HWAssignmentLangara

HWAssignmentLangara - HW Assignment FMGT 3121 Summer 2011...

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HW Assignment – FMGT 3121 Summer 2011 Akash S. R Quatchi Inc. purchased 90% of the voting shares of Sumi Inc for $600,000 on January 1, 2011. On that date, Sumi’s Commons Stock and Retained Earnings were valued at $200,000 and $250,000 respectively. Unless otherwise stated, assume that Quatchi uses the Cost Method to account for its investment in Sumi Inc. Sumi’s Fair Values approximated its Carrying values with the following exceptions: Sumi’s Trademark had a Fair Value which was $50,000 higher than its Carrying Value. Sumi’s Bonds Payable had a Fair Value which was $20,000 higher than their Carrying Value. The trademark had a useful life of exactly ten years remaining from the date of acquisition. The Bonds Payable mature on January 1, 2021. The Financial Statements of both companies for the Year ended December 31, 2012 are shown below: Income Statements Quatchi Inc. Sumi Inc. Sales $700,000 $640,000 Other Revenues $300,000 $160,000 Less: Expenses: Cost of Goods Sold: $280,000 $256,000 Depreciation Expense $ 30,000 $ 14,000 Other Expenses $ 90,000 $ 30,000 Income Tax Expense $240,000 $200,000 Net Income $360,000 $300,000 Retained Earnings Statements
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