On July 1, 2016, Killearn Company acquired 84.000 of the outstanding shares of Shaun Company for $20 per share. This acquisition gave Killearn a 25 percent ownership of Shaun and allowed Killearn to significantly influence the investee's decisions. As of July 1, 2016, the investee had assets with a book value of $5 million and liabilities of $266,400. At the time, Shaun held equipment appraised at $476,000 above book value; it was considered to have a seven-year remaining life with no salvage value. Shaun also held a copyright with a five-year remaining life on its books that was undervalued by $1.212,000. Any remaining excess cost was attributable to goodwill. Depreciation and amortization are computed using the straight-line method. Killearn applies the equity method for its investment in Shaun Shaun's policy is to declare and pay a $1 per share cash dividend every April 1 and October 1. Shaun's income, earned evenly throughout each year, was $645,000 in 2016, S679,800 in 2017 and $723,000 in 2018 In addition, Killearn sold inventory costing S139,200 to Shaun for $232,000 during 2017 Shaun resold $101,500 of this inventory during 2017 and the remaining $130,500 during 2018 ok nces a. Determine the equity income to be recognized by Killearn during each of these years. b. Compute Killearn's investment in Shaun Company's balance as of December 31, 2018 (For all requirements, enter your answers in whole dollars and not in millions.) Ja $ 41,825 Equity income 2016 Equity Income 2017 Equity income 2018 Investment in Shaun $ 1.497,325 ProForm acquired 70 percent of ClipRite on June 30, 2017 for $770,000 in cash. Based on ClipRite's acquisition date fair value, an unrecorded intangible of $450,000 was recognized and is being amortized at the rate of $12,000 per year. No goodwill was recognized in the acquisition. The noncontrolling interest fair value was assessed at $330,000 at the acquisition date. The 2018 financial statements are as follows: Cliprite $ (640,000) 410,000 110,000 Sales Cost of goods sold Operating expenses Dividend income Net Income Retained earnings, 1/1/18 Net income Dividends declared Retained earnings, 12/31/18 Cash and receivables Inventory Investment in ClipRite assets Accumulated depreciation Totals Liabilities Common stock Retained earnings, 12/31/18 Totals Proform $ (820,000) 545,000 120,000 (49,000 $ (204,000) $(1,100,000) (204,600) 120,000 $(1,184,680) $ 420,000 310,000 770,000 1,200,000 (400,000) $ 2.300.000 5 (816,000) (300,000 $ (120,000) $ (870,000) (120,000) 70,000 $ (920,000) $ 320,000 720,000 @ 700,000 (300,000 $ 1,440, eee 5 (220,000) (300,000) (920,000) $(1,440,000) $(2,300,000) ClipRite sold ProForm inventory costing $71,000 during the last six months of 2017 for $110.000. At year-end, 30 percent remained. ClipRite sells ProForm inventory costing $210,000 during 2018 for $270,000. At year-end, 10 percent is left with these facts, determine the consolidated balances for the following: Consolidated Balance $ 1.190.000 679,300 $ 242.000 5 Sales Cost of goods sold Operating expenses Dividend income Net income attributable to controlling interest Inventory Noncontrolling interest in subsidiary, 12/31/18 S $ 1,024,000 On January 1, 2016, Monica Company acquired 70 percent of Young Company's outstanding common stock for $756,000. The fair value of the noncontrolling interest at the acquisition date was $324,000, Young reported stockholders' equity accounts on that date as follows: Common stock-$10 par value Additional paid-in capital Retained earnings $ 300,000 40,000 600,000 In establishing the acquisition value, Monica appraised Young's assets and ascertained that the accounting records undervalued a building with a five-year remaining life) by $60,000. Any remaining excess acquisition date fair value was allocated to a franchise agreement to be amortized over 10 years. During the subsequent years, Young sold Monica inventory at a 20 percent gross profit rate, Monica consistently resold this merchandise in the year of acquisition or in the period immediately following. Transfers for the three years after this business combination was created amounted to the following: Year 2016 2017 2018 Transfer Price $70,000 90.000 100,000 Inventory Remaining at Year-End (at transfer price) $ 29,000 31,000 37,000 In addition, Monica sold Young several pieces of fully depreciated equipment on January 1, 2017 for $55,000. The equipment had originally cost Monica $88,000. Young plans to depreciate these assets over a five-year period. In 