Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 5, Problem 5.3.4C
To determine
Introduction:Consolidated income statement is the combination of income, revenue and expenses of holding companies and its subsidiaries depicting the overall scenario of the aggregate of the company as a whole.
To prepare:The consolidated statements if equipment is leased out.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Wember Company acquired a subsidiary company on December 31, 2015, and recorded the cost of the intangible assets it acquired as follows:
Patent
$100,000
Trade name
80,000
Goodwill
150,000
The patent is being amortized by the straight-line method over an expected life of 10 years with no residual value. Amortization has been recorded for the current year. The trade name was considered to have an indefinite life.
Because of the success of the subsidiary in the past, Wember has not previously considered any of the intangible assets to be impaired. However, in 2019, because of a current recession and technological changes in the subsidiary’s industry, Wember decides to review all of its intangible assets for impairment and record any adjustments at December 31, 2019.
Wember estimates that the fair value of the patent is $42,000. The company estimates the fair value of the trade name to be $90,000 but decides that it now has a limited life of 5 years. The subsidiary company,…
Wember Company acquired a subsidiary company on December 31, 2015, and recorded the cost of the intangible assets it acquired as follows:
Patent
$80,000
Trade name
100,000
Goodwill
250,000
The patent is being amortized by the straight-line method over an expected life of 10 years with no residual value. Amortization has been recorded for the current year. The trade name was considered to have an indefinite life.
Because of the success of the subsidiary in the past, Wember has not previously considered any of the intangible assets to be impaired. However, in 2019, because of a current recession and technological changes in the subsidiary’s industry, Wember decides to review all of its intangible assets for impairment and record any adjustments at December 31, 2019.
Wember estimates that the fair value of the patent is $42,000. The company estimates the fair value of the trade name to be $120,000 but decides that it now has a limited life of 6 years. The subsidiary…
Anton Company acquired the net assets of Hair Company on January 1, 2015, for $600,000. Using a business valuation model, the estimated value of Anton Company was $650,000 immediately after the acquisition. The fair value of Anton’s net assets was $400,000. 1. What amount of goodwill was recorded by Anton Company when it acquired Hair Company?2. Using the information, answer the questions posed in the following two independent situations: a. On December 31, 2016, there were indications that goodwill might have been impaired. At that time, the existing recorded book value of Anton Company’s net assets, including goodwill, was $500,000. The fair value of the net assets, exclusive of goodwill, was estimated to be $340,000. The value of the business was estimated to be $520,000. Is goodwill impaired? If so, what adjustment is needed? b. On December 31, 2018, there were indications that goodwill might have been impaired. At that time, the existing recorded book value of Anton Company’s net…
Chapter 5 Solutions
Advanced Accounting
Ch. 5 - Prob. 1UTICh. 5 - Subsidiary Company S has $1000,000 of bonds...Ch. 5 - Plessor Industries acquired 80% of the outstanding...Ch. 5 - Company P purchased $100,000 of subsidiary Company...Ch. 5 - Prob. 5UTICh. 5 - Prob. 6UTICh. 5 - Prob. 7UTICh. 5 - Prob. 1ECh. 5 - Prob. 2ECh. 5 - Prob. 3.1E
Ch. 5 - Prob. 3.2ECh. 5 - Prob. 4ECh. 5 - Carlton Company is an 80%- owned subsidiary of...Ch. 5 - Carlton Company is an 80%- owned subsidiary of...Ch. 5 - Prob. 6.1ECh. 5 - Prob. 6.2ECh. 5 - Prob. 7.1ECh. 5 - Prob. 7.2ECh. 5 - Prob. 7.3ECh. 5 - Prob. 8.1ECh. 5 - Prob. 8.3ECh. 5 - Prob. 9ECh. 5 - Prob. 5.1.1PCh. 5 - Prob. 5.1.2PCh. 5 - Prob. 5.2PCh. 5 - Prob. 5.3PCh. 5 - Prob. 5.4PCh. 5 - Prob. 5.5PCh. 5 - Prob. 5.6PCh. 5 - Prob. 5.7PCh. 5 - Prob. 5.8.1PCh. 5 - Prob. 5.8.2PCh. 5 - Prob. 5.9PCh. 5 - Prob. 5.10PCh. 5 - Prob. 5.14PCh. 5 - Prob. 5.2.1CCh. 5 - Prob. 5.2.2CCh. 5 - Prob. 5.3.1CCh. 5 - Prob. 5.3.2CCh. 5 - Prob. 5.3.3CCh. 5 - Prob. 5.3.4C
