On January 1, Jarel acquired 80 percent of the outstanding voting stock of Suarez for $260,000 cash consideration. The remaining 20 percent of Suarez had an acquisition-date fair value of $65,000. On January 1, Suarez possessed equipment (five-year remaining life) that was undervalued on its books by $25,000. Suarez also had developed several secret formulas that Jarel assessed at $50,000. These formulas, although not recorded on Suarez's financial records, were estimated to have a 20-year future life.
On January 1, Jarel acquired 80 percent of the outstanding voting stock of Suarez for $260,000 cash consideration. The remaining 20 percent of Suarez had an acquisition-date fair value of $65,000. On January 1, Suarez possessed equipment (five-year remaining life) that was undervalued on its books by $25,000. Suarez also had developed several secret formulas that Jarel assessed at $50,000. These formulas, although not recorded on Suarez's financial records, were estimated to have a 20-year future life.
Chapter20: Corporations: Distributions In Complete Liquidation And An Overview Of Reorganizations
Section: Chapter Questions
Problem 35P
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![Problem 5-11 (Static) (LO 5-2, 5-3, 5-5, 5-7)
On January 1, Jarel acquired 80 percent of the outstanding voting stock of Suarez for $260,000 cash consideration.
The remaining 20 percent of Suarez had an acquisition-date fair value of $65,000. On January 1, Suarez possessed
equipment (five-year remaining life) that was undervalued on its books by $25,000. Suarez also had developed
several secret formulas that Jarel assessed at $50,000. These formulas, although not recorded on Suarez's
financial records, were estimated to have a 20-year future life.
As of December 31, the financial statements appeared as follows:
Items
Revenues
Cost of goods sold
Expenses
Net income
Retained earnings, 1/1
Net income
Dividends declared
Retained earnings, 12/31
Cash and receivables
Inventory
Investment in Suarez
Equipment (net)
Total assets
Liabilities
Common stock
Retained earnings, 12/31
Total liabilities and equities
Jarel
$ (300,000)
140,000
20,000
$ (140,000)
$ (300,000)
(140,000)
$ (440,000)
$ 210,000
150,000
260,000
440,000
$ 1,060,000
8
$ (420,000)
(200,000)
(440,000)
(1,060,000)
a. Revenues
b. Cost of goods sold
c. Expenses
d. Noncontrolling interest appearing on the balance sheet
e. Equipment (net)
f. Inventory
< Prev 10 of 15
Suarez
$ (200,000)
80,000
10,000
$ (110,000)
$ (150,000)
(110,000)
$ (260,000)
$ 90,000
110,000
0
300,000
$ 500,000
Required:
Included in the preceding statements, Jarel sold inventory costing $80,000 to Suarez for $100,000. Of these goods,
Suarez still owns 60 percent on December 31. Compute the following amounts for the December 31 consolidated
financial statements for Jarel and Suarez.
Note: Input all amounts as positive value.
$ (140,000)
(100,000)
(260,000)
$ (500,000)
Consolidated
Amount
Next >](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe1806a2d-7382-46bc-a13c-914778559693%2Fa06a1c8f-6b25-48b3-93aa-48d816579f2d%2Fga11608_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Problem 5-11 (Static) (LO 5-2, 5-3, 5-5, 5-7)
On January 1, Jarel acquired 80 percent of the outstanding voting stock of Suarez for $260,000 cash consideration.
The remaining 20 percent of Suarez had an acquisition-date fair value of $65,000. On January 1, Suarez possessed
equipment (five-year remaining life) that was undervalued on its books by $25,000. Suarez also had developed
several secret formulas that Jarel assessed at $50,000. These formulas, although not recorded on Suarez's
financial records, were estimated to have a 20-year future life.
As of December 31, the financial statements appeared as follows:
Items
Revenues
Cost of goods sold
Expenses
Net income
Retained earnings, 1/1
Net income
Dividends declared
Retained earnings, 12/31
Cash and receivables
Inventory
Investment in Suarez
Equipment (net)
Total assets
Liabilities
Common stock
Retained earnings, 12/31
Total liabilities and equities
Jarel
$ (300,000)
140,000
20,000
$ (140,000)
$ (300,000)
(140,000)
$ (440,000)
$ 210,000
150,000
260,000
440,000
$ 1,060,000
8
$ (420,000)
(200,000)
(440,000)
(1,060,000)
a. Revenues
b. Cost of goods sold
c. Expenses
d. Noncontrolling interest appearing on the balance sheet
e. Equipment (net)
f. Inventory
< Prev 10 of 15
Suarez
$ (200,000)
80,000
10,000
$ (110,000)
$ (150,000)
(110,000)
$ (260,000)
$ 90,000
110,000
0
300,000
$ 500,000
Required:
Included in the preceding statements, Jarel sold inventory costing $80,000 to Suarez for $100,000. Of these goods,
Suarez still owns 60 percent on December 31. Compute the following amounts for the December 31 consolidated
financial statements for Jarel and Suarez.
Note: Input all amounts as positive value.
$ (140,000)
(100,000)
(260,000)
$ (500,000)
Consolidated
Amount
Next >
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