a. Determine the December 31, 2021, consolidated balance for each of the following accounts: Depreciation Expense Dividends Declared Buildings Goodwill Common Stock Revenues Equipment b. How does the parent's choice of an accounting method for its investment affect the balances computed in requirement (a)? c. Which method of accounting for this subsidiary is the parent actually using for internal reporting purposes? d. Determine parent's investment income for 2021 under partial equity method and equity method. e. What would be Foxx's balance for retained earnings as of January 1, 2021, if each of the following methods had been in use? Initial value method. • Partial equity method. · Equity method.
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- On May 1, 2015, Zoe Inc. purchased Branta Corp. for $15,000,000 in cash. They only received $12,000,000 in net assets. In 2016, the market value of the goodwill obtained from Branta Corp. was valued at $4,000,000, but in 2017 it dropped to $2,000,000. Prepare the journal entry for the creation of goodwill and the entry to record any impairments to it in subsequent years.Gray Companys financial statements showed income before income taxes of 4,030,000 for the year ended December 31, 2020, and 3,330,000 for the year ended December 31, 2019. Additional information is as follows: Capital expenditures were 2,800,000 in 2020 and 4,000,000 in 2019. Included in the 2020 capital expenditures is equipment purchased for 1,000,000 on January 1, 2020, with no salvage value. Gray used straight-line depreciation based on a 10-year estimated life in its financial statements. As a result of additional information now available, it is estimated that this equipment should have only an 8-year life. Gray made an error in its financial statements that should be regarded as material. A payment of 180,000 was made in January 2020 and charged to expense in 2020 for insurance premiums applicable to policies commencing and expiring in 2019. No liability had been recorded for this item at December 31, 2019. The allowance for doubtful accounts reflected in Grays financial statements was 7,000 at December 31, 2020, and 97,000 at December 31, 2019. During 2020, 90,000 of uncollectible receivables were written off against the allowance for doubtful accounts. In 2019, the provision for doubtful accounts was based on a percentage of net sales. The 2020 provision has not yet been recorded. Net sales were 58,500,000 for the year ended December 31, 2020, and 49,230,000 for the year ended December 31, 2019. Based on the latest available facts, the 2020 provision for doubtful accounts is estimated to be 0.2% of net sales. A review of the estimated warranty liability at December 31, 2020, which is included in other liabilities in Grays financial statements, has disclosed that this estimated liability should be increased 170,000. Gray has two large blast furnaces that it uses in its manufacturing process. These furnaces must be periodically relined. Furnace A was relined in January 2014 at a cost of 230,000 and in January 2019 at a cost of 280,000. Furnace B was relined for the first time in January 2020 at a cost of 300,000. In Grays financial statements, these costs were expensed as incurred. Since a relining will last for 5 years, Grays management feels it would be preferable to capitalize and depreciate the cost of the relining over the productive life of the relining. Gray has decided to nuke a change in accounting principle from expensing relining costs as incurred to capitalizing them and depreciating them over their productive life on a straight-line basis with a full years depreciation in the year of relining. This change meets the requirements for a change in accounting principle under GAAP. Required: 1. For the years ended December 31, 2020 and 2019, prepare a worksheet reconciling income before income taxes as given previously with income before income taxes as adjusted for the preceding additional information. Show supporting computations in good form. Ignore income taxes and deferred tax considerations in your answer. The worksheet should have the following format: 2. As of January 1, 2020, compute the retrospective adjustment of retained earnings for the change in accounting principle from expensing to capitalizing relining costs. Ignore income taxes and deferred tax considerations in your answer.Foxx Corporation acquired all of