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Wember Company acquired a subsidiary company on December 31, 2015, and recorded the cost of the intangible assets it acquired as follows: Patent $80,000 Trade name 100,000 Goodwill 250,000 The patent is being amortized by the straight-line method over an expected life of 10 years with no residual value. Amortization has been recorded for the current year. The trade name was considered to have an indefinite life. Because of the success of the subsidiary in the past, Wember has not previously considered any of the intangible assets to be impaired. However, in 2019, because of a current recession and technological changes in the subsidiary’s industry, Wember decides to review all of its intangible assets for impairment and record any adjustments at December 31, 2019. Wember estimates that the fair value of the patent is $42,000. The company estimates the fair value of the trade name to be $120,000 but decides that it now has a limited life of 6 years. The subsidiary…arrow_forwardIn January 1, 2015, Fun company purchased Company A for $40,000 in cash and paid immediately. Fun company assumed all of Company A's assets and assumed Company A's liabilities. company A has assets valued at $60,000 and liabilities valued at $50,000. Question 2: in 2016, fun company must test for the impairment of goodwill. Assume the only goodwill on fun company's books is from the acquisition of company A. Fun company determined that the goodwill has an estimated future cash flow of $25,000 and a fair market value of $20,000. Does fun company have to recognize an impairment? Why or why not? If an impairment must be recognized, compute the impairment loss and record the journal entry. ACTUAL QUESTION: suppose that the estimated future cash flow of goodwill in question #2 is $32,000, while the fair market value continues to be $20,000. Does fun company have to recognize an impairment? Why or why not? If an impairment must be recognized, compute the impairment loss and record the…arrow_forwardIn January 1, 2015, Fun company purchased Company A for $40,000 in cash and paid immediately. Fun company assumed all of Company A's assets and assumed Company A's liabilities. company A has assets valued at $60,000 and liabilities valued at $50,000. question: in 2016, fun company must test for the impairment of goodwill. Assume the only goodwill on fun company's books is from the acquisition of company A. Fun company determined that the goodwill has an estimated future cash flow of $25,000 and a fair market value of $20,000. Does fun company have to recognize an impairment? Why or why not? If an impairment must be recognized, compute the impairment loss and record the journal entry.arrow_forward
- On December 31, 2016, immediately after Todd Company’s acquisition of 80% of Keller Company, their balance sheets are as attached:An appraisal on December 31, 2016, which is considered carefully and approved by the boards of directors of both companies, places a total replacement value, less depreciation, of $2,800,000 on Keller’s depreciable fixed assets. The remaining depreciable life is 20 years. Todd Company offers to purchase all the assets of Keller Company, subject to its liabilities, as of December 31, 2016, for $2,500,000. Some of the stockholders of Keller Company object to the price because it does not include enough consideration for goodwill. 20% of the shareholders elect not to sell their shares. A counterproposal is made to 80% of the shareholders and an agreement is reached. In exchange for its own shares, Todd acquires 8,000 shares of the common stock of Keller at the agreed-upon $280 per share. The price includes a control premium. The shares held by the NCI are…arrow_forwardPritano Company acquired all the net assets of Succo Company on December 31, 2013, for $2,185,400 cash. The balance sheet of Succo Company immediately prior to the acquisition showed: Book value Fair value Current assets $ 871,440 $871,440 Plant and equipment 1,025,090 1,437,590 Total $1,896,530 $2,309,030 Liabilities $194,060 $207,670 Common stock 484,800 Other contributed capital 632,900 Retained earnings 584,770 Total $1,896,530 As part of the negotiations, Pritano agreed to pay the stockholders of Succo $356,690 cash if the post-combination earnings of Pritano averaged $2,185,400 or more per year over the next two years. The estimated fair value of the contingent consideration was $143,480 on the date of the acquisition. (a) Prepare the journal entry on the books of Pritano to record the acquisition on December 31, 