2018, Young earns a net income of $170,000 and declares and pays $50,000 in cash dividends. These figures increase the subsidiary's Retained Earnings to a $930,000 balance at the end of 2018. During this same year, Monica reported dividend income of $35,000 and an investment account containing the initial value balance of $756,000 No changes in Young's common stock accounts have occurred since Monica's acquisition AUTO b. Compute the net income attributable to the noncontrolling interest for 2018 Placid Lake Corporation acquired 90 percent of the outstanding voting stock of Scenic, Inc., on January 1, 2017, when Scenic had a net book value of $550,000. Any excess fair value was assigned to intangible assets and amortized at a rate of $8,000 per year. Placid Lake's 2018 net income before consideration of its relationship with Scenic (and before adjustments for intra entity sales) was $450,000. Scenic reported net income of $260,000 Placid Lake declared $140,000 in dividends during this period, Scenic paid $55,000. At the end of 2018, selected figures from the two companies' balance sheets were as follows: Inventory Land Equipment (net) Placid Lake $ 290,000 750,000 550,000 Scenic $ 105,000 350,000 450,000 Print During 2017, intra-entity sales of $150,000 (original cost of $72.000) were made Only 30 percent of this inventory was still held within the consolidated entity at the end of 2017 in 2018. $240,000 in intra entity sales were made with an original cost of $74,000 of this merchandise, 40 percent had not been resold to outside parties by the end of the year Each of the following questions should be considered as an independent situation for the year 2018 ferences Consolidated 1.1. Assume that no intra entity inventory or land sales occurred between Placid Lake and Scenic Instead, on January 1, 2017 Scenic sold equipment that originally cost $140,000 but had a $75,000 book value on that date) to Placid Lake for $100.000. At the time of sale, the equipment had a remaining useful life of five years. What worksheet entries are made for a December 31, 2018 consolidation of these two companies to eliminate the impact of the intra entity transfer? 1-2. For 2018, what is the noncontrolling interest's share of Scenic's net income? On July 1, 2016, Killearn Company acquired 84.000 of the outstanding shares of Shaun Company for $20 per share. This acquisition gave Killearn a 25 percent ownership of Shaun and allowed Killearn to significantly influence the investee's decisions. As of July 1, 2016, the investee had assets with a book value of $5 million and liabilities of $266,400. At the time, Shaun held equipment appraised at $476,000 above book value; it was considered to have a seven-year remaining life with no salvage value. Shaun also held a copyright with a five-year remaining life on its books that was undervalued by $1.212,000. Any remaining excess cost was attributable to goodwill. Depreciation and amortization are computed using the straight-line method. Killearn applies the equity method for its investment in Shaun Shaun's policy is to declare and pay a $1 per share cash dividend every April 1 and October 1. Shaun's income, earned evenly throughout each year, was $645,000 in 2016, S679,800 in 2017 and $723,000 in 2018 In addition, Killearn sold inventory costing S139,200 to Shaun for $232,000 during 2017 Shaun resold $101,500 of this inventory during 2017 and the remaining $130,500 during 2018 ok nces a. Determine the equity income to be recognized by Killearn during each of these years. b. Compute Killearn's investment in Shaun Company's balance as of December 31, 2018 (For all requirements, enter your answers in whole dollars and not in millions.) Ja $ 41,825 Equity income 2016 Equity Income 2017 Equity income 2018 Investment in Shaun $ 1.497,325 ProForm acquired 70 percent of ClipRite on June 30, 2017 for $770,000 in cash. Based on ClipRite's acquisition date fair value, an unrecorded intangible of $450,000 was recognized and is being amortized at the rate of $12,000 per year. No goodwill was recognized in the acquisition. The noncontrolling interest fair value was assessed at $330,000 at the acquisition date. The 2018 financial statements are as follows: Cliprite $ (640,000) 410,000 110,000 Sales Cost of goods sold Operating expenses Dividend income Net Income Retained earnings, 1/1/18 Net income Dividends declared Retained earnings, 12/31/18 Cash and receivables Inventory Investment in ClipRite assets Accumulated depreciation Totals