{"id":7215,"date":"2021-10-12T15:44:45","date_gmt":"2021-10-12T15:44:45","guid":{"rendered":"https:\/\/assignmenttutors.net\/blog\/accounting-question-accounting-homework-help\/"},"modified":"2021-10-12T15:44:45","modified_gmt":"2021-10-12T15:44:45","slug":"accounting-question-accounting-homework-help","status":"publish","type":"post","link":"https:\/\/assignmenttutors.net\/blog\/accounting-question-accounting-homework-help\/","title":{"rendered":"Accounting question | Accounting homework help"},"content":{"rendered":"
\n

(1).<\/span><\/strong>Herbert, Inc., acquired all of Rambis Company\u2019s outstanding stock on January 1, 2012, for $574,000 in cash. Annual excess amortization of $12,000 results from this transaction. On the date of the takeover, Herbert reported retained earnings of $400,000, and Rambis reported a $200,000 balance. Herbert reported internal income of $40,000 in 2012 and $50,000 in 2013 and paid $10,000 in dividends each year. Rambis reported net income of $20,000 in 2012 and $30,000 in 2013 and paid $5,000 in dividends each year.<\/span><\/p>\n

\u00a0<\/p>\n

a.<\/span><\/em>Assume that Herbert\u2019s internal income figures above do not include any income from the subsidiary.<\/span><\/p>\n

\u00a0<\/p>\n

\u2022 If the parent uses the equity method, what is the amount reported as consolidated retained earnings on December 31, 2013?<\/span><\/p>\n

\u00a0<\/p>\n

\u2022 Would the amount of consolidated retained earnings change if the parent had applied either the initial value or partial equity method for internal accounting purposes?<\/span><\/p>\n

\u00a0<\/p>\n

b.<\/span><\/em>Under each of the following situations, what is the Investment in Rambis account balance on Herbert\u2019s books on January 1, 2013?<\/span><\/p>\n

\u00a0<\/p>\n

\u2022 The parent uses the equity method.<\/span><\/p>\n

\u00a0<\/p>\n

\u2022 The parent uses the partial equity method.<\/span><\/p>\n

\u00a0<\/p>\n

\u2022 The parent uses the initial value method.<\/span><\/p>\n

\u00a0<\/p>\n

c.<\/span><\/em>Under each of the following situations, what is Entry\u00a0*C\u00a0<\/strong>on a 2013 consolidation worksheet?<\/span><\/p>\n

\u00a0<\/p>\n

\u2022 The parent uses the equity method.<\/span><\/p>\n

\u00a0<\/p>\n

\u2022 The parent uses the partial equity method.<\/span><\/p>\n

\u00a0<\/p>\n

\u2022 The parent uses the initial value method.<\/span><\/p>\n

\u00a0<\/p>\n

\u00a0<\/p>\n

\u00a0<\/p>\n

\u00a0<\/p>\n

\u00a0<\/p>\n

(2)<\/span><\/strong>The Krause Corporation acquired 80 percent of the 100,000 outstanding voting shares of Leahy, Inc., for $6.30 per share on January 1, 2012. The remaining 20 percent of Leahy\u2019s shares also traded actively at $6.30 per share before and after Krause\u2019s acquisition. An appraisal made on that date determined that all book values appropriately reflected the fair values of Leahy\u2019s underlying accounts except that a building with a 5-year life was undervalued by $45,000 and a fully amortized trademark with an estimated 10-year remaining life had a $60,000 fair value<\/span><\/p>\n

\u00a0<\/p>\n

At the acquisition date, Leahy reported common stock of $100,000 and retained earnings balance of $280,000.<\/span><\/p>\n

\u00a0<\/p>\n

Following are the separate financial statements for the year ending December 31, 2013:<\/span><\/p>\n

\u00a0<\/p>\n

Krause<\/span><\/strong><\/p>\n

\u00a0<\/p>\n

Corporation \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Leahy, Inc.<\/span><\/strong><\/p>\n

\u00a0<\/p>\n

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. $ (584,000) \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 $(250,000)<\/span><\/p>\n

\u00a0<\/p>\n

Cost of goods sold . . . . . . . . . . . . . . . . . . . . . \u00a0194,000 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a095,000<\/span><\/p>\n

\u00a0<\/p>\n

Operating expenses . . . . . . . . . . . . . . . . . . . . . 246,000 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a065,000<\/span><\/p>\n

\u00a0<\/p>\n

Dividend income . . . . . . . . . . . . . . . . . . . . .\u00a0 . (16,000)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0 \u00a0\u20130\u2013<\/span><\/p>\n

