Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Listen Pea Inc. acquired 75% of Slik Inc.'s outstanding common stock on January 1, 2020 for $96,000. On January 1, 2020, the fair value of

image text in transcribed
image text in transcribed
Listen Pea Inc. acquired 75% of Slik Inc.'s outstanding common stock on January 1, 2020 for $96,000. On January 1, 2020, the fair value of the noncontrolling interest (NCI) in Slik was $32,000 and the book value of Slik's net assets was $100,000. The book values and fair values of Slik's assets and liabilities at acquisition were equal except for Slik's buildings, which were worth $20,000 more than book value. Accumulated depreciation on Slik's buildings was $30,000 on January 1, 2020. Buildings are depreciated on a 10-year basis. Pea management determined on December 31, 2020, that goodwill from its purchase of Slik shares had been impaired and the correct amount was $2,500. Goodwill and goodwill impairment were assigned proportionately to Pea and noncontrolling shareholders. Select data from the consolidation worksheet for Pea and Slik as of December 31, 2020, are as follows: Pea Inc. Slik Inc. INCOME STATEMENT Depreciation Expense 25,000 10,000 Income from Slik 12,375 Goodwill Impairment Loss NCI in Net Income of Slik STATEMENT OF RETAINED EARNINGS 102,000 40,000 54,875 24,000 Beginning Balance Net Income Less: Dividends Declared Ending Balance (30,000) (16,000) 126,875 48,000 BALANCE SHEET 150.000 Buildings 350,000 Less: Accumulated Depreciation (145,000) Investment in Slik 96,375 (40,000) Goodwill Common Stock 200,000 60,000 NCI in Net Assets of Slik Identify the following statements that are TRUE regarding the Amortized Excess Value Reclassification Entry and the Excess Value (Differential) Reclassification Entry needed in the 2020 consolidation worksheet to consolidate Pea and Slik. The Amortized Excess Value Reclassification Entry includes a debit to Depreciation Expense of $2,000. The Amortized Excess Value Reclassification Entry includes a debit to Goodwill Impairment Loss of $5,500. The Amortized Excess Value Reclassification Entry includes a credit to Income from Slik of $5,625 The Amortized Excess Value Reclassification Entry includes a credit to NCI in Net Income of Slik of $1,875. The Amortized Excess Value Reclassification Entry includes a debit to Retained Earnings of $102,000. The Excess Value (Differential) Reclassification Entry includes a debit to Buildings of $20,000 The Excess Value (Differential) Reclassification Entry includes a debit to Goodwill of $2,500. The Excess Value (Differential) Reclassification Entry includes a credit to Accumulated Depreciation of $2,000. The Excess Value (Differential) Reclassification Entry includes a credit to Investment in Slik of $15,375. The Excess Value (Differential) Reclassification Entry includes a credit to NCI in Net Assets of Slik of $5,125. The Excess Value (Differential) Reclassification Entry includes a credit to Retained Earnings of $48,000. The Excess Value (Differential) Reclassification Entry includes a debit to Common Stock of $200,000. Listen Pea Inc. acquired 75% of Slik Inc.'s outstanding common stock on January 1, 2020 for $96,000. On January 1, 2020, the fair value of the noncontrolling interest (NCI) in Slik was $32,000 and the book value of Slik's net assets was $100,000. The book values and fair values of Slik's assets and liabilities at acquisition were equal except for Slik's buildings, which were worth $20,000 more than book value. Accumulated depreciation on Slik's buildings was $30,000 on January 1, 2020. Buildings are depreciated on a 10-year basis. Pea management determined on December 31, 2020, that goodwill from its purchase of Slik shares had been impaired and the correct amount was $2,500. Goodwill and goodwill impairment were assigned proportionately to Pea and noncontrolling shareholders. Select data from the consolidation worksheet for Pea and Slik as of December 31, 2020, are as follows: Pea Inc. Slik Inc. INCOME STATEMENT Depreciation Expense 25,000 10,000 Income from Slik 12,375 Goodwill Impairment Loss NCI in Net Income of Slik STATEMENT OF RETAINED EARNINGS 102,000 40,000 54,875 24,000 Beginning Balance Net Income Less: Dividends Declared Ending Balance (30,000) (16,000) 126,875 48,000 BALANCE SHEET 150.000 Buildings 350,000 Less: Accumulated Depreciation (145,000) Investment in Slik 96,375 (40,000) Goodwill Common Stock 200,000 60,000 NCI in Net Assets of Slik Identify the following statements that are TRUE regarding the Amortized Excess Value Reclassification Entry and the Excess Value (Differential) Reclassification Entry needed in the 2020 consolidation worksheet to consolidate Pea and Slik. The Amortized Excess Value Reclassification Entry includes a debit to Depreciation Expense of $2,000. The Amortized Excess Value Reclassification Entry includes a debit to Goodwill Impairment Loss of $5,500. The Amortized Excess Value Reclassification Entry includes a credit to Income from Slik of $5,625 The Amortized Excess Value Reclassification Entry includes a credit to NCI in Net Income of Slik of $1,875. The Amortized Excess Value Reclassification Entry includes a debit to Retained Earnings of $102,000. The Excess Value (Differential) Reclassification Entry includes a debit to Buildings of $20,000 The Excess Value (Differential) Reclassification Entry includes a debit to Goodwill of $2,500. The Excess Value (Differential) Reclassification Entry includes a credit to Accumulated Depreciation of $2,000. The Excess Value (Differential) Reclassification Entry includes a credit to Investment in Slik of $15,375. The Excess Value (Differential) Reclassification Entry includes a credit to NCI in Net Assets of Slik of $5,125. The Excess Value (Differential) Reclassification Entry includes a credit to Retained Earnings of $48,000. The Excess Value (Differential) Reclassification Entry includes a debit to Common Stock of $200,000

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

Managerial Accounting Creating Value In A Dynamic Business Environment

Authors: Ronald Hilton, David Platt

13th Edition

1264100698, 9781264100699

More Books

Students also viewed these Accounting questions

Question

How is the NDAA used to shape defense policies indirectly?

Answered: 1 week ago