Greenburg Company’s outstanding stock on January 1, 2019, for $662,000 cash. Greenburg’s accounting records showed net assets on that date of $490,000, although equipment with a 10-year remaining life was undervalued on the records by $99,500. Any recognized goodwill is considered to have an indefinite life. Greenburg reports net income in 2019 of $106,000 and $133,000 in 2020. The subsidiary declared dividends of $20,000 in each of these two years. Account balances for the year ending December 31, 2021, follow. Credit balances are indicated by parentheses. Foxx Greenburg Revenues $ (912,000 ) $ (764,000 ) Cost of goods sold 114,000 191,000 Depreciation expense 370,000 406,000 Investment income (20,000 ) 0 Net income $ (448,000 ) $ (167,000 ) Retained earnings, 1/1/21 $ (1,204,000 ) $ (389,000 ) Net income (448,000 ) (167,000 ) Dividends declared 120,000 20,000 Retained…
- Foxx Corporation acquired all of Greenburg Company’s outstanding stock on January 1, 2019, for $640,000 cash. Greenburg’s accounting records showed net assets on that date of $465,000, although equipment with a 10-year remaining life was undervalued on the records by $86,500. Any recognized goodwill is considered to have an indefinite life. Greenburg reports net income in 2019 of $130,500 and $126,000 in 2020. The subsidiary declared dividends of $20,000 in each of these two years. Account balances for the year ending December 31, 2021, follow. Credit balances are indicated by parentheses. Foxx Greenburg Revenues $ (948,000 ) $ (764,000 ) Cost of goods sold 118,500 191,000 Depreciation expense 312,000 443,000 Investment income (20,000 ) 0 Net income $ (537,500 ) $ (130,000 ) Retained earnings, 1/1/21 $ (1,198,000 ) $ (381,500 ) Net income (537,500 ) (130,000 ) Dividends declared 120,000 20,000 Retained…Foxx Corporation acquired all of Greenburg Company's outstanding stock on January 1, 2019, for $743,000 cash. Greenburg's accounting records showed net assets on that date of $609,000, although equipment with a 10-year remaining life was undervalued on the records by $59,500. Any recognized goodwill is considered to have an indefinite life. Greenburg reports net income in 2019 of $125,000 and $127,500 in 2020. The subsidiary declared dividends of $20,000 in each of these two years. Account balances for the year ending December 31, 2021, follow. Credit balances are indicated by parentheses. Greenburg $ (920,000) 230,000 425,000 Foxx $(1,184,000) 148, 000 392,000 (20,000) $ (664,000) $(1,140,000) (664,000) Revenues Cost of goods sold Depreciation expense Investment income Net income $ (265,000) Retained earnings, 1/1/21 Net income (521,500) (265,000) 20,000 Dividends declared 120,000 Retained earnings, 12/31/21 $(1,684,000) $ (766, 500) 328,000 743,000 1,022,000 844,000 652,000 $…Foxx Corporation acquired all of Greenburg Company’s outstanding stock on January 1, 2019, for $858,000 cash. Greenburg’s accounting records showed net assets on that date of $717,000, although equipment with a 10-year remaining life was undervalued on the records by $60,000. Any recognized goodwill is considered to have an indefinite life. Greenburg reports net income in 2019 of $113,000 and $148,500 in 2020. The subsidiary declared dividends of $20,000 in each of these two years. Account balances for the year ending December 31, 2021, follow. Credit balances are indicated by parentheses. Foxx Greenburg Revenues $ (828,000 ) $ (968,000 ) Cost of goods sold 103,500 242,000 Depreciation expense 424,000 358,000 Investment income (20,000 ) 0 Net income $ (320,500 ) $ (368,000 ) Retained earnings, 1/1/21 $ (1,234,000 ) $ (638,500 ) Net income (320,500 ) (368,000 ) Dividends declared 120,000 20,000 Retained…
- Bassett Inc. acquired all of the outstanding common stock of Brinkman Corp. on January 1, 2019, for $422,000. Equipment with a ten-year life was undervalued on Brinkman's financial records by $48,000. Brinkman also owned an unrecorded customer list with an assessed fair value of $71,000 and an estimated remaining life of five years. Brinkman earned reported net income of $185,000 in 2019 and $226,000 in 2020. Dividends of $75,000 were paid in each of these two years. Selected account balances as of December 31, 2021, for the two companies follow. Revenues Expenses Investment income Retained earnings, 1/1/21 Dividends paid Multiple Choice $806,000. $811,000. If the equity method had been applied, what would be the Investment in Brinkman Corp. account balance within the records of Bassett at the end of 2021? $863,000. $920,000. Bassett $1,120,000 $1,036,000. 