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Kroft Foods acquired Codberry Inc. on January 1, 2019, for $40,000,000, in a stock acqusition. Codberry's aquisition-date assets and liabilities were reported at amounts approximating
Kroft Foods acquired Codberry Inc. on January 1, 2019, for $40,000,000, in a stock acqusition. Codberry's aquisition-date assets and liabilities were reported at amounts approximating fair value, except its inventories (FIFO) were overvalued by $2,000,000, its property and equipment (20-year remaining life, straight-line) was overvalued by $10,000,000, and it had previously unreported identifiable intangibles (5-year remaining life, straight-line) with a fair value of $14,000,000. Goodwill from this acquisition was impaired by $1,000,000 during 2019. Kroft uses the complete equity method to account for the investment on its own books. Below are the December 31, 2019 trial balances of Kroft and Codberry: Current assets Property and equipment, net Investment in Codberry Liabilities Captial Stock Retained earning, January 1 Dividends Dr (Cr) Kroft Codberry $8,000,000 $6,200,000 110,000,000 65,000,000 41,200,000 (87,500,000) (46,200,000) (39,000,000 (2,000,000) (16,000,000) (20,500,000) 500,000 (50,000,000) (20,000,000) (1,700,000) 30,000,000 15,000,000 5,000,000 2,000,000 Sales revenue Equity in net income of Codberry Cost of goods sold Operating Expenses Working paper elimination entry (C) is: Select one: Equity in net income of Codberry 1,700,000 Investment in Codberry 1,700,000 Dividends Investment in Codberry Equity in net income of Codberry 500,000 1,200,000 1,700,000 Equity in net income of Codberry 1,700,000 Dividends Investment in Codberry 500,000 1,200,000 1,700,000 Investment in Codberry Equity in net income of Codberry 1,700,000 Working paper eliminating entry (E) is: Select one: Capital stock 2,000,000 Retained earnings, January 1 20,500,000 Investment in Codberry 22,500,000 Investment in Codberry 38,500,000 Capital stock Retained earnings, January 1 2,000,000 36,500,000 Capital stock 2,000,000 Retained earnings, January 1 36,500,000 Investment in Codberry 38,500,000 2,000,000 Capital stock Investment in Codberry 2,000,000
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