\u00a0<\/p>\n

Net income . . . . . . . . . . . . . . . . . . . . . .. . . . $ (160,000)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 $ (90,000)<\/span><\/p>\n

\u00a0<\/p>\n

Retained earnings, 1\/1\/13 . . . . . . . . . . . .. . . $ (700,000)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 $(350,000)<\/span><\/p>\n

\u00a0<\/p>\n

Net income (above) . . . . . . . . . . . . . . . . . .. . . (160,000) \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0(90,000)<\/span><\/p>\n

\u00a0<\/p>\n

Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . 70,000 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a020,000<\/span><\/p>\n

\u00a0<\/p>\n

Retained earnings, 12\/31\/13 . . . . . . . . . . . . . $ (790,000)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 $(420,000)<\/span><\/p>\n

\u00a0<\/p>\n

Current assets . . . . . . . . . . . . . . . . . . . . . . . . \u00a0$ 296,000 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 $ 191,000<\/span><\/p>\n

\u00a0<\/p>\n

Investment in Leahy, Inc. . . . . . . . . . . . . . . .\u00a0 . 504,000\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0 \u00a0\u20130\u2013<\/span><\/p>\n

\u00a0<\/p>\n

Buildings and equipment (net) . . . . . . . . . . .. . 680,000 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0390,000<\/span><\/p>\n

\u00a0<\/p>\n

Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 144,000<\/span><\/p>\n

\u00a0<\/p>\n

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,580,000 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0$ 725,000<\/span><\/p>\n

\u00a0<\/p>\n

Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . $ (470,000)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 $(205,000)<\/span><\/p>\n

\u00a0<\/p>\n

Common stock . . . . . . . . . . . . . . . . . . . . .\u00a0 . . (320,000)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 (100,000)<\/span><\/p>\n

\u00a0<\/p>\n

Retained earnings, 12\/31\/13 (above) . . . . .. . (790,000)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 (420,000)<\/span><\/p>\n

\u00a0<\/p>\n

Total liabilities and equities . . . . . . . . . .\u00a0 . $(1,580,000)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 $(725,000)<\/span><\/p>\n

\u00a0<\/p>\n

\u00a0<\/p>\n

\u00a0<\/p>\n

a.\u00a0<\/span><\/em>Prepare a worksheet to consolidate these two companies as of December 31, 2013.<\/span><\/p>\n

\u00a0<\/p>\n

b.\u00a0<\/span><\/em>Prepare a 2013 consolidated income statement for Krause and Leahy.<\/span><\/p>\n

\u00a0<\/p>\n

c.\u00a0<\/span><\/em>If instead the non-controlling interest shares of Leahy had traded for $4.85 surrounding<\/span><\/p>\n

\u00a0<\/p>\n

Krause\u2019s acquisition date, how would the consolidated statements change?<\/span><\/p>\n

\u00a0<\/p>\n

\u00a0<\/p>\n

\u00a0<\/p>\n

(3)<\/span><\/strong>Parker, Inc., acquires 70 percent of Sawyer Company for $420,000. The remaining 30 percent of Sawyer\u2019s outstanding shares continue to trade at a collective value of $174,000. On the acquisition date, Sawyer has the following accounts:<\/span><\/p>\n

\u00a0<\/p>\n

Book Value \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Fair Value<\/span><\/strong><\/p>\n

\u00a0<\/p>\n

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . $ 210,000 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 $ 210,000<\/span><\/p>\n

\u00a0<\/p>\n

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170,000 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 180,000<\/span><\/p>\n

\u00a0<\/p>\n

Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 330,000<\/span><\/p>\n

\u00a0<\/p>\n

Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (280,000) \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 (280,000)<\/span><\/p>\n

\u00a0<\/p>\n

The buildings have a 10-year life. In addition, Sawyer holds a patent worth $140,000 that has a five-year life but is not recorded on its financial records. At the end of the year, the two companies report the following balances:<\/span><\/p>\n

\u00a0<\/p>\n

Parker \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Sawyer<\/span><\/strong><\/p>\n

\u00a0<\/p>\n

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . .. $(900,000)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0$(600,000)<\/span><\/p>\n

\u00a0<\/p>\n

Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600,000\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 400,000<\/span><\/p>\n

\u00a0<\/p>\n

\u00a0<\/p>\n

\u00a0<\/p>\n

a.<\/span><\/em>Assume that the acquisition took place on January 1. What figures would appear in a consolidated income statement for this year?<\/span><\/p>\n

\u00a0<\/p>\n

b.<\/span><\/em>Assume that the acquisition took place on April 1. Sawyer\u2019s revenues and expenses occurred uniformly throughout the year. What amounts would appear in a consolidated income statement for this year?<\/span><\/p>\n

