ADVANCEDWEEK4SOLUTIONS08 - Answers to Problems 1 D 2 B 3 C...

Info icon This preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Answers to Problems 1. D 2. B 3. C 4. A Acquisition price .......................................................................... $1,600,000 Equity income ($560,000 × 40%) ...................................................... 224,000 Dividends (50,000 shares × $2.00) ................................................... (100,000 ) Investment in Harrison Corporation as of December 31 .............. $1,724,000 5. A Acquisition price ......................................................... $700,000 Income accruals: 2008—$170,000 × 20% .................. 34,000 2009—$210,000 × 20% ................. 42,000 Amortization (below): 2008 ......................................... (10,000) Amortization: 2009 ...................................................... (10,000) Dividends: 2008—$70,000 × 20% ............................... (14,000) 2009—$70,000 × 20% ............................... (14,000 ) Investment in Bremm, December 31, 2009 .......... $728,000 Acquisition price ......................................................... $700,000 Bremm’s net assets acquired ($3,000,000 × 20%)... (600,000 ) Patent ............................................................................ $100,000 Annual amortization (10 year life) ............................. $10,000 6. B Purchase Price of Baskett Stock .................... $500,000 Book Value of Baskett ($900,000 × 40%) ........ (360,000 ) Cost in Excess of Book Value ................... $140,000 Life Annual Payment identified with undervalued ............. Amortization Building ($140,000 × 40%) .......................... 56,000 7 yrs. $8,000 Trademark ($210,000 × 40%) ...................... 84,000 10 yrs. 8,400 Total .................................................................. $ -0- $16,400 Cost of Purchase .............................................................. $500,000 Income Accrued ($90,000 × 40%) ............................... 36,000 Amortization (above) ................................................... (16,400) Dividend Collected ($30,000 × 40%) ......................... (12,000 ) Investment in Baskett ............................................ $507,600
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
7. D The 2008 purchase must be reported using the equity method. Purchase Price of Goldman Stock .................................................. $600,000 Book Value of Goldman Stock ($1,200,000 × 40%) ........................ (480,000 ) Goodwill ............................................................................................. $120,000 Life of Goodwill ................................................................................. indefinite Annual Amortization ......................................................................... (-0- ) Cost on January 1, 2008 ................................................................... $600,000 2008 Income Accrued ($140,000 x 40%) ......................................... 56,000 2008 Dividend Collected ($50,000 × 40%) ....................................... (20,000) 2009 Income Accrued ($140,000 × 40%) ......................................... 56,000 2009 Dividend Collected ($50,000 × 40%) ....................................... (20,000) 2010 Income Accrued ($140,000 × 40%) ......................................... 56,000 2010 Dividend Collected ($50,000 × 40%) ....................................... (20,000 ) Investment in Goldman, 12/31/10 ............................................... $708,000 8. D 9. A Gross Profit Markup: $36,000/$90,000 = 40% Inventory Remaining at Year-End .................................................... $20,000 Markup ................................................................................................ × 40% Unrealized Gain ............................................................................ $8,000 Ownership .......................................................................................... × 30% Intercompany Unrealized Gain—Deferred ................................ $2,400
Image of page 2
10.B Purchase Price of Steinbart Shares ................................................ $530,000 Book Value of Steinbart Shares ($1,200,000 × 40%) ...................... (480,000 ) Tradename ......................................................................................... $50,000 Life of Tradename ............................................................................. 20 years Annual Amortization ......................................................................... $2,500
Image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern