Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2020, in exchange for $5.916,000 incash. Allison intends to maintain Mathias as a wholly owned subsidiary. Both companies have December 31 fiscal year-ends. At theacquisition date, Mathias's stockholders' equity was $2.010.000 including retained earnings of $1,510,000.At the acquisition date, Allison prepared the following fair-value allocation schedule for its newly acquired subsidiary:Consideration transferredMathias stockholders' equityExcess fair over book valueto unpatented technology (8-year remaining life)to patents (18-year remaining life)to increase long-term debt (undervalued, 5-year remaining life)$5,916,0002,010,000$3,906,000$ 816,8002,520, 00e(110, 000)3,226,000$ 680,000GoodwillPostacquisition, Allison employs the equity method to account for its investment in Mathias. During the two years following thebusiness combination, Mathias reports the following income and dividends:Income$ 476, 250952, 5eeDividends$ 25,0005e,eee20202021No asset impairments have occurred since the acquisition date.Individual financial statements for each company as of December 31, 2021, follow. Parentheses indicate credit balances. Dividendsdeclared were paid in the same period. AllisonMathiasIncome Statement$ (6,440,ee0)4,528,e00885, 000435,00059,000(620,500)$ (1,153,500)SalesCost of goods soldDepreciation expenseAmortization expenseInterest expenseEquity earnings in Mathias$(3,910,e0e)2,506, 500283,000106, e0062,000$ (952,500)Net incomeStatement of Retained EarningsRetained earnings 1/1Net income (above)Dividends declared$ (5,360,000)(1,153,5e0)560, e00$ (5,953,5e0)$(1,961,250)(952,500)se, e00$(2,863,758)Retained earnings 12/31Balance SheetCash78,ee0960, eee1,720,e006,685,7503,720,000100, eee2,135,000432,000$ 15,750,750146,800230, e00795, 800Accounts receivableInventoryInvestment in MathiasEquipment (net)Patents2,059,000Unpatented technologyGoodwill1,460, 000Total assets$ 4,690, 000Accounts payableLong-term debtCommon stock(597,250)(1,800, e00)(8, 200, e00)(5,953,500)$ (126,250)(1,200,000)(50e, e0e)(2,863,750)Retained earnings 12/31Total liabilities and equity$(15,750,750)$(4, 69e, eee)Requlred:a. Determine the annual excess fair over book value amortization.b. Prepare a worksheet to determine the consolidated values to be reported on Allison's financial statements.

The question is based on the concept of Financial Accounting.

Answered: Allison Corporation acquired all of the…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 8MC

