Question
On January 1, 2021, Gooch Company acquires 80% of the outstanding common stock of House Inc., for a purchase price of $12,400,000. It was determined
On January 1, 2021, Gooch Company acquires 80% of the outstanding common stock of House Inc., for a purchase price of $12,400,000. It was determined that the fair value of the noncontrolling interest in the subsidiary is $3,100,000. The book value of the Houses stockholders equity on the date of acquisition is $10,000,000 and its fair value of identifiable net assets is $10,850,000. The acquisition-date acquisition accounting premium (AAP) is allocated $600,000 to equipment with a remaining useful life of 10 years, and $250,000 to a patent with a remaining useful life of 5 years. Assume that during the year ended December 31, 2021, House reports net income of $950,000 and pays dividends of $150,000. Gooch uses the equity method to account for its investment in House.
Determine the December 31, 2021 ending balance in Gooch Companys pre-consolidation equity investment account.
Select one:
A. $12,952,000
B. $13,090,000
C. $12,400,000
D. $13,040,000
59.
On January 1, 2020, Coldspring Corp. paid $770,000 to acquire Whitt Co. Coldspring used the equity method to account for the investment. The following information is available for the assets, liabilities, and stockholders' equity accounts of Whitt:
| Book Value | Fair Value |
Current assets | $95,000 | $95,000 |
Land | 95,000 | 120,000 |
Building (twenty year life) | 255,000 | 310,000 |
Equipment (five year life) | 185,000 | 190,000 |
Current liabilities | 40,000 | 40,000 |
Long-term liabilities | 65,000 | 65,000 |
Common stock | 140,000 |
|
Additional paid-in capital | 300,000 |
|
Retained earnings | 210,000 |
|
Whitt earned net income for 2020 of $125,000 and paid dividends of $18,000 during the year. For 2020, what is the balance in Equity Income on Coldspring's books?
Select one:
A. $128,750
B. $125,000
C. $121,250
D. $143,000
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started