500,000 Not given 850,000 132,000 Brinkman $860,000 600,000 Ø 650,000 80,000Parent Company acquired all of Sub Company’s outstanding stock on January 1, 2019 for $600,000 cash. Sub’s accounting records showed net assets on that date of $470,000 although equipment with a 10-year remaining life was undervalued on the records by $90,000. Any recognized goodwill is considered to have an indefinite life. Sub reports net income in 2019 of $90,000 and $100,000 in 2020 and declared dividends of $20,000 in each of these two years. Account balances for the year ending December 31, 2021 follow. Credit balances are indicated by parentheses. Parent Sub Revenues (800,000) (600,000) Cost of Goods Sold 100,000 150,000 Depreciation Expense…On June 30, 2018, Streeter Company reported the following account balances:On June 30, 2018, Princeton Company paid $310,800 cash for all assets and liabilities of Streeter, which will cease to exist as a separate entity. In connection with the acquisition, Princeton paid $15,100 in legal fees. Princeton also agreed to pay $55,600 to the former owners of Streeter contingent on meeting certain revenue goals during 2019. Princeton estimated the present value of its probability adjusted expected payment for the contingency at $17,900.In determining its offer, Princeton noted the following pertaining to Streeter:• It holds a building with a fair value $43,100 more than its book value.• It has developed a customer list appraised at $25,200, although it is not recorded in its financial records.• It has research and development activity in process with an appraised fair value of $36,400. However, the project has not yet reached technological feasibility and the assets used in the activity…
- On January 1, 2020, AMI Corporation purchased the non-cash net assets of Sheffield Ltd. for $8,087,900. Following is the statement of financial position of Sheffield Ltd. from the company's year-end the previous day: Sheffield Ltd.Statement of Financial PositionAs at December 31, 2019 Cash $630,000 Accounts receivable 554,000 Inventory 2,510,000 Property, plant, and equipment (net) 2,070,000 Land 2,570,000 $8,334,000 Accounts payable $324,000 Common shares 2,520,000 Retained earnings 5,490,000 $8,334,000 As part of the negotiations, AMI and Sheffield agreed on the following fair values for the items on Sheffield's statement of financial position: Accounts receivable $552,400 Inventory 2,265,000 Property, plant, and equipment 1,870,000 Land 3,620,000 Accounts payable 313,500 Prepare the journal entry on the books of AMI Corporation to record the purchase, assuming that instead of buying the net assets of…On January 2, 2019, ABC Co. acquired 80% of the outstanding common stock of Shade Co. for ₱1,344,000 with no goodwill resulting from the acquisition. The following selected account balances were taken from the accounting records of XYZ Co. Details shown doe XYZ Co. in the image. The building has an estimated useful life of 10 years and the equipment is expected to last for 5 years. For the year 2019, ABC Co. reported net income from own operations of ₱2,240,000 and XYZ Co. reported ₱600,000 net income from own operations. ABC Co. accounts its investment in XYZ Co. using the cost method. What is the consolidated income statement for the year 2019. NCI in the consolidated FS for the year 2019.On January 2, 2019, Upo Co. purchased 75% of the outstanding shares of Napa Co. resulting to a goodwill of P60,000. On that date, the non-cash assets of Napa Co. whose book values did not equal their book values were accounts receivable which was overstated by P4,500 and equipment with a remaining 5 year life on the purchase date which was understated by P50,000. For the year 2010, Upo and Napa reported net income of P350,000 and P200,000 each respectively. Upo’s beginning inventory included merchandise purchased from Napa Company amounting to P39,000 which was sold to them by Napa at a 30% markup, 80% of these goods were sold during the year. Napa, on the other hand, included inventory items which they purchased from Upo Co. amounting to 18,000. These goods were sold by Upo at a 25% markup. 90% of these goods were sold by Napa for the year.What is the Noncontrolling interest's share in the Net income of the subsidiary?