See similar textbooks

Similar questions

Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2020, in exchange for $6,162,000 in cash. Allison intends to maintain Mathias as a wholly owned subsidiary. Both companies have December 31 fiscal year-ends. At the acquisition date, Mathias’s stockholders’ equity was $2,070,000 including retained earnings of $1,570,000. At the acquisition date, Allison prepared the following fair-value allocation schedule for its newly acquired subsidiary: Consideration transferred $ 6,162,000 Mathias stockholders' equity 2,070,000 Excess fair over book value $ 4,092,000 to unpatented technology (8-year remaining life) $ 912,000 to patents (10-year remaining life) 2,640,000 to increase long-term debt (undervalued, 5-year remaining life) (170,000 ) 3,382,000 Goodwill $ 710,000 Postacquisition, Allison employs the equity method to account for its investment in…
On January 1, 2020, Adams acquires 100% of Baker in a transaction accounted for using the acquisition method. Adams will use equity accounting for its investment in Baker. Baker will remain a wholly owned subsidiary of Adams. The following is information about this acquisition. To pay for this purchase, Adams issues 20,000 shares of common stock with a $5 par and $20 market value. Legal and accounting costs were $50,000. Stock issuance costs were $20,000. If Baker has net income of $50,000 in 2021, Adams will pay an additional $100,000. At acquisition date there is a 40% probability of this occurring. The book value of net assets acquired of Baker was $200,000 at acquisition date. Adams was willing to pay in excess of book value to acquire Baker because Baker had a building (10 year life) with a book value of $300,000 and a fair value of $340,000. Baker has $40,000 in net income in 2020 and pays a dividend of $30,000. Adams has $100,000 of net income in 2020 and pays a dividend of…
Allison Corporation acquired all of the outstanding voting stock of Mathias, Incorporated, on January 1, 2023, in exchange for $6,059,500 in cash. Allison intends to maintain Mathias as a wholly owned subsidiary. Both companies have December 31 fiscal year-ends. At the acquisition date, Mathias’s stockholders’ equity was $2,045,000 including retained earnings of $1,545,000. At the acquisition date, Allison prepared the following fair-value allocation schedule for its newly acquired subsidiary: Consideration transferred $ 6,059,500 Mathias stockholders' equity 2,045,000 Excess fair over book value $ 4,014,500 to unpatented technology (8-year remaining life) $ 872,000 to patents (10-year remaining life) 2,590,000 to increase long-term debt (undervalued, 5-year remaining life) (145,000) 3,317,000 Goodwill $ 697,500 Postacquisition, Allison employs the equity method to account for its investment in Mathias. During the two years following the business…
Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2017, in exchange for $5,875,000 in cash. Allison intends to maintain Mathias as a wholly owned subsidiary. Both companies have December 31 fiscal year-ends. At the acquisition date, Mathias’s stockholders’ equity was $2,000,000 including retained earnings of $1,500,000. At the acquisition date, Allison prepared the following fair value allocation schedule for its newly acquired subsidiary Post-acquisition, Allison employs the equity method to account for its investment in Mathias. During the two years following the business combination, Mathias reports the following income and dividends: Year Income Dividends 2020 480,000 25,000 2021 960,000 50,000 No asset impairments have occurred since the acquisition date. Individual financial statements for each company as of December 31, 2018, appear below. Parentheses indicate credit balances. Dividends declared were paid in the same…
On January 1, 2020, Adams acquires 100% of Baker in a transaction accounted for using the acquisition method. Adams will use equity accounting for its investment in Baker. Baker will remain a wholly-owned subsidiary of Adams. The following is information about this acquisition.To pay for this purchase, Adams issues 20,000 shares of common stock with a $5 par and $20 market value. Legal and accounting costs were $50,000. Stock issuance costs were $20,000. If Baker has a net income of $50,000 in 2021, Adams will pay an additional $100,000. At the acquisition date, there is a 40% probability of this occurring.The book value of net assets acquired of Baker was $200,000 at the acquisition date. Adams was willing to pay in excess of book value to acquire Baker because Baker had a building (10-year life) with a book value of $300,000 and a fair value of $340,000. Baker has $40,000 in net income in 2020 and pays a dividend of $30,000. Adams has $100,000 of net income in 2020 and pays a…
On January 1, 2020, Adams acquires 100% of Baker in a transaction accounted for using the acquisition method. Adams will use equity accounting for its investment in Baker. Baker will remain a wholly owned subsidiary of Adams. The following is information about this acquisition. To pay for this purchase, Adams issues 20,000 shares of common stock with a $5 par and $20 market value. Legal and accounting costs were $50,000. Stock issuance costs were $20,000. If Baker has net income of $50,000 in 2021, Adams will pay an additional $100,000. At acquisition date there is a 40% probability of this occurring. The book value of net assets acquired of Baker was $200,000 at acquisition date. Adams was willing to pay in excess of book value to acquire Baker because Baker had a building (10 year life) with a book value of $300,000 and a fair value of $340,000. Baker has $40,000 in net income in 2020 and pays a dividend of $30,000. Adams has $100,000 of net income in 2020 and pays a…
