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Prat Corporation paid $10,000 for a 60% interest in Simm Corporation on January 1, 2003 when Simm’s stockholders’ equity consisted of $10,000 Capital Stock and $5,000 Retained Earnings. Simm’s assets and liabilities were fairly valued on this date. Two years later, on December 31, 2004, the balance sheets of Prat.
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11.Kirkland Corporation paid $1,600,000 for a 40% interest in Rio Corporation on January 1, 2002 when Rio’s stockholder’s equity was as follows: 10% cumulative preferred stock, $100 par             $1,000,000 Common stock, $10 par value                             600,000 Other paid-in capital                                   800,000 Retained earnings                                     1,600,000 Total stockholders’ equity                          $4,000,000 On this date, the book values of Rio’s assets and.
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Exercise 5 Proctor Corporation created a wholly owned subsidiary, Surefoot Corporation, on January 1, 2001, at which time Proctor sold land with a book value of $90,000 to Surefoot at its fair market value of $140,000. Also, on January 1, 2001, Proctor sold to Surefoot equipment with a book value of.
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Exercise 9 On January 1, 2003, Owens, Inc. purchased 80% of the outstanding voting common stock of Wayward, Inc., for $2,850,000. The book value of Wayward’s net assets on that date was $3,100,000. Book values were equal to fair values except as follows: Assets & Liabilities Book Values Fair Values Equipment $ 250,000 $ 190,000 Building 600,000 700,000 Note payable 270,000 240,000 Required: Prepare a schedule to.
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Exercise 7 Walnut Corporation paid $500,000 for 80% of the outstanding voting common stock of Brazil Corporation on January 2, 2003 when the book value of Brazil’s net assets was $460,000. The fair values of Brazil’s identifiable net assets were equal to their book values except as indicated below. Brazil reported net.
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Exercise 9 On July 1, 2003, Gator Corporation issued 23,000 shares of its own $2 par value common stock for 35,000 shares of the outstanding stock of Seminole Corporation in a purchase acquisition. Gator common stock at July 1, 2003 was selling at $14 per share. Just before the business combination,.
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Exercise 3 Pnat Corporation paid $279,000 for 70% of Soot Corporation’s $10 par common stock on December 31, 2003, when Soot Corporation’s stockholders’ equity was made up of $200,000 of Common Stock, $60,000 Additional Paid-in Capital and $40,000 of Retained Earnings. Soot’s identifiable assets and liabilities reflected their fair values on.
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Exercise 7 Johnson Corporation paid $500,000 to acquire 100% of the outstanding voting common stock of Cajun Corporation on January 1, 2003. The fair market values and book values of Cajun’s assets and liabilities are given below. Cajun Book Values Cajun Fair Values Cash $ 25,000 $ 25,000 Inventories 55,000 55,000 Other current assets 110,000 110,000 Land 100,000 200,000 Plant and equipment-net 660,000 800,000 $ 950,000 $ 1,190,000 Liabilities $ 220,000 $ 220,000 Capital stock, $10 par value 500,000 Additional paid-in capital 170,000 Retained earnings 60,000 $ 950,000 $ 220,000 Required: 1.Prepare a schedule.
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Exercises Exercise 1 Packer Corporation paid $360,000 for a 75% interest in Shiela Corporation’s outstanding Capital Stock on January 1, 2003, when Shiela’s stockholders’ equity consisted of $300,000 of Capital Stock and $100,000 of Retained Earnings. Book values of Shiela’s net assets were equal to their fair values on this date. The.
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Exercise 1 Pat Corporation paid $15,700 for a 90% interest in Sen Corporation on January 1, 2002, when Sen stockholders’ equity consisted of $10,000 Capital Stock and $3,000 of Retained Earnings. The excess cost over book value was attributable to goodwill. Additional information: 1. Pat sells merchandise to Sen at 120% of Pat’s cost..
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Multiple Choice Questions 1.The material sale of inventory items by a parent company to an affiliated company: a.enters the consolidated revenue computation only if the transfer was the result of arm’s length bargaining. b.affects consolidated net income under a periodic inventory system but not under a perpetual inventory system. c.does not result in consolidated.
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Exercise 4 Pots Corporation acquired 80% of Sidd Corporation on January 1, 2003 for $24,000 cash when Sidd’s stockholders’ equity consisted of $10,000 of Common Stock and $3,000 of Retained Earnings. The difference between the price paid by Pots and the underlying equity acquired in Sidd was allocated solely to a.
