[SOLVED] Allen Company acquired 100 percent of Bradford

> A company acquires a subsidiary and will prepare consolidated financial statements for external reporting purposes. For internal reporting purposes, the company has decided to apply the equity method. Why might the company have made this decision? a. It

> Kaplan Corporation acquired Star, Inc., on January 1, 2017, by issuing 13,000 shares of common stock with a $10 per share par value and a $23 market value. This transaction resulted in recognizing $62,000 of goodwill. Kaplan also agreed to compensate Sta

> On January 1, 2016, Phoenix Co. acquired 100 percent of the outstanding voting shares of Sedona Inc., for $600,000 cash. At January 1, 2016, Sedonaâs net assets had a total carrying amount of $420,000. Equipment (eight-year remaining li

> The separate condensed balance sheets of Patrick Corporation and its wholly owned subsidiary, Sean Corporation, are as follows: Additional Information: â On December 31, 2017, Patrick acquired 100 percent of Seanâs v

> On July 1, TruData Company issues 10,000 shares of its common stock with a $5 par value and a $40 fair value in exchange for all of Webstat Companyâs outstanding voting shares. Webstatâs precombination book and fair va

> Catron Corporation is having liquidity problems, and as a result, it sells all of its outstanding stock to Lambert, Inc., for cash. Because of Catron’s problems, Lambert is able to acquire this stock at less than the fair value of the company’s net asset

> On July 1, TruData Company issues 10,000 shares of its common stock with a $5 par value and a $40 fair value in exchange for all of Webstat Companyâs outstanding voting shares. Webstatâs precombination book and fair va

> Prior to being united in a business combination, Atkins, Inc., and Waterson Corporation had the following stockholdersâ equity figures: Atkins issues 51,000 new shares of its common stock valued at $3 per share for all of the outstandi

> On May 1, Donovan Company reported the following account balances: Current assets ................................. $ 90,000 Buildings & equipment (net) …....... 220,000 Total assets ...................................... $310,000 Liabilities.........

> On June 1, Cline Co. paid $800,000 cash for all of the issued and outstanding common stock of Renn Corp. The carrying amounts for Renn’s assets and liabilities on June 1 follow: Cash ........................................ $150,000 Accounts receivable..

> On January 1, 2016, Phoenix Co. acquired 100 percent of the outstanding voting shares of Sedona Inc., for $600,000 cash. At January 1, 2016, Sedonaâs net assets had a total carrying amount of $420,000. Equipment (eight-year remaining li

> Dosmann, Inc., bought all outstanding shares of Lizzi Corporation on January 1, 2016, for $700,000 in cash. This portion of the consideration transferred results in a fair-value allocation of $35,000 to equipment and goodwill of $88,000. At the acquisiti

> If no legal, regulatory, contractual, competitive, economic, or other factors limit the life of an intangible asset, the asset’s assigned value is allocated to expense over which of the following? a. 20 years. b. 20 years with an annual impairment revi

> Duke Corporation owns a 70 percent equity interest in Salem Company, a subsidiary corporation. During the current year, a portion of this stock is sold to an outside party. Before recording this transaction, Duke adjusts the book value of its investment

> An acquired entity has a long-term operating lease for an office building used for central management. The terms of the lease are very favorable relative to current market rates. However, the lease prohibits subleasing or any other transfer of rights. In

> 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 b

> Paar Corporation bought 100 percent of Kimmel, Inc., on January 1, 2015. On that date, Paar’s equipment (10-year remaining life) has a book value of $420,000 but a fair value of $520,000. Kimmel has equipment (10-year remaining life) with a book value of

> Under fair-value accounting for an equity investment, which of the following affects the income the investor recognizes from its ownership of the investee? a. The investee’s reported income adjusted for excess cost over book value amortizations. b. Cha

> Hawkins Company has owned 10 percent of Larker, Inc., for the past several years. This ownership did not allow Hawkins to have significant influence over Larker. Recently, Hawkins acquired an additional 30 percent of Larker and now will use the equity me

> Which of the following does not indicate an investor company’s ability to significantly influence an investee? a. Material intra-entity transactions. b. The investor owns 30 percent of the investee but another owner holds the remaining 70 percent. c.