Intor Company acquired 20% of the ordinary shares of Intee Company on January 1, 2019. At this date, all the identifiable assets and liabilities of Intee were recorded at fair value. An analysis of the acquisition showed that P200,000 of goodwill was acquired. Intee Company recorded a profit of P1,000,000 for 2020 and paid dividend of P700,000 during the same year. The following transactions have occurred between the two entities. • In December 2020, Intee sold inventory to Intor for P1,500,000. This inventory had previously cost Intee P1,000,000 and remains unsold by Intor on December 31. 2020. • In November 2020, Intor sold inventory to Intee at a before tax profit of P300.000. Half of this was sold by Intee before December 31, 2020. • In December 2019, Intee sold inventory to Intor for P1,800,000. This inventory had cost Intee P1,200,000. At December 31. 2019, this inventory remained unsold by Intor. However, it was all sold by Intor in 2020. Ignoring income tax, Intor company…
On January 1, 2021, KORU Co. issued shares of its $5 par value share capital to acquire all the net assets of PATRICH Company, which was liquidated immediately thereafter. Cost of issuing equity instruments amounting to $5,000 were incurred and paid by KORU Co., aside from the indirect acquisition costs amounting $3,000. The Statement of Financial Position for KORU Co. and the Statement of Financial for the combined company under the purchase method are presented below. KORU Co. Combined KORU Co. Combined Cash 70,000 100,000 Accounts Payable 40,000 60,000 Accounts Receivable 130,000 180,000 Bonds Payable 100,000 160,000 Inventory 100,000 220,000 Ordinary Share Capital 200,000 240,000 Land 100,000 175,000 Share Premium 60,000 420,000 Buildings and Equipment 400,000 550,000 Retained Earnings 250,000 247,000 Accumulated Depreciation 150,000 150,000 Goodwill - 52,000 Shortly after the above information was compiled, a fire destroyed the accounting…
On January 1, 2019, GRANGER Co. acquired 80% interest in HISTORIA, Inc. by issuing 5,000 shares with fair value of P30 per share and par value of P20 per share. The financial statements of GRANGER Co. and HISTORIA, Inc. immediately after the acquisition are shown in the image. On January 1, 2019, the fair value of the assets and liabilities of HISTORIA, Inc. were determined by appraisal, show in the image. The equipment has a remaining useful life as of 4 years from January 1, 2019. Prepare the consolidated statement of financial position as at January 1, 2019. GRANGER Co. elects to measure non-controlling interest as its proportionate share in HISTORIA’s net identifiable assets.
On January 1, 2021, Kristine Company acquired 10% of the outstanding voting shares of another entity. On January 1, 2022, Kristine Company gained the ability to exercise significant influence over financial and operating control of the entity by acquiring additional 20% of the investee’s outstanding shares. The two purchase were made at price proportionate to the value assigned to the investee’s net assets which equaled their carrying amount. For the years ended December 31, 2021 and 2022, the investee reported the following: 2021 2022 Dividend paid 3,000,000 8,000,000 Net income 7,000,000 9,000,000 What total amount should Kristine include in profit or loss for the year ended December 31, 2022?
On 1 July 2019, Brad Ltd acquired all assets and liabilities of Pitt Ltd. In exchange for these assets and liabilities, Brad Ltd issued 100,000 shares that at date of issue had a fair value of $5.20 per share. Costs of issuing these shares amounted to $1,000. Legal cost associated with the acquisition of Pitt Ltd amounted to $1,200.The assets and liabilities of Pitt Ltd at 1 July 2019 were as follows:Carrying Amount ($) Fair Value ($)AssetsCash 2,000 2,000Accounts receivable 10,000 10,000Inventory 64,000 68,000Equipment 320,000 232,000Accumulated depn - Equipment (96,000) -Patents 280,000 280,000LiabilitiesAccounts payable (16,000) (16,000)Debentures (64,000) (64,000)Required:a) Prepare the acquisition analysis at 1 July 2019 for the acquisition of Pitt Ltd by Brad Ltd.b) Prepare the journal entries in the records of Brad Ltd at 1 July 2019.
On January 1, 2020, Pfizer Corp. acquired 80% of Vaxx Corp.’s common stock for P160,000 cash. The fair value of the non-controlling interest at the date was determined to be P40,000. Data from the balance sheets of the two companies included the following accounts as of the date of acquisition: On the date of the business combination, the book values of Vaxx Corp’s net assets and liabilities approximated fair value except for inventory, which has a fair value of P45,000, and land, which had a fair value of P60,000. (using full goodwill approach). Pfizer Corporation Vaxx Corporation Cash 60,000 20,000 Accounts receivable 80,000 30,000 Inventory 90,000 40,000 Land 100,000 40,000 Buildings and equipment 200,000 150,000 Less: Accumulated depreciation (80,000) (50,000) Investment in Vaxx Corp. stock 160,000 - Total Assets 610,000 230,000 Accounts payable 110,000 30,000 Bonds…

SEE MORE QUESTIONS

Recommended textbooks for you

Intermediate Accounting: Reporting And Analysis

Accounting

ISBN:

9781337788281

Author:

James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:

Cengage Learning

SWFT Corp Partner Estates Trusts

Accounting

ISBN:

9780357161548

Author:

Raabe

Publisher:

Cengage

CONCEPTS IN FED.TAX., 2020-W/ACCESS

Accounting

ISBN:

9780357110362

Author:

Murphy

Publisher:

CENGAGE L

Intermediate Accounting: Reporting And Analysis

Accounting

ISBN:

9781337788281

Author:

James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:

Cengage Learning

SWFT Corp Partner Estates Trusts

Accounting

ISBN:

9780357161548

Author:

Raabe

Publisher:

Cengage

CONCEPTS IN FED.TAX., 2020-W/ACCESS

Accounting

ISBN:

9780357110362

Author:

Murphy

Publisher:

CENGAGE L

SWFT Comprehensive Vol 2020

Accounting

ISBN:

9780357391723

Author:

Maloney

Publisher:

Cengage

SEE MORE TEXTBOOKS