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Exercise 5 Book values and fair values of Subway Corporation’s assets and liabilities at January 1, 2003, are shown below: Assets Book Values Fair Values Other current assets $ 125,000 $ 125,000 Inventories 150,000 190,000 Land 100,000 200,000 Buildings-net 300,000 240,000 Equipment-net 230,000 230,000 $ 905,000 $ 985,000 Liabilities and Equities Current liabilities $  95,000 $  95,000 7% Bonds payable 300,000 270,000 Common stock 500,000 Retained earnings 10,000 $ 905,000 $ 365,000 Hubbard Corporation acquires all of the outstanding common voting stock of Subway for $700,000 cash.
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Multiple Choice Questions 1.State Corporation is a 30%-owned equity investee of Pico Corporation. During 2003, State declared $50,000 in dividends to be paid in 2004. How does the dividend declaration affect Pico’s balance sheet at December 31, 2003? a.It decreases current assets. b.It increases current assets. c.It increases the Investment in State account. d.It decreases.
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Exercise 10 On October 1, 2003, Hunter Corporation issued 10,000 shares of its own $1 par value common stock for 37,500 shares of the outstanding stock of Target Corporation in a purchase acquisition. Hunter common stock at October 1, 2003 was selling at $8.25 per share. Just before the business combination,.
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11.Sylvester Corporation acquired an 80% interest in Shuster Corporation on January 1, 2002. On January 1, 2003, Shuster sold a building with a book value of $100,000 to Sylvester for $160,000. The building had a remaining useful life of ten years and no salvage value. The separate balance sheets of.
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Exercise 2 Paul Corporation acquired all the voting stock of Slim Corporation on January 1, 2002 for $70,000 when Slim had Capital Stock of $50,000 and Retained Earnings of $8,000. The excess of cost over book value was allocated $3,000 to inventories that were sold in 2002, $4,000 to equipment with.
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Exercises Exercise 1 Alt Corporation paid $200,000 cash for 40% of the voting common stock of Biden Corporation on January 1, 2003. Book value and fair value information for Biden Corporation on this date is as follows: Assets Book Values Fair Values Cash $  60,000 $  60,000 Accounts receivable 120,000 120,000 Inventories 80,000 100,000 Equipment 340,000 400,000 $ 600,000 $ 680,000 Liabilities & Equities Accounts payable $ 200,000 $ 200,000 Note payable 120,000 100,000 Capital stock 200,000 Retained earnings 80,000 $ 600,000 $ 300,000 Required: Prepare.
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Multiple Choice Questions 1.Penny Corporation owns 90% of the outstanding voting stock of Sundial Company and Maxima Corporation owns the remaining 10% of Sundial’s voting stock. On the consolidated financial statements of Penny Corporation and Subsidiary, Maxima is: a.an affiliate. b.an associate. c.an equity investee. d.a minority interest. 2.Which of the following conditions would.
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11.A newly acquired subsidiary has pre-existing goodwill on its books. The parent company's consolidated balance sheet will: a.not show any value for the subsidiary's pre-existing goodwill. b.treat the goodwill similarly to other intangible assets of the acquired company. c.will not show any value for the pre-existing goodwill unless all other assets of the.
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11.What amount of total liabilities will be reported? a.$103,000 b.$130,500 c.$156,250 d.$174,000 12.What is the reported amount for the minority interest? a.$34,667 b.$50,000 c.$65,333 d.$75,000 13.What is the amount of consolidated Retained Earnings? a.$112,000 b.$149,500 c.$162,000 d.$173,333 14.What is the amount of total assets? a.$622,250 b.$690,000 c.$736,000 d.$886,000 15.Which one of the following will increase consolidated Retained Earnings? a.An increase in the value of goodwill subsequent to the parent's date of.
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Exercise 10 Bulldog Corporation paid $77,000 for a 60% interest in Sunshine Corporation on January 1, 2003, when Sunshine’s Capital Stock was $80,000 and its Retained Earnings $20,000. The fair values of Sunshine's identifiable assets and liabilities were the same as the recorded book values on the acquisition date. Trial balances.
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Exercise 9 On January 1, 2002, Rosario Corporation purchased 70% of the common stock of Rover Corporation for $320,000 when Rover had Common Stock outstanding of $100,000 and Retained Earnings of $200,000. Any excess differential was attributed to goodwill. At the end of 2002, Rosario and Rover had unrealized inventory profits from.
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Exercise 7 Turner Corporation had $300,000 of $10 par value common stock outstanding on January 1, 2001, and retained earnings of $100,000 on the same date. During 2001, 2002, and 2003, Turner earned net incomes of $40,000, $70,000, and $30,000, respectively, and paid dividends of $30,000, $55,000, and $10,000, respectively. On.
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Multiple Choice Questions 1.Which of the following statements about a parent and its 80%-owned subsidiary is true? a.The Investment in Subsidiary account on the parent’s books and the subsidiary equity accounts on the subsidiary’s books are reciprocal, and therefore always equal. b.Conceptually, minority interest represents the equity investment in consolidated net assets by.
