please show work P2-5 Prepare an allocation schedule; compute income and the inv
ID: 341596 • Letter: P
Question
please show work
P2-5 Prepare an allocation schedule; compute income and the investment balance Pop Corporation paid $1,680,000 for a 30 percent interest in Son Corporation's outstanding voting stock on January 1, 2016. The book values and fair values of Son's assets and liabilities on January 1, along with amortization data, are as follows (in thousands): Book Value Fair Value S 400 400 Cash Accounts receivable-net Inventories (sold in 2016) Other current assets Land Buildings-net (10-year remaining life) Equipment-net (7-year remaining life) 700 1,000 700 1,200 200 2001.700 900 1,500 2,000 $6,700 $ 800800 500 $5,900 Total assets Accounts payable Other current liabilities Bonds payable (due January 1, 2021) Capital stock, $10 par Retained eamings Total equities 200 1,100 200 1,000 3,000 900 Son Corporation reported net income of $1,200,000 for 2016 and paid dividends of $600,000. REQUIRED 1. Prepare a schedule to allocate the investment fair values/book value differentials relating to Pop's invest- ment in Son. 2. Calculate Pop's income from Son for 2016. 3. Determine the balance of Pop's Investment in Son account at December 31.2016.Explanation / Answer
Cost of investment in T corp 1680 Book value Acquired (3900*30%) 1170 Excess cost over book value acquired 510 1) Particulars Fair value - book Value % acquired Amount Inventories 200000 30% 60000 land 800000 30% 240000 Buildings-Net 500000 30% 150000 Equipment -Net -700000 30% -210000 Bonds payable -100000 30% -30000 Assigned to idenifiable 210000 Net Assets Remained in goodwill 300000 Excess of cost over book value acquired 510000 2) Equity Income ( 1200000*30%) 360000 Less: Amortization of differentials: Inventories ( sold in 2011) -60000 Buildings (150000/10) -15000 Equipment( 210000/7) 30000 Bonds payable (30000/5) 6000 Income from T corp 321000 3) Investment cost 1680000 Income from T corp 321000 Dividends 600000 Interest in dividends (600000*30%) 180000 Investment In T corp (1680000+321000-180000) 1821000 Therefore investment in T corpoartion is 1821000
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.