Financial Reporting and Controlling

On May 1, Donovan Company reported the following account balances (see figure).

On May 1, Beasleay paid $400,000 in stock (fair value) for all of the assets and liabilities of Donovan, which will cease to exist as a separate entity. In connection with the merger, Beasley incurred $15,000 in accounts payable for legal and accounting fees.

Beasley also agreed to pay $75,000 to the former owners of Donovan contingent on meeting certain revenue goals during the following year. Beasley estimated the present value of its probability adjusted expected payment fo rthe contingency at $20,000.

What should Beasley record as total liabilities incurred or assumed in connection with the Donovan merger?

Prior to being united in a business combination, Atkins, Inc., and Waterson Corporatino had the following stockholders' equity figures (see figure).

Atkins issues 51,000 new shares of its common stock vlaued at $3 per share for all of the outstanding stock of Waterson. Immediately afterward, what are consolidated Additional Paid-In Capital and Retained Earnings, respectively?

On its acquisition-date consolidated balance sheet, what amount should TruData report as goodwill?

On its acquisition-date consolidated balance sheet, what amount should TruData report as patented technology (net)?

On its acquisition-date consolidated balance sheet, what amount should TruData report as common stock?

On its acquisition-date consolidated balance sheet, what amount should TruData report as retained earnings as of July 1?

In the December 31, 2017, consolidated balance sheet of Patrick and its subsidiay, what amount of total assets should be reported?

In the December 31, 2017, consolidated balance sheet of Patrick and its subsidiary, what amount of total stockholders' equity should be reported?

The following book and fair values were available for Westmont Company as of March 1 (see figure)

Arturo Company pays $4,000,000 cash and issues 20,000 shares of its $2 par value common stock (fair value of $50 per share) for all of Westmont's common stock in a merger, after which Westmont will cease to exist as a separate entity. Stock issue costs amount to $25,000 and Arturo pays $42,000 for legal fees to complete the transaction. Prepare Arturo's journal entries to record its acquisition of Westmont.

The following book and fair values were available for Westmont Company as of March 1 (see figure)

Arturo Company pays $4,200,000 cash in a merger, after which Westmont will cease to exist as a separate entity. Arturo pays $42,000 for legal fees to complete the transaction. Prepare Arturo's journal entries to record its acquisition of Westmont.

On December 31, Padre acquires Sol's outstanding stock by paying $360,000 in cash and issuing 10.000 shares of its own common stock with a fair value of $40 per share. Padre paid legal and accounting fees of $20,000 as well as $5,000 in stock issuance costs.

Determine the value that would be shown in Padre's consolidated financial statement for each of the accounts listed:

Inventory, Land, Buildings and equipment, Franchise agreement, Goodwill, Revenues, Additional paid-in capital, Expenses, Retained earnings 1/1, Retained earnings 12/31

What are the consolidated balances for the following accounts?

Net income, Retained earnings 1/1/17, Patented technology, Goodwill, Liabilities, Common stock, Additional paid-in capital

See figure. Prepare an acquisition-date consolidated balance sheet for Casey Corporation and its subsidiary Kennedy Corporation.

Allerton Company acquires all of Deluxe Company's assets and liabilities for cash on January 1, 2018, and subsequently formally dissolves Deluxe. At the acquisition date, the following book and fair values were available for the Deluxe Company accounts (see figure).

Prepare Allerton's entry to record its acquisition of Deluxe in its accounting records assuming the following cash exchange amounts:

Case 1: $145,000

Case 2: $110,000

Which of the following does not indicate an investor company's ability to signigficantly influence an investee?

Hawkins Company has owned 10 percent of Larker, Inc., for the past several years. This ownership did not allow Hawkins to have significant influence of Larker. Recently, Hawkins acquired an additional 30 percent of Larker and now will use the equity method. How will the investor report change?

When an equity method investment account is reduced to a zero balance

On January 1, Puckett Company paid $1.6 million for 50,000 shares of Harrison's voting common stock, which represents a 40 percent investment. No allocation to goodwill or other specific account was made. Significant influence over Harrison is achieved by this acquisition and so Puckert applies the equity method. Harrison declared a $2 per share dividend during the year and reported net income of $560,000. What is the balance in the Investment in Harrison account found in Puckett's financial records as of December 31?

