1. On January 1, 20X1, Port Inc. acquired 80% of the outstanding voting shares of Salut...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
1. On January 1, 20X1, Port Inc. acquired 80% of the outstanding voting shares of Salut Inc. for total consideration of $1,200,000. On this date, Salut reported total assets of $1,800,000 and total liabilities of $800,000. All assets and liabilities had fair values equal to carrying values except for the following: Carrying value Fair value $ 90,000 200,000 Patent Bonds payable $ 150,000 The patent had a remaining useful life of 10 years as of the date of acquisition. The bonds mature on December 31, 20X4. It is now December 31, 20X2, and Port and Salut reported $140,000 and $80,000 of net income, respectively. Port uses the cost method to account for Salut in its legal entity financial statements. Salut did not declare any dividends during 20X2. For impairment testing purposes, Port evaluates Salut as a stand-alone cash- generating unit (CGU). The net asset value of the CGU was found to be impaired by $20,000 in 20X2, and the impairment loss was allocated entirely to goodwill. What is the amount of consolidated net income attributable to the shareholders of Port for the year ended December 31, 20X2, assuming that Port elected to use the fair value enterprise (FVE) method? a) $170,800 b) $186,800 c) $190,800 d) $205,200 2. PET Co. owns 80% of the common shares of SAL Corp. PET has no other investments. Goodwill associated with the investment is nil, but there is a fair value increment of $62,500 relating to SAL's patent that is being amortized over 10 years. PET's and SAL's reported net income for 20X5 is as follows: PET Co. SAL Corp. Net income $200,000 $50,000 SAL declared $25,000 in dividends in 20X5. Assuming PET uses the cost method, what amount of consolidated net income attributable to the parent (ATP) would be reported in 20X5? a) $210,000 b) $215,000 c) $223,750 d) $235,000 3. If goodwill is impaired in a given year, how does this affect consolidated net income attributable to the NCI on the consolidated statement of comprehensive income (SCI) for the year under the FVE method versus the identifiable net assets (INA) approach? a) Under the FVE method, the consolidated net income attributable to the NCI is reduced by the NCI's proportionate share in the goodwill impairment, whereas under the INA approach it is not. Thus, the amount of consolidated net income attributable to the NCI will be lower when using the FVE method than when using the INA approach. b) There is no difference in the amount reported for consolidated net income attributable to the NCI on the consolidated SCI. However, NCI on the consolidated statement of financial position (SFP) will be lower when using the FVE method than when using the INA approach. c) Under the FVE method, the NCI does not share in the goodwill impairment, whereas under the INA approach it does. Thus, the amount of consolidated net income attributable to NCI would be higher when using the INA approach. d) Under the FVE method, consolidated net income attributable to the NCI is reduced by the proportionate share of goodwill impairment based on the percentage ownership of the parent. Use the following information to answer Questions 4 and 5: PLE Corp. purchased 100% of the outstanding voting shares of SPP Inc. on December 31, 20X4. On this date, SPP reported $200,000 in common shares and $420,000 in retained earnings. The following AD schedule has been provided regarding the purchase: AD and amortization schedule Acquisition (SFP) 12/31/20X4 SCI 20X5 SFP 12/31/20X5 SCI SFP 12/31/20X6 20X6 Inventory Land $ 35,000 $ 35,000 $ $ 170,000 170,000 170,000 Building and equipment Long-term debt Goodwill 315,000 (215,000) 300,500 $ 605,500 283,500 (86,000) (129,000) 300.500 $ (19,500) $ 625,000 $ (34.000) 31,500 31,500 (86,000) 252,000 (43,000) 280.000 $ 659.000 20.500 4. Which of the following statements are true? i. The value of consideration given by PLE to acquire 100% of SPP on December 31, 20X4, was $1,225,500. ii. At acquisition, long-term debt had a fair value less than book value. i. The AD at acquisition of $605,500 represents the price paid for the net assets in excess of the book value. a) (i). (ii), and (ii b) (i) and (ii) c) (ii) and (ii) d) (i) and (iii) 5. During 20X6, in their legal entity income statements, PLE reported $140,000 of interest expense, and SPP reported $190,000. What amount would be reported as consolidated interest expense on the consolidated SCI? a) $244,000 b) $287,000 c) $296,000 d) $416,000 1. On January 1, 20X1, Port Inc. acquired 80% of the outstanding voting shares of Salut Inc. for total consideration of $1,200,000. On this date, Salut reported total assets of $1,800,000 and total liabilities of $800,000. All assets and liabilities had fair values equal to carrying values except for the following: Carrying value Fair value $ 90,000 200,000 Patent Bonds payable $ 150,000 The patent had a remaining useful life of 10 years as of the date of acquisition. The bonds mature on December 31, 20X4. It is now December 31, 20X2, and Port and Salut reported $140,000 and $80,000 of net income, respectively. Port uses the cost method to account for Salut in its legal entity financial statements. Salut did not declare any dividends during 20X2. For impairment testing purposes, Port evaluates Salut as a stand-alone cash- generating unit (CGU). The net asset value of the CGU was found to be impaired by $20,000 in 20X2, and the impairment loss was allocated entirely to goodwill. What is the amount of consolidated net income attributable to the shareholders of Port for the year ended December 31, 20X2, assuming that Port elected to use the fair value enterprise (FVE) method? a) $170,800 b) $186,800 c) $190,800 d) $205,200 2. PET Co. owns 80% of the common shares of SAL Corp. PET has no other investments. Goodwill associated with the investment is nil, but there is a fair value increment of $62,500 relating to SAL's patent that is being amortized over 10 years. PET's and SAL's reported net income for 20X5 is as follows: PET Co. SAL Corp. Net income $200,000 $50,000 SAL declared $25,000 in dividends in 20X5. Assuming PET uses the cost method, what amount of consolidated net income attributable to the parent (ATP) would be reported in 20X5? a) $210,000 b) $215,000 c) $223,750 d) $235,000 3. If goodwill is impaired in a given year, how does this affect consolidated net income attributable to the NCI on the consolidated statement of comprehensive income (SCI) for the year under the FVE method versus the identifiable net assets (INA) approach? a) Under the FVE method, the consolidated net income attributable to the NCI is reduced by the NCI's proportionate share in the goodwill impairment, whereas under the INA approach it is not. Thus, the amount of consolidated net income attributable to the NCI will be lower when using the FVE method than when using the INA approach. b) There is no difference in the amount reported for consolidated net income attributable to the NCI on the consolidated SCI. However, NCI on the consolidated statement of financial position (SFP) will be lower when using the FVE method than when using the INA approach. c) Under the FVE method, the NCI does not share in the goodwill impairment, whereas under the INA approach it does. Thus, the amount of consolidated net income attributable to NCI would be higher when using the INA approach. d) Under the FVE method, consolidated net income attributable to the NCI is reduced by the proportionate share of goodwill impairment based on the percentage ownership of the parent. Use the following information to answer Questions 4 and 5: PLE Corp. purchased 100% of the outstanding voting shares of SPP Inc. on December 31, 20X4. On this date, SPP reported $200,000 in common shares and $420,000 in retained earnings. The following AD schedule has been provided regarding the purchase: AD and amortization schedule Acquisition (SFP) 12/31/20X4 SCI 20X5 SFP 12/31/20X5 SCI SFP 12/31/20X6 20X6 Inventory Land $ 35,000 $ 35,000 $ $ 170,000 170,000 170,000 Building and equipment Long-term debt Goodwill 315,000 (215,000) 300,500 $ 605,500 283,500 (86,000) (129,000) 300.500 $ (19,500) $ 625,000 $ (34.000) 31,500 31,500 (86,000) 252,000 (43,000) 280.000 $ 659.000 20.500 4. Which of the following statements are true? i. The value of consideration given by PLE to acquire 100% of SPP on December 31, 20X4, was $1,225,500. ii. At acquisition, long-term debt had a fair value less than book value. i. The AD at acquisition of $605,500 represents the price paid for the net assets in excess of the book value. a) (i). (ii), and (ii b) (i) and (ii) c) (ii) and (ii) d) (i) and (iii) 5. During 20X6, in their legal entity income statements, PLE reported $140,000 of interest expense, and SPP reported $190,000. What amount would be reported as consolidated interest expense on the consolidated SCI? a) $244,000 b) $287,000 c) $296,000 d) $416,000
Expert Answer:
Answer rating: 100% (QA)
Question 1 Question 2 Correct 215000 Explanation Consolidated Net Income Particulars Net income Pet Co 20000 Less Dividend income from Sal Corp 2500080 20000 Net income from operations 180000 Net inco... View the full answer
Posted Date:
Students also viewed these accounting questions
-
1.Which will be relatively easier to pivot into and why?