Liabilities Common stock Retained earnings, 12/31/18 Totals Proform $ (820,000) 545,000 120,000 (49,000 $ (204,000) $(1,100,000) (204,600) 120,000 $(1,184,680) $ 420,000 310,000 770,000 1,200,000 (400,000) $ 2.300.000 5 (816,000) (300,000 $ (120,000) $ (870,000) (120,000) 70,000 $ (920,000) $ 320,000 720,000 @ 700,000 (300,000 $ 1,440, eee 5 (220,000) (300,000) (920,000) $(1,440,000) $(2,300,000) ClipRite sold ProForm inventory costing $71,000 during the last six months of 2017 for $110.000. At year-end, 30 percent remained. ClipRite sells ProForm inventory costing $210,000 during 2018 for $270,000. At year-end, 10 percent is left with these facts, determine the consolidated balances for the following: Consolidated Balance $ 1.190.000 679,300 $ 242.000 5 Sales Cost of goods sold Operating expenses Dividend income Net income attributable to controlling interest Inventory Noncontrolling interest in subsidiary, 12/31/18 S $ 1,024,000 On January 1, 2016, Monica Company acquired 70 percent of Young Company's outstanding common stock for $756,000. The fair value of the noncontrolling interest at the acquisition date was $324,000, Young reported stockholders' equity accounts on that date as follows: Common stock-$10 par value Additional paid-in capital Retained earnings $ 300,000 40,000 600,000 In establishing the acquisition value, Monica appraised Young's assets and ascertained that the accounting records undervalued a building with a five-year remaining life) by $60,000. Any remaining excess acquisition date fair value was allocated to a franchise agreement to be amortized over 10 years. During the subsequent years, Young sold Monica inventory at a 20 percent gross profit rate, Monica consistently resold this merchandise in the year of acquisition or in the period immediately following. Transfers for the three years after this business combination was created amounted to the following: Year 2016 2017 2018 Transfer Price $70,000 90.000 100,000 Inventory Remaining at Year-End (at transfer price) $ 29,000 31,000 37,000 In addition, Monica sold Young several pieces of fully depreciated equipment on January 1, 2017 for $55,000. The equipment had originally cost Monica $88,000. Young plans to depreciate these assets over a five-year period. In 2018, Young earns a net income of $170,000 and declares and pays $50,000 in cash dividends. These figures increase the subsidiary's Retained Earnings to a $930,000 balance at the end of 2018. During this same year, Monica reported dividend income of $35,000 and an investment account containing the initial value balance of $756,000 No changes in Young's common stock accounts have occurred since Monica's acquisition AUTO b. Compute the net income attributable to the noncontrolling interest for 2018 Placid Lake Corporation acquired 90 percent of the outstanding voting stock of Scenic, Inc., on January 1, 2017, when Scenic had a net book value of $550,000. Any excess fair value was assigned to intangible assets and amortized at a rate of $8,000 per year. Placid Lake's 2018 net income before consideration of its relationship with Scenic (and before adjustments for intra entity sales) was $450,000. Scenic reported net income of $260,000 Placid Lake declared $140,000 in dividends during this period, Scenic paid $55,000. At the end of 2018, selected figures from the two companies' balance sheets were as follows: Inventory Land Equipment (net) Placid Lake $ 290,000 750,000 550,000 Scenic $ 105,000 350,000 450,000 Print During 2017, intra-entity sales of $150,000 (original cost of $72.000) were made Only 30 percent of this inventory was still held within the consolidated entity at the end of 2017 in 2018. $240,000 in intra entity sales were made with an original cost of $74,000 of this merchandise, 40 percent had not been resold to outside parties by the end of the year Each of the following questions should be considered as an independent situation for the year 2018 ferences Consolidated 1.1. Assume that no intra entity inventory or land sales occurred between Placid Lake and Scenic Instead, on January 1, 2017 Scenic sold equipment that originally cost $140,000 but had a $75,000 book value on that date) to Placid Lake for $100.000. At the time of sale, the equipment had a remaining useful life of five years. What worksheet entries are made for a December 31, 2018 consolidation of these two companies to eliminate the impact of the intra entity transfer? 1-2. For 2018, what is the noncontrolling interest's share of Scenic's net income