\u00a0<\/p>\n

\u00a0<\/p>\n

\u00a0<\/p>\n

(4)<\/span><\/strong>Placid Lake Corporation acquired 80 percent of the outstanding voting stock of Scenic, Inc., on January 1, 2012, when Scenic had a net book value of $400,000. Any excess fair value was assigned to intangible assets and amortized at a rate of $5,000 per year.<\/span><\/p>\n

\u00a0<\/p>\n

Placid Lake\u2019s 2013 net income before consideration of its relationship with Scenic (and before adjustments for intra-entity sales) was $300,000. Scenic reported net income of $110,000.<\/span><\/p>\n

\u00a0<\/p>\n

Placid Lake distributed $100,000 in dividends during this period; Scenic paid $40,000. At the end of 2013, selected figures from the two companies\u2019 balance sheets were as follows:<\/span><\/p>\n

\u00a0<\/p>\n

\u00a0<\/p>\n

\u00a0<\/p>\n

Placid Lake\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Scenic<\/span><\/strong><\/p>\n

\u00a0<\/p>\n

Inventory . . . . . . . . . . . . . . . . . . . . . . . .. . . . . $140,000 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 $ 90,000<\/span><\/p>\n

\u00a0<\/p>\n

Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .\u00a0 . . 600,000 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 200,000<\/span><\/p>\n

\u00a0<\/p>\n

Equipment (net) . . . . . . . . . . . . . . . . . . . . . . . . 400,000 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 300,000<\/span><\/p>\n

\u00a0<\/p>\n

\u00a0<\/p>\n

\u00a0<\/p>\n

During 2012, intra-entity sales of $90,000 (original cost of $54,000) were made. Only<\/span><\/p>\n

\u00a0<\/p>\n

20 percent of this inventory was still held within the consolidated entity at the end of 2012. In<\/span><\/p>\n

\u00a0<\/p>\n

2013, $120,000 in intra-entity sales were made with an original cost of $66,000. Of this merchandise, 30 percent had not been resold to outside parties by the end of the year.<\/span><\/p>\n

\u00a0<\/p>\n

Each of the following questions should be considered as an independent situation for the year 2013.<\/span><\/em><\/p>\n

\u00a0<\/p>\n

a.\u00a0<\/span><\/em>What is consolidated net income for Placid Lake and its subsidiary?<\/span><\/p>\n

\u00a0<\/p>\n

b.\u00a0<\/span><\/em>If the intra-entity sales were upstream, how would consolidated net income be allocated to the controlling and non-controlling interest?<\/span><\/p>\n

\u00a0<\/p>\n

c.\u00a0<\/span><\/em>If the intra-entity sales were downstream, how would consolidated net income be allocated to the controlling and non-controlling interest?<\/span><\/p>\n

\u00a0<\/p>\n

d.\u00a0<\/span><\/em>What is the consolidated balance in the ending Inventory account?<\/span><\/p>\n

\u00a0<\/p>\n

e.\u00a0<\/span><\/em>Assume that no intra-entity inventory sales occurred between Placid Lake and Scenic. Instead, in 2012, Scenic sold land costing $30,000 to Placid Lake for $50,000. On the 2013 consolidated balance sheet, what value should be reported for land?<\/span><\/p>\n

\u00a0<\/p>\n

f.\u00a0<\/span><\/em>Assume that no intra-entity inventory or land sales occurred between Placid Lake and Scenic.<\/span><\/p>\n

\u00a0<\/p>\n

\u00a0<\/p>\n

Instead, on January 1, 2012, Scenic sold equipment (that originally cost $100,000 but had a $60,000 book value on that date) to Placid Lake for $80,000. At the time of sale, the equipment had a remaining useful life of five years. What worksheet entries are made for a December 31, 2013, consolidation of these two companies to eliminate the impact of the intra-entity transfer? For 2013, what is the non-controlling interest\u2019s share of Scenic\u2019s net income?<\/span><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

(1).Herbert, Inc., acquired all of Rambis Company\u2019s outstanding stock on January 1, 2012, for $574,000 in cash. Annual excess amortization of $12,000 results from this transaction. On the date of the takeover, Herbert reported retained earnings of $400,000, and Rambis reported a $200,000 balance. Herbert reported internal income of $40,000 in 2012 and $50,000 in […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[31],"tags":[],"class_list":["post-7215","post","type-post","status-publish","format-standard","hentry","category-homework-help"],"_links":{"self":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts\/7215","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/comments?post=7215"}],"version-history":[{"count":0,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts\/7215\/revisions"}],"wp:attachment":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/media?parent=7215"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/categories?post=7215"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/tags?post=7215"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}