2013. (If no entry is required, select…arrow_forwardOn December 31, Year 4, Prone Inc. sold a piece of equipment to its 90 percent owned subsidiary, Supine Co. Details are as follows: Original purchase date January 1, Year 1 Original cost to Prone $65,000 Original estimate of salvage value $10,000 Original estimate of economic life 5 years $60,000 Intercompany selling price Both companies use straight-line depreciation. Both companies think that, as of the end of Year 4, the equipment's remaining useful life will be four years and the salvage value will become zero. In preparing its Year 5 consolidated financial statements, consolidated depreciation expense will be reduced by: $8,775 $7,800 O $7,020 O $9,750arrow_forward
- Abra Ltd sold an item of plant to its subsidiary Cadabra Ltd on 1 January 2017 for $50 000. The asset had cost Abra Ltd $60 000 when acquired on 1 January 2015. At that time the useful life of the plant was assessed at 6 years. Rounded to the nearest dollar, the consolidation elimination entries at 30 June 2017 in relation to the sale of plant are which of the following? a. Plant Dr 10 000 Gain on sale Dr 10 000 Accumulated depreciation Cr 20 000 Deferred tax asset Dr 3 000 Income tax expense Cr 3 000 Accumulated depreciation Dr 1 250 Depreciation expense Cr 1 250 Income tax expense Dr 375 Deferred tax asset Cr 375 b. Accumulated depreciation Dr 10 000 Gain on sale Dr 10 000 Plant Cr 20 000 Deferred tax asset Dr 3 000 Income tax expense Cr 3…arrow_forwardOn January 1, 2014, Bigg Corporation sold equipment with a book value of $20,000 and a 10-year remaining useful life to its wholly-owned subsidiary, Little Corporation, for $30,000. Both Bigg and Little use the straight-line depreciation method, assuming no salvage value. On December 31, 2014, the separate company financial statements held the following balances associated with the equipment: Bigg Little Gain on sale of equipment $10,000 Depreciation expense $3,000 Equipment 30,000 Accumulated depreciation 3,000 A working paper entry to consolidate the financial statements of Bigg and Little on December 31,…arrow_forwardOn January 1, 2015, Company P sold a machine to its 70%-owned subsidiary, Company S, for $60,000. The book value of the machine was $50,000. The machine was depreciated using the straight-line method over five years. On December 31, 2017, Company S sold the machine to a nonaffiliated firm for $35,000. On the consolidated statements, how much gain or loss on the intercompany machine sale should be recognized in 2015, 2016, and 2017?arrow_forward
- Abra Ltd sold an item of plant to its subsidiary Cadabra Ltd on 1 January 2017 for $50 000. The asset had cost Abra Ltd $60 000 when acquired on 1 January 2015. At that time the useful life of the plant was assessed at 6 years. Rounded to the nearest dollar, the consolidation elimination entries at 30 June 2017 in relation to the sale of plant are which of the following? a. Gain on sale Dr 10 000 Plant Cr 10 000 Deferred tax asset Dr 3 000 Income tax expense Cr 3 000 Accumulated depreciation Dr 1 250 Depreciation expense Cr 1 250 Income tax expense Dr 375 Deferred tax asset Cr 375 b. Accumulated depreciation Dr 10 000 Gain on sale Dr 10 000 Plant Cr 20 000 Deferred tax asset Dr 3 000 Income tax expense Cr 3 000 Accumulated…arrow_forwardOn July 15, 2016, Cottonwood Industries sold a patent and equipment to Roquemore Corporation for $750,000 and $325,000, respectively. The book value of the patent and equipment on the date of sale were $120,000 and $400,000 (cost of $550,000 less accumulated depreciation of $150,000), respectively. Required: Prepare the journal entries to record the sales of the patent and equipmentarrow_forwardPlenny Corporation sold equipment to its 90%-owned subsidiary, Sourdough Corp., on January 1, 2014. Plenny sold the equipment for $100,000 when its book value was $75,000 and it had a 5-year remaining useful life with no expected salvage value. Straight-line depreciation is used by both companies. Separate balance sheets for Plenny and Sourdough included the following equipment and accumulated depreciation amounts on December 31, 2014: Plenny Sourdough Equipment $850,000 $300,000 Less: Accumulated depreciation (200,000) (60,000) Equipment-net $650,000 $240,000 Consolidated amounts for equipment and accumulated depreciation at December 31, 2014 were respectively A. $1,125,000 and $260,000. B. $1,125,000 and…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you