Chapter 6 Problems-1

Chapter 6 Problems-1 - Chapter 6 Problems Problem 1(a Net...

Info icon This preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 6 Problems Problem 1 (a) Net income Pill – Year 1 (cost method) 25,000 Less: Dividends from Sill (85% × 9,000) 7,650 17,350 Net income of Sill – Year 1 40,000 Less: Goodwill impairment loss 1,500 38,500 85% 32,725 Consolidated net income – Year 1 50,075 (b) Noncontrolling interest – Year 1 [15% × (40,000 – 1,500)] 5,775 (c) Investment in Sill – Dec. 31, Year 1 (cost method) 238,000 Income from Sill 32,725 270,725 Less: Dividends from Sill 7,650 Investment in Sill Dec. 31, Year 1 - equity method 263,075
Image of page 1

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

View Full Document Right Arrow Icon
Problem 2 Cost of 75% investment 600,000 Implied cost of 100% investment 800,000 Small Common stock 400,000 Retained earnings 100,000 500,000 Purchase discrepancy – Jan. 1, Year 1 300,000 Allocated: Inventory 40,000 Patents (70,000) (30,000) Balance – goodwill 330,000 Balance Balance Jan. 1 Amortization Dec. 31 Year 1 Yr 1 & 2 Year 3 Year 3 Inventory 40,000 40,000 Patents (70,000) (28,000) (14,000) (28,000) Goodwill 330,000 0 19,300 310,700 300,000 12,000 5,300 282,700 PART A Year 1 Year 2 Year 3 Investment in Small 600,000 Cash 600,000 Cash 18,750 7,500 30,000 Dividend income 18,750 7,500 30,000 PART B (a) Goodwill 310,700 (b) Small’s common stock 400,000 Small’s retained earnings (100+80-25-35-10+100-40) 170,000 570,000 Unamortized purchase discrepancy 282,700 852,700
Image of page 2
NCI’s share (25%) 213,175 (c) Large’s retained earnings 500,000 Small’s retained earnings (100+80-25-35-10) 110,000 Small’s retained earnings, date of acquisition 100,000 Change since acquisition 10,000 Less: cumulative amortization of purchase discrepancy 12,000 (2,000) Large’s share (75%) (1,500) Consolidated retained earnings 498,500 (d) Large’s net income 200,000 Less: dividends from Small (40,000 x75%) (30,000) 170,000 Small’s net income 100,000 Less: amortization of purchase discrepancy 5,300 94,700 Large’s share (75%) 71,025 Consolidated net income 241,025 (e) NCI on income statement (94,700 x 25%) 23,675 Problem 3 Cost of 70% investment 84,000 Implied cost of 100% investment 120,000 Petite Common stock 35,000 Retained earnings 25,000 60,000 Purchase discrepancy – Jan. 1, Year 2 60,000 Allocated: Inventory 10,000 Equipment 20,000 30,000 Balance - goodwill 30,000 Balance Balance Jan. 1 Amortization Dec. 31 Year 2 Yrs 2 to 5 Year 6 Year 6 Inventory 10,000 10,000
Image of page 3

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

View Full Document Right Arrow Icon
Equipment 20,000 8,000 2,000 10,000 Goodwill 30,000 0 2,000 28,000 60,000 18,000 4,000 38,000 (a) Inventory (150,000 + 80,000) 230,000 Equipment, net (326,000 + 160,000 + 10,000) 496,000
Image of page 4
Image of page 5
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