Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On January1, 20X5, Pan Corp. purchased 85% of the outstanding voting common shares of Spoon Inc. for $850,000 cash. On this date, Spoon reported common

On January1, 20X5, Pan Corp. purchased 85% of the outstanding voting common shares of Spoon Inc. for $850,000 cash. On this date, Spoon reported common shares of $400,000 and retained earnings of $500,000. Spoon's identifiable assets and liabilities had fair values equal to their carrying values.

Additional information:

  • The investment in the subsidiary was found to be impaired by $10,000 in 20X7. The entire impairment loss was allocated to goodwill.
  • On January1, 20X6, Spoon sold a trademark to Pan for $80,000. On this date, the trademark had a carrying value of $70,000 on the books of Spoon and a remaining useful life of five years.
  • On September1, 20X8, Pan sold land to Spoon at a $30,000 loss. Spoon still owns this land as of December31, 20X8. The land asset was not impaired at time of sale.
  • During 20X8, Pan's inventory sales to Spoon were $70,000. Spoon still had $20,000 of this inventory on hand at December31, 20X8. Inventory purchased from Pan and still on hand at December31, 20X7, was $7,000. Pan prices intercompany sales to yield a 25% gross margin.
  • During 20X8, Spoon's inventory sales to Pan were $40,000. Pan still had $8,000 of this inventory on hand at December31, 20X8. Inventory purchased from Spoon and still on hand at December31, 20X7, was $4,000. Spoon's gross margin on sales is 30% for all intercompany transactions.
  • Pan paid dividends of $15,000 and Spoon paid dividends of $20,000 in 20X8.
  • Pan uses the cost method to record its investment in Spoon. Pan applies the fair value entity method (FVE) for goodwill calculations.
  • Spoon has not had any changes to its common share account since acquisition.

The following are the statements of comprehensive income for the year ended December31, 20X8, for Pan and Spoon:

Statements of comprehensive income

For the year ended December31, 20X8

PanSpoonSales and other income$840,000$710,000Cost of goods sold630,000497,000Amortization expense68,00054,000142,000159,000Income tax expense (40%)56,80063,600Net income and comprehensive income$85,200$95,400

Selected statement of financial position accounts at December31, 20X8, are as follows:

PanSpoonInventory$95,000$58,000Property, plant, and equipment (net) (includes land)416,000397,000Trademark (net)32,000Retained earnings984,000748,000

What is the consolidated net income for the year ended December31, 20X8?

Question 1 options:

$144,130

$170,130

$178,930

$180,130

Question 2(1 point)

What amount would be reported on the consolidated statement of financial position for trademarks at December31, 20X8?

Question 2 options:

$22,000

$28,000

$36,000

$38,000

Question 3(1 point)

What amount would be reported on the consolidated statement of financial position for inventory?

Question 3 options:

$145,600

$148,550

$148,560

$160,400

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_2

Step: 3

blur-text-image_3

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

Rockford Practice Set To Accompany Intermediate Accounting

Authors: Donald E. Kieso

16th Edition

1119287936, 9781119287933

More Books

Students also viewed these Accounting questions

Question

Distinguish between comparative advantage and absolute advantage.

Answered: 1 week ago