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Exercise 8 Jerry Corporation paid $100,000 to acquire 100% of the outstanding voting common stock of Captain Corporation on January 1, 2003. The fair market values and book values of Cajun’s assets and liabilities are given below. Captain Book Values Captain Fair Values Cash $ 25,000 $ 25,000 Inventories 55,000 70,000 Other current assets 110,000 300,000 Land 100,000 300,000 Plant and equipment-net 660,000 600,000 $ 950,000 $ 1,295,000 Liabilities $ 220,000 $ 220,000 Capital stock, $10 par value 500,000 Additional paid-in capital 170,000 Retained earnings 60,000 $ 950,000 $ 220,000 Required: 1.Prepare a schedule.
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11.Bradley Corporation acquires all of the voting stock of Norwood Corporation for $900,000 cash. The book values of Norwood’s assets are $850,000, but the fair values are $820,000 because inventory has a fair value below its book value. Norwood has no liabilities. Goodwill from the combination is computed as: a.$900,000 less.
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Exercise 8 For 2001, 2002, and 2003, Jones Corporation earned net incomes of $40,000, $70,000, and $100,000, respectively, and paid dividends of $24,000, $32,000, and $44,000, respectively. At the beginning of 2001, Jones had $500,000 of $10 par value common stock outstanding and $100,000 of retained earnings. On January 1 of each.
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Multiple Choice Questions 1.If land with a book value of $10,000 is sold by a parent to its subsidiary for $10,000: a.no consolidation working paper is necessary. b.a consolidation working paper entry is required only if the subsidiary is less than 100% owned. c.a consolidation working paper entry is required because the land account.
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Exercise 8 On January 1, 2003 Duke Corporation issued 100,000 new shares of its $5 par value common stock valued at $19 a share for all of Roger Corporation’s outstanding common shares in a purchase acquisition. Duke paid $15,000 for registering and issuing securities and $10,000 for other direct costs of.
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Exercise 8 On December 31, 2003, Spartan Corporation issued 11,000 shares of its own $5 par value common stock for 16,000 shares of the outstanding stock of Wolverine Corporation in a purchase acquisition. Spartan common stock at December 31, 2003 was selling at $50 per share. Just before the business combination,.
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11.Snodgrass Corporation is an 80%-owned subsidiary of Prattle Corporation. During 2002, Snodgrass sold merchandise that cost $120,000 to Prattle for $160,000. Prattle’s ending inventory at December 31, 2002 contained unrealized profit of $8,000 from the intercompany sales. During 2003, Snodgrass sold merchandise that cost $140,000 to Prattle for $190,000. One-half of.
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Exercise 2 Plex Corporation paid $26,800 cash for a 70% interest in Sung Corporation on January 1, 2002, when Sung’s stockholders’ equity consisted of $15,000 Capital Stock and $9,000 of Retained Earnings. Additional information: 1. The cost-book value differential was allocated to a patent with a 20-year amortization period. 2. Plex Corporation sold inventory items that.
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Exercise 5 Pull Corporation acquired 90% of Hard Corporation on January 1, 2003 for $72,000 cash when Hard’s stockholders’ equity consisted of $30,000 of Common Stock and $30,000 of Retained Earnings. The difference between the price paid by Pull and the underlying equity acquired in Hard was allocated to a plant.
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Exercise 6 Grant Corporation acquired all of the outstanding voting common stock of the Lee Corporation several years ago when the book values and fair values of Lee’s net assets were equal. On April 1, 2001, Grant sold land that cost $50,000 to Lee for $75,000. Lee resold the land for $78,000.
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Exercise 1 Perzee Corporation acquired a 60% interest in Seitz Corporation on January 1, 2002, at a cost equal to book value and fair value. Perzee regularly sells merchandise to Seitz at 120% of Perzee’s cost. The intercompany sales information for 2002 is as follows:      Intercompany sales at selling price      $.
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Exercise 3 Ponka Corporation acquired a 30% interest in Scotia Corporation for $25,000 cash on January 1, 2003, when Scotia’s stockholders’ equity consisted of $30,000 of capital stock and $20,000 of retained earnings. Scotia Corporation reported net income of $15,000 for 2003. The allocation of the $10,000 excess of cost over.
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Exercise 4 Pippin Corporation acquired a 75% interest in Charlie Corporation on January 1, 2003 for $29,000 cash when Charlie had Capital Stock of $18,000 and Retained Earnings of $17,000. Charlie’s assets and liabilities had book values equal to their fair values except for inventory that was undervalued by $2,000. Balance.