> A company acquires a subsidiary and will prepare consolidated financial statements for external reporting purposes. For internal reporting purposes, the company has decided to apply the initial value method. Why might the company have made this decision?

> In question (8), how would the parent record the sales transaction?

> CCES Corporation acquires a controlling interest in Schmaling, Inc. CCES may utilize any one of three methods to internally account for this investment. Describe each of these methods, and indicate their advantages and disadvantages.

> On January 1, 2017, Allan Company bought a 15 percent interest in Sysinger Company. The acquisition price of $184,500 reflected an assessment that all of Sysingerâs accounts were fairly valued within the companyâs acco

> Benns adopts the equity method for its 100 percent investment in Waters. At the end of six years, Benns reports an investment in Waters of $920,000. What figures constitute this balance?

> On July 1, 2018, Truman Company acquired a 70 percent interest in Atlanta Company in exchange for consideration of $720,000 in cash and equity securities. The remaining 30 percent of Atlanta’s shares traded closely near an average price that totaled $290

> Following are the individual financial statements for Gibson and Davis for the year ending December 31, 2018: Gibson acquired 60 percent of Davis on April 1, 2018, for $528,000. On that date, equipment owned by Davis (with a five-year remaining life) wa

> The Holtz Corporation acquired 80 percent of the 100,000 outstanding voting shares of Devine, Inc., for $7.20 per share on January 1, 2017. The remaining 20 percent of Devineâs shares also traded actively at $7.20 per share before and a

> Nascent, Inc., acquires 60 percent of Sea-Breeze Corporation for $414,000 cash on January 1, 2015. The remaining 40 percent of the Sea-Breeze shares traded near a total value of $276,000 both before and after the acquisition date. On January 1, 2015, Sea

> Following are several account balances taken from the records of Karson and Reilly as of DecemberÂ 31, 2018. A few asset accounts have been omitted here. All revenues, expenses, and dividend declarations occurred evenly throughout the year. An

> Miller Company acquired an 80 percent interest in Taylor Company on January 1, 2016. Miller paid $664,000 in cash to the owners of Taylor to acquire these shares. In addition, the remaining 20 percent of Taylor shares continued to trade at a total value

> On January 1, 2016, Telconnect acquires 70 percent of Bandmor for $490,000 cash. The remaining 30 percent of Bandmorâs shares continued to trade at a total value of $210,000. The new subsidiary reported common stock of $300,000 on that

> Posada Company acquired 7,000 of the 10,000 outstanding shares of Sabathia Company on January 1, 2016, for $840,000. The subsidiary’s total fair value was assessed at $1,200,000 although its book value on that date was $1,130,000. The $70,000 fair value

> On January 1, 2018, Morey, Inc., exchanged $178,000 for 25 percent of Amsterdam Corporation. Morey appropriately applied the equity method to this investment. At January 1, the book values of Amsterdam’s assets and liabilities approximated their fair val

> On January 1, 2017, Holland Corporation paid $8 per share to a group of Zeeland Corporation shareholders to acquire 60,000 shares of Zeelandâs outstanding voting stock, representing a 60 percent ownership interest. The remaining 40,000

> Several years ago, Jenkins Company acquired a controlling interest in Lambert Company. Lambert recently borrowed $100,000 from Jenkins. In consolidating the financial records of these two companies, how will this debt be handled?

