Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Power Corporation acquired 75 percent of Best Companys ownership on January 1, 20X8, for $93,000. At that date, the fair value of the noncontrolling interest

Power Corporation acquired 75 percent of Best Companys ownership on January 1, 20X8, for $93,000. At that date, the fair value of the noncontrolling interest was $31,000. The book value of Bests net assets at acquisition was $90,000. The book values and fair values of Bests assets and liabilities were equal, except for Bests buildings and equipment, which were worth $18,000 more than book value. Accumulated depreciation on the buildings and equipment was $24,000 on the acquisition date.Buildings and equipment are depreciated on a 10-year basis.

Although goodwill is not amortized, the management of Power concluded at December 31, 20X8, that goodwill from its purchase of Best shares had been impaired and the correct carrying amount was $2,800. Goodwill and goodwill impairment were assigned proportionately to the controlling and noncontrolling shareholders.

Trial balance data for Power and Best on December 31, 20X8, are as follows:

Power Corporation Best Company
Item Debit Credit Debit Credit
Cash $ 49,500 $ 26,000
Accounts Receivable 72,000 17,000
Inventory 92,000 30,000
Land 47,000 20,000
Buildings and Equipment 360,000 164,000
Investment in Best Co. Stock 104,400
Cost of Goods Sold 118,000 103,000
Wage Expense 42,000 23,000
Depreciation Expense 23,000 8,000
Interest Expense 10,000 2,000
Other Expenses 11,500 3,000
Dividends Declared 39,000 16,800
Accumulated Depreciation $ 144,000 $ 32,000
Accounts Payable 43,000 11,000
Wages Payable 12,000 7,000
Notes Payable 201,400 86,800
Common Stock 189,000 66,000
Retained Earnings 91,000 24,000
Sales 264,000 186,000
Income from Subsidiary 24,000
$ 968,400 $ 968,400 $ 412,800 $ 412,800

Record the amortized excess value reclassification entry.

Depreciation Expense 1800

Goodwill Impairment Loss XX

Income from Best Company XX

NCI in NI of Best Co. XX

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

Financial Accounting For MBAs

Authors: Peter D. Easton, John J. Wild, Robert F. Halsey, Mary Lea McAnally

4th Edition

9781934319345

More Books

Students also viewed these Accounting questions

Question

d. Is it part of a concentration, minor, or major program?

Answered: 1 week ago

Question

is particularly relevant to these questions.)

Answered: 1 week ago