Question
Carson, Inc., acquires 80 percent of the outstaniding common stock of Gardena corporation on January 1, 2020, in exchange for $900,000 cash. At the acquisition
Carson, Inc., acquires 80 percent of the outstaniding common stock of Gardena corporation on January 1, 2020, in exchange for $900,000 cash. At the acquisition date, Gardena's total fair value, including the noncontrolling interest, was assessed at $1,125,000. Also at the acquisition date, Gardena's book value was $690,000. Several individual items on Gardena's financial records had fair values that differed from their book values as follows:
| Book value | Fair value | |||||||||
| Trademark (indefinite life) | $360,000 | $383,000 | ||||||||
| Property and equipment (net, 8-year remaining useful life) | 290,000 | 330,000 | ||||||||
| Patent (14-year remaining useful life) | 132,000 | 272,000 | ||||||||
| For internal reporting purposes, Carson, inc., employs the equity method to account for this investment. The following account balances are for the year | |||||||||||
| ending December 31, 2020, for both companies. At year-end, there were no intra-entity receivables or payables. | |||||||||||
| 5. The working paper entry to eliminate Carsons investment in Gardena at December 31, 2020 (only consolidation JE S and A) | |||||||||
| Your answer: | |||||||||
| 6. What is the consolidated balance for investment at December 31, 2020? | |||||
| Your answer: | |||||
| 7. What is the consolidated balance for equiy in income of Gardena at December 31, 2020? | |||||||
| Your answer: | |||||||
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Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516