> On January 1, 2016, Parflex Corporation exchanged $344,000 cash for 90 percent of Eagle Corporationâs outstanding voting stock. Eagleâs acquisition date balance sheet follows: On January 1, 2016, Parflex prepared the

> Plaza, Inc., acquires 80 percent of the outstanding common stock of Stanford Corporation on January 1, 2018, in exchange for $900,000 cash. At the acquisition date, Stanfordâs total fair value, including the noncontrolling interest, was

> On January 1, Beckman, Inc., acquires 60 percent of the outstanding stock of Calvin for $36,000. Calvin Co. has one recorded asset, a specialized production machine with a book value of $10,000 and no liabilities. The fair value of the machine is $50,000

> Parker, Inc., acquires 70 percent of Sawyer Company for $420,000. The remaining 30 percent of Sawyerâs outstanding shares continue to trade at a collective value of $174,000. On the acquisition date, Sawyer has the following accounts:

> On January 1, 2017, Palka, Inc., acquired 70 percent of the outstanding shares of Sellinger Company for $1,141,000 in cash. The price paid was proportionate to Sellingerâs total fair value, although at the acquisition date, Sellinger ha

> On January 1, Patterson Corporation acquired 80 percent of the 100,000 outstanding voting shares of Soriano, Inc., in exchange for $31.25 per share cash. The remaining 20 percent of Sorianoâs shares continued to trade for $30 both befor

> On January 1, 2018, Johnsonville Enterprises, Inc., acquired 80 percent of Stayer Company’s outstanding common shares in exchange for $3,000,000 cash. The price paid for the 80 percent ownership interest was proportionately representative of the fair val

> On January 1, 2017, Harrison, Inc., acquired 90 percent of Starr Company in exchange for $1,125,000 fair-value consideration. The total fair value of Starr Company was assessed at $1,200,000. Harrison computed annual excess fair-value amortization of $8,

> On January 1, 2017, Pinnacle Corporation exchanged $3,200,000 cash for 100 percent of the outstanding voting stock of Strata Corporation. On the acquisition date, Strata had the following balance sheet: Pinnacle prepared the following fair-value allocat

> When a parent company applies the initial value method or the partial equity method to an investment, a worksheet adjustment must be made to the parent’s beginning Retained Earnings account (Entry *C) in every period after the year of acquisition. What i

> On January 1, 2017, Prestige Corporation acquired 100 percent of the voting stock of Stylene Corporation in exchange for $2,030,000 in cash and securities. On the acquisition date, Stylene had the following balance sheet: At the acquisition date, the bo

> On January 3, 2016, Persoff Corporation acquired all of the outstanding voting stock of Sea Cliff, Inc., in exchange for $6,000,000 in cash. Persoff elected to exercise control over Sea Cliff as a wholly owned subsidiary with an independent accounting sy

> Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2017, in exchange for $5,875,000 in cash. Allison intends to maintain Mathias as a wholly owned subsidiary. Both companies have December 31 fiscal year-ends.

> Foxx Corporation acquired all of Greenburg Companyâs outstanding stock on January 1, 2016, for $600,000 cash. Greenburgâs accounting records showed net assets on that date of $470,000, although equipment with a 10-year

> Adams, Inc., acquires Clay Corporation on January 1, 2017, in exchange for $510,000 cash. Immediately after the acquisition, the two companies have the following account balances. Clayâs equipment (with a five-year remaining life) is ac

> Chapman Company obtains 100 percent of Abernethy Companyâs stock on January 1, 2017. As of that date, Abernethy has the following trial balance: During 2017, Abernethy reported net income of $80,000 while declaring and paying dividends

> Destin Company recently acquired several businesses and recognized goodwill in each acquisition. Destin has allocated the resulting goodwill to its three reporting units: Sand Dollar, Salty Dog, and Baytowne. Destin opts to skip the qualitative assessmen

> Francisco Inc. acquired 100 percent of the voting shares of Beltran Company on January 1, 2017. In exchange, Francisco paid $450,000 in cash and issued 104,000 shares of its own $1 par value common stock. On this date, Franciscoâs stock

> Angela Corporation (a private company) acquired all of the outstanding voting stock of Eddy Tech, Inc., on January 1, 2018, in exchange for $9,000,000 in cash. At the acquisition date, Eddy Techâs stockholdersâ equity

> When a parent company uses the equity method to account for investment in a subsidiary, the amortization expense entry recorded during the year is eliminated on a consolidation worksheet as a component of Entry I. What is the necessity of removing this a

> Briefly discuss the cost savings that may result from a private company electing to amortize goodwill as opposed to annual impairment testing.

