Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

4. McGuire Company acquired 90 percent of Hogan Company on January 1, 2019, for $234,000 cash. This amount is reflective of Hogans total acquisition-date fair

4. McGuire Company acquired 90 percent of Hogan Company on January 1, 2019, for $234,000 cash. This amount is reflective of Hogans total acquisition-date fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following:

Book Value Fair Value
Buildings (10-year life) $ 10,000 $ 8,000
Equipment (4-year life) 14,000 18,000
Land 5,000 12,000

Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years.

In consolidation at December 31, 2019, what adjustment is necessary for Hogan's Land account?

Multiple Choice

  • $6,300 decrease.

  • $6,300 increase.

  • $7,000 increase.

  • $8,000 decrease.

  • No adjustment is necessa

5.McGuire Company acquired 90 percent of Hogan Company on January 1, 2019, for $234,000 cash. This amount is reflective of Hogans total acquisition-date fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following:

Book Value Fair Value
Buildings (10-year life) $ 10,000 $ 8,000
Equipment (4-year life) 14,000 18,000
Land 5,000 12,000

Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years.

In consolidation at December 31, 2020, what net adjustment is necessary for Hogan's Patent account?

Multiple Choice

  • No adjustment is necessary.

  • $8,000.

  • $6,600.

  • $4,200.

  • $5,500.

6.Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2019. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.

Demers earns income and pays dividends as follows:

2019 2020 2021
Net income $ 100,000 $ 120,000 $ 130,000
Dividends 40,000 50,000 60,000

Assume the equity method is applied.

Compute Pell's investment account balance in Demers at December 31, 2021.

Multiple Choice

  • $639,000.

  • $620,000.

  • $676,000.

  • $763,200.

  • $643,200.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Principles Of Cost Accounting

Authors: Edward J. Vanderbeck

12th Edition

0324100949, 978-0324100945

More Books

Students also viewed these Accounting questions

Question

Why should a consultants progress be regularly monitored?

Answered: 1 week ago