Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On January 1, 2017, Travers Company acquired 90 percent of Yarrow Company's outstanding stock for $945,000. The 10 percent noncontrolling interest had an assessed fair

image text in transcribed
image text in transcribed
image text in transcribed
On January 1, 2017, Travers Company acquired 90 percent of Yarrow Company's outstanding stock for $945,000. The 10 percent noncontrolling interest had an assessed fair value of $105,000 on that date. Any acquisition-date excess fair value over book value was attributed to an unrecorded customer list developed by Yarrow with a remaining life of 15 years. On the same date, Yarrow acquired an 80 percent interest in Stookey Company for $544,000. At the acquisition date, the 20 percent noncontrolling interest fair value was $136,000. Any excess fair value was attributed to a fully amortized copyright that had a remaining ife of 10 years. Although both investments are accounted for using the initial value method, neither Yarrow nor Stookey have distributed dividends since the acquisition date. Travers has a policy to declare and pay cash dividends each year equal to 40 percent of its separate company operating earnings. Reported income totals for 2017 follow $550,000 285,000 220,000 Yarrow Company Following are the 2018 financial statements for these three companies. Stookey has transferred numerous amounts of inventory to Yarrow since the takeover amounting to $130,000 (2017) and $162,500 (2018). These transactions include the same markup applicable to Stookey's outside sales. In each year, Yarrow carried 20 percent of this inventory into the succeeding year before disposing of it. An effective tax rate of 40 percent is applicable to all companies. All dividend declarations are paid in the same period. s(1,150,000) (792,500) (550,0001) Cost of goods sold operating expenses 422,500 105,000 612,500 330,000 110,000 Net income Retained earnings, 1/1/18 Dividenda declared (410,000) (265,000) (110,000) s (950,000) (795,000) (525,000) (410,000) 164,000 (265,000) (110,000) $(1,196,000) (1,060,000) (635, 000) $ 502,500 Retained earnings, 12/31/18 596,500 945,000 $ 394,700 Investment in Stookey Company 544,000 1,246 500886,000505,000 1,932,500 $(1,092,000)$ (542,500) s (64,700) and equipment (net) Total assets s 2,788,000 $ 899,700 Common stock (330,000) (1 196,000) 1,060,000) (500,000) (200,000) Potal liabilities and equities $(2,788,000) (1,932,500) (899, 700) Note: Parentheses indicate a credit balance

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

Accounting Principles Volume 1

Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak

8th Canadian Edition

111950242X, 1-119-50242-5, 978-1119502425

More Books

Students also viewed these Accounting questions

Question

What is meant by Career Planning and development ?

Answered: 1 week ago

Question

What are Fringe Benefits ? List out some.

Answered: 1 week ago