> 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 acquisit

> Pratt Company acquired all of Spider, Inc.âs outstanding shares on December 31, 2018, for $495,000 cash. Pratt will operate Spider as a wholly owned subsidiary with a separate legal and accounting identity. Although many of Spider&acirc

> On January 1, 2018 Casey Corporation exchanged $3,300,000 cash for 100 percent of the outstanding voting stock of Kennedy Corporation. Casey plans to maintain Kennedy as a wholly owned subsidiary with separate legal status and accounting information syst

> On June 30, 2017, Wisconsin, Inc., issued $300,000 in debt and 15,000 new shares of its $10 par value stock to Badger Company owners in exchange for all of the outstanding shares of that company. Wisconsin shares had a fair value of $40 per share. Prior

> On May 1, Soriano Co. reported the following account balances along with their estimated fair values: On that day, Zambrano paid cash to acquire all of the assets and liabilities of Soriano, which will cease to exist as a separate entity. To facilitate

> On January 1, NewTune Company exchanges 15,000 shares of its common stock for all of the outstanding shares of On-the-Go, Inc. Each of NewTuneâs shares has a $4 par value and a $50 fair value. The fair value of the stock exchanged in th

> On January 1, 2017, Stream Company acquired 30 percent of the outstanding voting shares of Q-Video, Inc., for $770,000. Q-Video manufactures specialty cables for computer monitors. On that date, Q-Video reported assets and liabilities with book values of

> On January 1, 2017, Fisher Corporation purchased 40 percent (80,000 shares) of the common stock of Bowden, Inc., for $982,000 in cash and began to use the equity method for the investment. The price paid represented a $60,000 payment in excess of the boo

> On July 1, 2016, Killearn Company acquired 88,000 of the outstanding shares of Shaun Company for $13 per share. This acquisition gave Killearn a 25 percent ownership of Shaun and allowed Killearn to significantly influence the investee’s decisions. As o

> What is a control premium and how does it affect consolidated financial statements?

> On January 1, 2018, Pine Company owns 40 percent (40,000 shares) of Seacrest, Inc., which it purchased several years ago for $182,000. Since the date of acquisition, the equity method has been properly applied, and the carrying amount of the investment a

> Harper, Inc. acquires 40 percent of the outstanding voting stock of Kinman Company on January 1, 2017, for $210,000 in cash. The book value of Kinman’s net assets on that date was $400,000, although one of the company’s buildings, with a $60,000 carrying

> Belden, Inc. acquires 30 percent of the outstanding voting shares of Sheffield, Inc. on January 1, 2017, for $312,000, which gives Belden the ability to significantly influence Sheffield. Sheffield has a net book value of $800,000 at January 1, 2017. She

> On December 31, 2016, Akron, Inc. purchased 5 Percent of Zip Companyâs common shares on the open market in exchange for $16,000. On December 31, 2017, Akron, Inc., acquires an additional 25 percent of Zip Companyâs out

> Matthew, Inc. owns 30 percent of the outstanding stock of Lindman Company and has the ability to significantly influence the investee’s operations and decision making. On January 1, 2018, the balance in the Investment in Lindman account is $335,000. Amor

> Several years ago, Einstein, Inc., bought 40 percent of the outstanding voting stock of Brooks Company. The equity method is appropriately applied. On August 1 of the current year, Einstein sold a portion of these shares. a. How does Einstein compute th

> Following are selected account balances from Penske Company and Stanza Corporation as of December 31, 2018: On January 1, 2018, Penske acquired all of Stanzaâs outstanding stock for $680,000 fair value in cash and common stock. Penske

> Echo, Inc., purchased 10 percent of ProForm Corporation on January 1, 2017, for $345,000 and accounted for the investment using the fair-value method. Echo acquires an additional 15 percent of ProForm on January 1, 2018, for $580,000. The equity method o

