Question
On January 1, 2019, Phoenix Co. acquired 100 percent of the outstanding voting shares of Sedona Inc. for $706,000 cash. At January 1, 2019, Sedonas
On January 1, 2019, Phoenix Co. acquired 100 percent of the outstanding voting shares of Sedona Inc. for $706,000 cash. At January 1, 2019, Sedonas net assets had a total carrying amount of $494,200. Equipment (eight-year remaining life) was undervalued on Sedonas financial records by $92,000. Any remaining excess fair over book value was attributed to a customer list developed by Sedona (four-year remaining life), but not recorded on its books. Phoenix applies the equity method to account for its investment in Sedona. Each year since the acquisition, Sedona has declared a $29,500 dividend. Sedona recorded net income of $85,500 in 2019 and $103,100 in 2020.
Selected account balances from the two companies individual records were as follows:
| Phoenix | Sedona | |||||
| 2021 Revenues | $ | 611,000 | $ | 380,000 | ||
| 2021 Expenses | 418,000 | 283,000 | ||||
| 2021 Income from Sedona | 55,550 | |||||
| Retained earnings 12/31/21 | 304,750 | 206,900 | ||||
Problem 3-10 (Algo) (LO 3-3a)
What is consolidated net income for Phoenix and Sedona for 2021?
Multiple Choice
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$248,550
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$193,000
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$283,550
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$273,550
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