-
The Ralston Company owns 35% of the outstanding voting shares of Purina Inc. Under what circumstances would Ralston determine that it is inappropriate to report this investment using the equity...
-
(2) In R, A point mass M moves with the velocity v (t) = (1, t cost, tsin t) and the original position r(0)= (-1,1,0). Another point mass M has the position function r(t) = (t, 2 cost, 2 sin t). (a)...
-
The comparative balance sheet of Merrick Equipment Co. for December 31, 20Y9 and 20Y8, is as follows: Dec. 31, 20Y9 Dec. 31, 20Y8 Assets Cash $70,720 $47,940 Accounts receivable (net) 207,230 188,190...
-
Exhibit contains income statements and balance sheets of The Hershey Company. For more than 100 years, The Hershey Company has enjoyed a position as one of North Americas largest manufacturers of...
-
Two flows are mixed to form a single flow. Flow at state 1 is 1.5 kg/s water at 400 kPa, 200oC and flow at state 2 is 500 kPa, 100oC. Which mass flow rate at state 2 will produce an exit T3 = 150oC...
-
In evaluating investment centers, what does multiplying the profit margin bythe investment turnover equal?
-
With regard to current GASB standards for pension reporting do the following: a. Distinguish between (1) Defined contribution plans and (2) Defined benefit plans. b. Distinguish between (1) Agent and...
-
Part D Investment Assessment Complete an investment assessment of this venture using the following information: Initial investment (capital cost) - $350,000. - Projected venture lifetime 12 years. -...
-
Case Study Progressive Hospital is considering the purchase of a new "Sidewinder" scanner, which costs $3,000,000. The new scanner provides a 360-degree internal feature view of the organ or body...
-
Select the statement that is incorrect. In relation to replaceable rules: a. If a company decides not to draft its own constitution, the replaceable rules provide the basic internal rules required...
-
What do you understand by type 1 and type 2 rationing?
-
What is financial intermediation? Demonstrate the welfare superiority of the introduction of financial intermediation.
-
Your message of June 1 claims that the blade in your food processor malfunctioned. Although you apparently failed to read the operators manual, we are sending you a replacement blade PLUS another...
-
Using qualitative and quantitative measures, lenders utilize a review process called the five C's of credit to evaluate a borrower. They include an evaluation of the borrower's character...
-
The owners of Boston-based food truck Mei Mei Street Kitchen and Mei Mei restaurant, collectively known as the Mei Mei Group, imaginatively provide context to the definition of marketing by creating,...
-
1) Projects not managed properly can run into all sorts of problems. Explain broadly how costs, quality, and timeliness of projects can be affected by mismanagement. 2) Activity A B C D E F G...
-
AB CORPORATION ISSUED THE FOLLOWING 850 COMMON STOCKS PAR VALUE P100 750 PARTICIPATING PREFERRED STOCKS PAR VALUE P100 AT 3% AB CORPORATION DECLARED P100,000.00 DIVIDEND IN 2022.
-
It is likely that at least some anticompetitive practices have been prevented by _________ policies simply through their prohibition of monopoly-like practices.
-
From societys point of view, allocative efficiency occurs where the price of the good is equal to _________. But with natural monopoly, at the optimal level of output for allocative efficiency,...
-
Three major approaches to dealing with the monopoly problem are commonly used: _________ policies, _________, and _________ ownership.
Study smarter with the SolutionInn App