> On January 1, 2016, Halstead, Inc., purchased 75,000 shares of Sedgwick Company common stock for $1,480,000, giving Halstead 25 percent ownership and the ability to apply significant influence over Sedgwick. Any excess of cost over book value acquired wa

> BuyCo, Inc. holds 25 percent of the outstanding shares of Marqueen Company and appropriately applies the equity method of accounting. Excess cost amortization (related to a patent) associated with this investment amounts to $10,000 per year. For 2017, Ma

> Maguire Company obtains 100 percent control over Williams Company. Several years after the takeover, consolidated financial statements are being produced. For each of the following accounts, briefly describe the values that should be included in consolid

> Chapman Company obtains 100 percent of Abernethy Companyâs stock on January 1, 2017. As of that date, Abernethy has the following trial balance: During 2017, Abernethy reported net income of $80,000 while declaring and paying dividends

> 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

> Alomar Co., a consolidated enterprise, conducted an impairment review for each of its reporting units. In its qualitative assessment, one particular reporting unit, Sellers, emerged as a candidate for possible goodwill impairment. Sellers has recognized

> On January 1, 2017, Alison, Inc., paid $60,000 for a 40 percent interest in Holister Corporation’s common stock. This investee had assets with a book value of $200,000 and liabilities of $75,000. A patent held by Holister having a $5,000 book value was a

> Haynes, Inc., obtained 100 percent of Turner Companyâs common stock on January 1, 2017, by issuing 9,000 shares of $10 par value common stock. Haynesâs shares had a $15 per share fair value. On that date, Turner report

> Consolidated financial reporting is appropriate when one entity has a controlling financial interest in another entity. The usual condition for a controlling financial interest is ownership of a majority voting interest. But in some circumstances, contro

> On August 27, 2015, Celgene Corporation acquired all of the outstanding stock of Receptos, Inc., in exchange for $7.6 billion in cash. Referring to Celgene’s 2015 financial statements and its July 14, 2015, press release announcing the acquisition, answe

> In February 2015, Arctic Cat, Inc., acquired the assets and liabilities of MotorFist, LLC, a privately owned company based in Idaho Falls, Idaho, in exchange for $9.118 million in cash and contingent consideration. Referring to Arctic Cat’s 2015 annual 1

> Jonas Tech Corporation recently acquired Innovation Plus Company. The combined firm consists of three related businesses that will serve as reporting units. In connection with the acquisition, Jonas requests your help with the following asset valuation a

> Herbert, Inc., acquired all of Rambis Company’s outstanding stock on January 1, 2017, 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,

> Since 1995, Starbucks Corporation had owned a 39.5 percent equity interest in Starbucks Coffee Japan, Ltd. ("Starbucks Japan"). Its joint venture partner, Sazaby League of Japan also owned a 39.5 percent equity interest in Starbucks Japan. The remaining

> Costco Wholesale Corporation owns and operates membership warehouses in the United States, Canada, United Kingdom, Mexico, Japan, Australia, and Spain. Costco also engages in retail operations through majority owned subsidiaries in Korea and Taiwan. The

> Wolf Pack Transport Co. has a 25 percent equity investment in Maggie Valley Depot (MVD), Inc., which owns and operates a warehousing facility used for the collection and redistribution of various consumer goods. Wolf Pack paid $1,685,000 for its 25 perce

> In 2015 Microsoft Corporation reported a $5.1 billion charge for the impairment of goodwill and a $2.2 billion charge for the impairment of intangible assets in one of its reporting units (segments) in its 10-K annual report. Referring to Microsoft’s 201

> NaviNow Company agrees to pay $20 million in cash to the four former owners of TrafficEye for all of its assets and liabilities. These four owners of TrafficEye developed and patented a technology for realtime monitoring of traffic patterns on the nation

> A vice president for operations at Poncho Platforms asks for your help on a financial reporting issue concerning goodwill. Two years ago, the company suffered a goodwill impairment loss for its Chip Integration reporting unit. Since that time, however, t

Question: Allen Company acquired 100 percent of Bradford

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