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Plant Company acquired all of Sprout Corporation's stock on January 1, 20X3 for $250,000 cash. The total market value of the net identifiable assets of
Plant Company acquired all of Sprout Corporation's stock on January 1, 20X3 for $250,000 cash. The total market value of the net identifiable assets of Sprout was $210,000 and the total book value was $180,000 at the time of the acquisition. The difference between the market value and underlying book value of the assets at the time of acquisition was related to the following assets: During 20X3, Sprout reported income of $50,000, dividend of $20,000, retained earnings of $200,000, common stock of $50,000. At December 31,203, Sprout also owed Plant $4,000 for services provided and determined a goodwill impairment loss of $5,000. At the time of acquisition, the building has four years of remaining life and straight-line depreciation is used. 3. The basic consolidation entry includes a debit of: a) Income from S prout of $50,000 b) Dividends declared of $20,000 (c) Investment in Sprout of $280,000 d) Investment in Sprout of $250,000 e) Retained earning of $230,000 4. What is the accounting treatment to deal with the $4,000 Sprout owed during consolidation? a) nothing needed b) demand Spout for a liquidation c) credit accounts payable 4,000 d) debit accounts receivable of $4,000 e) credit accounts receivable of $4,000 5. The equity-method entry on the parent's book related to the amortization of the excess value includes: a) A debit of investment in Sprout 10,000 b) A credit of investment in Sprout 10,000 c) A debit of common stock of 50,000 d) A credit of common stock of 50,000 e) A credit of income from Sprout of 10,000 6. For consolidation, the excess value reclassification entry includes: a) A debit of building 20,000 b) A debit of investment of 60,000 c) A credit of goodwill of 10,000 d) A credit of inventory of 10,000 e) A credit of building of 20,000 7. For consolidation, the amortized excess value reclassification entry includes: a) A debit of building 20,000 b) A debit of investment of 60,000 c) A credit of depreciation expense of 5,000 d) A credit of impairment loss of 5,000 e) A credit of income from Spout of 10,000
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