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Exercise 6 Jerome Corporation acquired 90% of the outstanding voting common stock of Sidney Corporation for $200,000 on January 1, 2003. Sidney’s book values and fair values for its assets and liabilities are given below. Sidney Book Value Sidney Fair Values Cash $ 25,000 $ 25,000 Inventories 55,000 47,000 Other current assets 110,000 90,000 Land 100,000 170,000 Plant and equipment-net 660,000 700,000 $ 950,000 $ 1,032,000 Liabilities $ 220,000 $ 220,000 Capital stock, $10 par value 500,000 Additional paid-in capital 170,000 Retained earnings 60,000 $ 950,000 $ 220,000 Required: 1.Prepare a schedule to allocate the.
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Exercise 5 On January 1, 2003, Pal Corporation issued 10,000 shares of its own $10 par value common stock for 9,000 shares of the outstanding stock of Sugar Corporation in a purchase acquisition. Pal common stock at January 1, 2003 was selling at $70 per share. Just before the business combination,.
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Exercise 7 Craig Corporation acquired a 70% interest in Swamey Corporation at book value several years ago. Swamey purchases its entire inventory from Craig at 140% of Craig’s cost. During 2003, Craig sold $160,000 of merchandise to Swamey. Swamey’s beginning and ending inventories for 2003 were $49,000 and $33,600, respectively. Income.
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Exercise 3 Separate income statements of Peck Corporation and its 80%-owned subsidiary, Snodgrass Corporation, for 2003 are as follows: Peck Snodgrass Sales Revenue $ 800,000 $ 300,000 Gain on equipment 35,000 Gain on land 20,000 Cost of sales ( 400,000 ) ( 160,000 ) Other expenses ( 265,000 ) ( 60,000 ) Separate incomes $ 170,000 $ 100,000 Additional information: 1.Peck acquired its 80% interest in Snodgrass Corporation when the book values were equal to the fair values. 2.The gain on equipment relates to.
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Exercise 9 Painter Corporation paid $88,500 for a 70% interest in Scrubber Corporation on January 1, 2003, when Scrubber’s Capital Stock was $70,000 and its Retained Earnings $30,000. The fair values of Scrubber's identifiable assets and liabilities were the same as the recorded book values on the acquisition date. Trial balances.
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Exercise 4 Cocker Corporation acquired an 80% interest in Tallerico Corporation at book value in 2002. During 2003, Cocker sold $148,000 of merchandise to Tallerico at 160% of Cocker’s cost. Tallerico’s beginning and ending inventories for 2003 were $38,000 and $44,000, respectively. Income statement information for both companies for 2003 is.
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Exercise 6 The consolidated balance sheet of Pepper Corporation and Salt Corporation, its 90% owned subsidiary, as of December 31, 2003, contains the following accounts and balances: Pepper Corporation and Subsidiary Consolidated Balance Sheet at December 31, 2003 Balances Cash $ 19,000 Accounts receivable-net 70,000 Inventories 110,000 Other current assets 85,000 Plant assets-net 290,000 Goodwill from consolidation 39,000 $ 613,000 Accounts payable $ 73,000 Other liabilities 70,000 Capital stock 350,000 Retained earnings 80,000 Minority interest 40,000 $ 613,000 Pepper Corporation acquired its 90%.
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Exercises Exercise 1 Balance sheet information for Eikman Corporation at January 1, 2003, is summarized as follows: Current assets     $ 230,000 Liabilities         $ 300,000 Plant assets 450,000 Capital stock $10 par 200,000 Retained earnings 180,000                    $ 680,000                     $ 680,000 Eikman’s assets and liabilities are fairly valued except for plant assets that are undervalued by $50,000. On January 2, 2003, Butler Corporation issues 20,000 shares of.
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Exercise 5 Burpee Corporation purchased a 40% interest in the common stock of Coty Corporation for $2,660,000 on January 1, 2003, when the book value of Coty’s net assets was $6,000,000. Coty’s book values equaled their fair values except for the following items: Book Value Fair Value Difference Inventories $ 450,000 $ 500,000 $ 50,000 Land 100,000 450,000 350,000 Building-net 400,000 200,000 ( 200,000 ) Equipment-net 350,000 400,000 50,000 Required: Prepare a schedule to allocate any excess purchase.
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Exercise 6 Prat Corporation paid $24,800 for an 80% interest in Sage Corporation on January 1, 2002, at which time Sage’s stockholders’ equity consisted of $15,000 of Common Stock and $6,000 of Retained Earnings. The fair values of Sage Corporation’s assets and liabilities were identical to recorded book values when Prat.
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Exercise 1 Play Corporation acquired all the voting stock of Sand Company for $500,000 on January 1, 2003 when Sand had Capital Stock of $300,000 and Retained Earnings of $150,000. Sand’s assets and liabilities were fairly valued except for the plant assets. The entire cost-book differential is allocated to plant assets.
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