Question
Hamza Inc. acquired all of the outstanding common stock of Ali Corp. on January 1, 2016, for $372,000. Equipment with a ten-year life was undervalued
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Hamza Inc. acquired all of the outstanding common stock of Ali Corp. on January 1, 2016, for $372,000. Equipment with a ten-year life was undervalued on Ali's financial records by $46,000. Hamza also owned an unrecorded customer list with an assessed fair value of $67,000 and an estimated remaining life of five years.
Ali Co. earned reported net income of $180,000 in 2016 and $216,000 in 2017. Dividends of $70,000 were paid in each of these two years. Selected account balances as of December 31, 2018, for the two companies follow.
Hamza Co
Ali Co
Revenues
$1,080,000
$840,000
Expenses
480,000
600,000
Investment income
Not given
0
Retained earnings, 1/1/18
840,000
600,000
Dividends paid
132,000
70,000
17. If the partial equity method had been applied, what was 2018 consolidated net income?
$768,400.
$840,000.
$240,000.
$822,000.
$600,000.
Hamza Inc. acquired all of the outstanding common stock of Ali Corp. on January 1, 2016, for $372,000. Equipment with a ten-year life was undervalued on Ali's financial records by $46,000. Hamza also owned an unrecorded customer list with an assessed fair value of $67,000 and an estimated remaining life of five years.
Ali Co. earned reported net income of $180,000 in 2016 and $216,000 in 2017. Dividends of $70,000 were paid in each of these two years. Selected account balances as of December 31, 2018, for the two companies follow.
|
| Hamza Co | Ali Co |
| Revenues | $1,080,000 | $840,000 |
| Expenses | 480,000 | 600,000 |
| Investment income | Not given | 0 |
| Retained earnings, 1/1/18 | 840,000 | 600,000 |
| Dividends paid | 132,000 | 70,000 |
17. If the partial equity method had been applied, what was 2018 consolidated net income?
| $768,400. | ||
| $840,000. | ||
| $240,000. | ||
| $822,000. | ||
| $600,000. |
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Auditing Cases An Active Learning Approach
Authors: Mark S. Beasley, Frank A. Buckless, Steven M. Glover, Douglas F. Prawitt
2nd Edition
0130674842, 978-0130674845
