ACCT 450 CH4 Essay example

Submitted By Stephen-McDaniel
Words: 3448
Pages: 14

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Bailey, Inc., buys 60 percent of the outstanding stock of Luebs, Inc. Luebs owns a piece of land that cost $205,000 but was worth $510,000 at the acquisition date. What value should be attributed to this land in a consolidated balance sheet at the date of takeover?

$305,000

$123,000

$510,000

$387,000

At the date control is obtained, the parent consolidates subsidiary assets at fair value ($510,000 in this case) regardless of the parent's percentage ownership.
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Jordan, Inc., holds 75 percent of the outstanding stock of Paxson Corporation. Paxson currently owes Jordan $500,000 for inventory acquired over the past few months. In preparing consolidated financial statements, what amount of this debt should be eliminated?

0

$125,000

$375,000

$500,000

In consolidating the subsidiary's figures, all intra-entity balances must be eliminated in their entirety for external reporting purposes. Even though the subsidiary is less than fully owned, the parent nonetheless controls it.
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On January 1, 2012, Brendan, Inc., reports net assets of $895,050 although equipment (with a four-year life) having a book value of $502,000 is worth $573,750 and an unrecorded patent is valued at $46,300. Hope Corporation pays $810,480 on that date for an 80 percent ownership in Brendan. If the patent is to be written off over a 10-year period, at what amount should it be reported on consolidated statements at December 31, 2013?

$33,336

$29,632

$37,040

$41,670

An asset acquired in a business combination is initially valued at 100% acquisition-date fair value and subsequently amortized over its useful life.

Patent fair value at January 1, 2012
$
46,300 Amortization for 2 years (10 year life) (9,260
)

Patent reported amount December 31, 2013
$
37,040

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On January 1, 2012, Chamberlain Corporation pays $578,800 for a 60 percent ownership in Neville. Annual excess fair-value amortization of $20,500 results from the acquisition. On December 31, 2013, Neville reports revenues of $491,000 and expenses of $338,000 and Chamberlain reports revenues of $792,000 and expenses of $422,000. The parent figures contain no income from the subsidiary. What is consolidated net income attributable to the controlling interest?

$502,500

$491,000

$470,000

$449,500

Combined revenues
$
1,283,000 Combined expenses (760,000
)
Excess acquisition-date fair value amortization (20,500
)

Consolidated net income
$
502,500 Less: noncontrolling interest ($132,500 × 40%) (53,000
)

Consolidated net income to controlling interest
$
449,500

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Amie, Inc., has 144,000 shares of $1 par value stock outstanding. Prairie Corporation acquired 43,200 of Amie’s shares on January 1, 2010, for $86,400 when Amie’s net assets had a total fair value of $312,600. On July 1, 2013, Prairie agreed to buy an additional 86,400 shares of Amie from a single stockholder for $4 per share. Although Amie’s shares were selling in the $3 range around July 1, 2013, Prairie forecasted that obtaining control of Amie would produce significant revenue synergies to justify the premium price paid. If Amie’s net identifiable assets had a fair value of $438,400 at July 1, 2013, how much goodwill should Prairie report in its postcombination consolidated balance sheet?

$0

$137,600

$80,000

$43,200

Amie, Inc. fair value at July 1, 2013:

30% previously owned fair value (43,200 shares × $3)
$
129,600 60% new shares acquired (86,400 shares × $4) 345,600 10% NCI fair value (14,400 shares × $3) 43,200

Acquisition-date fair value
$
518,400 Net assets' fair value 438,400

Goodwill
$
80,000

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On April 1, Pujols, Inc., exchanges $490,500 fair-value consideration for 70 percent of…