Question
UBetcha Corporation acquired 30 percent of the voting stock of Trunks Corporation on January 2, 2019, for $1.6 million in cash. Trunks balance sheet and
UBetcha Corporation acquired 30 percent of the voting stock of Trunks Corporation on January 2, 2019, for $1.6 million in cash. Trunks balance sheet and estimated fair values of its assets and liabilities on January 2, 2019 are as follows (in thousands).
Trunks Corporation | ||
Balance Sheet | ||
January 2, 2019 | ||
Book Value | Fair Value | |
Assets | ||
Cash and receivables | 300 | 300 |
Inventory | 600 | 350 |
Investments | 250 | 250 |
Land | 400 | 1,000 |
Property and equipment | 2,000 | 350 |
Accumulated depreciation | (750) | |
TOTAL ASSETS | 2,800 | 2,250 |
Liabilities and Equity | ||
Current liabilities | 450 | 450 |
Long-term liabilities | 1,500 | 1,500 |
Common stock, $2.00 par | 300 | |
Additional paid-in capital | 450 | |
Retained earnings | 400 | |
Accumulated other comprehensive income | (300) | |
TOTAL LIABILITIES AND EQUITY | 2,800 | 1,950 |
In addition to its reported assets, Trunks has unreported franchise agreements (5year life) valued at $500,000. Its property and equipment has a 20year average remaining life. Trunks reported income of $750,000 and paid no dividends in 2019. Please note that Trunks uses the FIFO inventory method.
Required
- How many shares of Trunks stock did Ubetcha acquire? Please show calculations so that partial credit can be granted.
- Prepare a schedule, in good form, that shows the computation of Ubetchas equity in Trunks net income for 2019. Please show calculations so that partial credit can be granted.
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