Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Pavin acquires all of Stabler's outstanding shares on January 1, 2012, for $460,000 in cash Of this amount, $30,000 was attributed to equipment with a
Pavin acquires all of Stabler's outstanding shares on January 1, 2012, for $460,000 in cash Of this amount, $30,000 was attributed to equipment with a 10-year remaining life and $40,000 was assigned to trademarks expensed over a 20-year period. Pavin applies the partial equity method so that income is accrued each period based solely on the earnings reported by the subsidiary On January 1, 2015, Pavin reports $300,000 in bonds outstanding with a book value of $282,000. Stabler purchases half of these bonds on the open market for $145,500 During 2015, Pavin begins to sell merchandise to Stabler. During that year, inventory costing $80,000 was transferred at a price of $100,000. All but $10,000 (at sales price) of these goods were resold to outside parties by year-end. Stabler still owes $33,000 for inventory shipped from Pavin during December The following financial figures are for the two companies for the year ending December Pavin Stabler (740,000) (505,000) 240,000 158,500 Revenues Cost of goods sold Expenses Interest expense-bonds Interest income-bond investment Loss on extinguishment of bonds Equity in Stabler's income Net income 455,000 125,000 36,000 (16,500) 123,000 (247,000)(123,000) Retained earnings, 1/1/15 Net income Dividends paid Retained earnings, 12/31/15 (345,000) (361,000) (247,000) (123,000) 155,000 (437,000)(423,000 61,000
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