Parker, Inc., acquires 70 percent of Sawyer Company for $420,000. The remaining 30 percent of LO6 Sawyers
Question:
Parker, Inc., acquires 70 percent of Sawyer Company for $420,000. The remaining 30 percent of LO6 Sawyer’s outstanding shares continue to trade at a collective value of $174,000. On the acquisition date, Sawyer has the following accounts:
Current assets Land.
Buildings Liabilities Book Value
$ 210,000 170,000 300,000 (280,000)
Fair Value
$ 210,000 180,000 330,000 (280,000)
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:
Revenues Expenses Parker
$(900,000)
600,000 Sawyer
$(600,000)
400,000 a.Assume that the acquisition took place on January 1. What figures would appear in a consoli¬ dated income statement for this year?
h. Assume that the acquisition took place on April 1. Sawyer’s revenues and expenses occurred uniformly throughout the year. What amounts would appear in a consolidated income statement for this year?
Step by Step Answer:
Advanced Accounting
ISBN: 9780073379456
9th Edition
Authors: Joe Ben Hoyle, Timothy S. Doupnik, Thomas F. Schaefer, Oe Ben Hoyle