Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Husky, Inc. obtained 100% of Cougar Company's common stock on January 1, 2019, by issuing 50,000 shares of common stock that was trading at

image text in transcribedimage text in transcribedimage text in transcribed

Husky, Inc. obtained 100% of Cougar Company's common stock on January 1, 2019, by issuing 50,000 shares of common stock that was trading at $40 per share. The acquisition agreement also contained a contingent consideration clause to which Husky assigned a fair value of $100,000. On January 1, 2019, Cougar reported a net book value of $1,600,000. However, Equipment (10-year life) was undervalued by $150,000. Also, Cougar had research and development in process with an assessed value of $200,000, although no value had been recorded on Cougar's books. This amount is not being amortized. Any remaining excess of fair value over book value was attributed to Goodwill. During 2019, Cougar reported Net Income of $320,000 and paid Dividends of $120,000. The following figures come from the individual accounting records of the two companies as of December 31, 2020. Net Income of Husky is from its own operations and excludes any income from Cougar:

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

Financial Accounting An Integrated Statements Approach

Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren

2nd Edition

324312113, 978-0324312119

More Books

Students also viewed these Accounting questions