required:
Determine Allison's December 31, 2018, Investment inMathias balance.
Prepare a worksheet to determine the consolidated valuesto be reported on Allisonâs financial statements.
Prepare a worksheet to determine the consolidated values to bereported on Allisonâs financial statements. (For accounts wheremultiple consolidation entries are required, combine all debitentries into one amount and enter this amount in the debit columnof the worksheet. Similarly, combine all credit entries into oneamount and enter this amount in the credit column of the worksheet.Amounts in the Debit and Credit columns should be entered aspositive. Negative amounts for the Consolidated Totals columnshould be entered with a minus sign.)
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| Chapman Company obtains 100 percent of Abernethy Companyâs stock on January 1, 2014. As of that date, Abernethy has the following trial balance: |
| Debit | Credit | ||||
| Accounts payable | $ | 57,300 | |||
| Accounts receivable | $ | 42,200 | |||
| Additional paid-in capital | 50,000 | ||||
| Buildings (net) (4-year life) | 214,000 | ||||
| Cash and short-term investments | 82,250 | ||||
| Common stock | 250,000 | ||||
| Equipment (net) (5-year life) | 375,000 | ||||
| Inventory | 90,500 | ||||
| Land | 117,000 | ||||
| Long-term liabilities (mature 12/31/17) | 170,000 | ||||
| Retained earnings, 1/1/14 | 409,650 | ||||
| Supplies | 16,000 | ||||
| Totals | $ | 936,950 | $ | 936,950 | |
| During 2014, Abernethy reported net income of $117,500 while declaring and paying dividends of $15,000. During 2015, Abernethy reported net income of $171,250 while declaring and paying dividends of $55,000. |
| Assume that Chapman Company acquired Abernethyâs common stock for $860,500 in cash. As of January 1, 2014, Abernethyâs land had a fair value of $132,000, its buildings were valued at $287,600, and its equipment was appraised at $352,500. Chapman uses the equity method for this investment. |
| Prepare consolidation worksheet entries for December 31, 2014, and December 31, 2015. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) There should be ten entries and I solved the first few:
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On December 31, 2016, the accounts inthe ledger of Monroe Entertainment Co. are listed below. Allaccounts have normal balances. At the beginning of the year,retained earning balance is $4,000.
Note Payable due 10/31/2018 | $ 10,000 |
Accounts Receivable | 6,000 |
Accumulated Depreciation- Equipment (Creditbalance) | 6,000 |
Dividends | 1,000 |
Cash | 16,000 |
Depreciation Expense | 5,000 |
Equipment | 12,000 |
Fees Earned | 50,000 |
Rent Expense | 6,000 |
Supplies | 2,000 |
Supplies Expense | 3,000 |
Wages Expense | 21,000 |
Wages Payable | 2,000 |
Q1. Generate the Income statement
| Monroe Entertainment Company Income Statement | ||
For the Year Ended December 31, 2016 | ||
Revenues: | ||
S | ||
Total Revenue | ||
Expenses: | ||
Total Expenses: | ||
Net Income | $ | |
Please generate Retained Earnings Statement based uponthe above information and net income youcalculated.
Monroe Entertainment Company
Retained Earnings Statement
For the Year Ended Dec 31, 2016
Retained Earnings at beginning of the year | $___________________ |
Net Income | _____________________ |
Less: Dividends | _____________________ |
Net Increase/(Decrease) in the end | ______________________ |
Retained Earnings at end of the year | $_____________________ |
Please generate Balance Sheet as of December 31, 2016.
| Monroe Entertainment Company Balance Sheet | |||||
Dec 31, 2016 | |||||
Assets | Liabilities | ||||
$ | $ | ||||
Total Assets | $ | Total Liabilities and Shareholdersâ Equity | $ | ||