In January 2017, Domingo, Inc., acquired 20 percent of the outstanding common stock of Martes, lnc., for $700,000. This investment gave Domingo the ability to exercise significant influence over Martes, whose balance sheet on that date showed total assets of $3,900,000 with liabilities of $900,000. Any excess of cost over book value of the investment was artributed to a patent having a remaining useful life of 10 years.

In 2017, Martes reported net income of $170,000. In 2018, Martes reported net income of $210,000. Dividends of $70,000 were declared in each of tbese two years. What is the equity method balance of Domingo's Investment in Martes, Inc., at December 31, 2018?

Franklin purchases 40 percent of Johnson Company on January 1 for $500,000. Although Franklin did not use it, this acquisition gave Franklin the ability to apply significant influence to Johnson' s operating and financing policies. Johnson reports assets on that date of $1,400,000 with liabilities of $500,000. One building with a seven-year remaining life is undervalued on Johnson's books by$140,000. Also, Johnson's book value for its trademark (10-year remaining life) is undervalued by $210,000. During the year, Johnson reports net income of $90,000 while declaring dividends of$30,000. What is the Investment in Johnson Company balance (equity method) in Franklin's financial records as of December 31?

Evan Company reports net income of $140,000 each year and declares an annual cash dividend of$50,000. The company holds net assets of $1,200,000 on January 1, 2017. On that date, Shalina purchases 40 percent of Evan's outstanding common stock for $600,000, which gives it the ability to significantly influence Evan. At the purchase date, tbe excess of Shalina's cost over its proportionate share of Evan's book value was assigned to goodwill. On December 31, 2019, wbat is the Investment in Evan Company balance (equity method) in Shalina's financial records?

On January 3, 2018, Matteson Corporation acquired 40 percent of the outstanding common stock of O'Toole Company for $1,160,000. This acquisition gave Matteson the ability to exercise significant influence over the investee. The book value of the acquired shares was $820,000. Any excess cost over the underlying book value was assigned to a copyright that was undervalued on its balance sheet. This copyright has a remaining useful life of 10 years. For the year ended December 31, 2018, O'Toole reported net income of $260,000 and declared cash dividends of $50,000. At December 31, 2018, what should Matteson report as its investment in O'Toole under the equity method?

On January 1, 2018, Fisher Corporation paid $2,290,000 for 35 percent of the outstanding voting stock of Steel, Inc., and appropriately applies the equity method for its investment. Any excess of cost over Steel's book value was attributed to goodwill. During 2018, Steel reports $720,000 in net income and a $100,000 other comprehensive income loss. Steel also declares and pays $20,000 in dividends.

a. What amount should Fisher report as its Investment in Steel on its December 31, 2018, balance sheet?

b. What amount should Fisher report as Equity in Earnings of Steel on its 2018 income statement?

Milani, Inc., acquired 10 percent of Seida Corporation on January 1, 2017, for $190,000 and appropriately accounted for the investment using the fair-value method. On January 1, 2018, Milani purchased an additional 30 percent of Seida for $600,000 which resulted in significant influence over Seida. On that date, the fair value of Seida's common stock was $2,000,000 in total. Seida's January 1, 2018, book value equaled $1,850,000, although land was undervalued by $120,000. Any additional excess fair value over Seida's book value was attributable to a trademark with an 8-year remaining life. During 2018, Seida reported income of $300,000 and declared and paid dividends of $110,000. Prepare the 2018 journal entries for Milani related to its investment in Seida. 

Situation and numbers in the picture. Questions:

a) Assume Akron applies the equity method to its Investment in Zip account:
1. What amount of equity income should Akron report for 2018
2. On Akron's December 31, 2018, balance sheet, what amount is reported for the Investment in Zip account?

b) Assume Akron uses fair-value accounting for its Investment in Zip account:
1. What amount of income from its investment in Zip should Akron report for 2018?
2. On Akron's Decembe r31, 2018, balance sheet, what amount is reported for the Investment in Zip account?

Which of the following does not represent a primary motivation for business combinations?

Which of the following is the best theoretical justification for consolidated financial statements?