Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On January 1, 2020, EMS Inc. acquired 70% of GRS Co. by paying $1,500,000 cash. The non-controlling interest is valued at $600,000. GRS Co. reported

On January 1, 2020, EMS Inc. acquired 70% of GRS Co. by paying $1,500,000 cash. The non-controlling interest is valued at $600,000. GRS Co. reported a Common Stock account balance of $750,000 and Retained Earnings of $125,000 at that date. At the date of acquisition, GRS, Co. had a piece of equipment on its books that was undervalued by $250,000, with a remaining 5 year life and a customer list that was valued at $300,000, which was not recorded on its books, with a remaining 10 year life. The subsidiary earned $377,000 in 2020 and $422,000 in 2021 with dividend payments of $50,000 each year. Without regard for this investment, EMS, Inc. had income of $867,000 in 2020 and $920,000 in 2021.

A) Prepare a fair value allocation schedule, including the amount of goodwill allocated to EMS, Inc. and the amount of goodwill allocated to the Non-controlling interest.

B) Prepare a proper presentation of consolidated net income for 2020, including the amount allocated to the non-controlling interest and the amount allocated to the controlling interest.

C) If the parent had used the equity method, what would be the balance in the Investment in GRS, Co. account at December 31, 2021? What is the non-controlling interest balance as of December 31, 2021?

D) Prepare all of the consolidating entries for December 31, 2020 assuming EMS, Inc. used the equity method in its separate financial statements.

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

Lab Manual To Accompany Auditing IT Infrastructure For Compliance Version 2

Authors: Martin Weiss

2nd Edition

1284059189, 978-1284059182

More Books

Students also viewed these Accounting questions

Question

What are the essential components of a futures contract?

Answered: 1 week ago