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Foster Corporation established Kline Company as a wholly owned subsid
On January 1, 20X7, Yang Corporation acquired 25 percent of the outstanding shares of Spiel
Corporation for $100,000 cash. Spiel Company reported net income of $75,000 and paid
dividends of $30,000 for both 20X7 and 20X8. The fair value of shares held by
You are CFO of a large company that has a few subsidiaries. A new board member is unfamiliar
with consolidation procedures particularly with respect to the elimination of intercompany
inventory transactions. Provide a summary of your talking points with t
On December 31, 20X8, Mercury Corporation acquired 100 percent ownership of Saturn
Corporation. On that date, Saturn reported assets and liabilities with book values of $300,000
and $100,000, respectively, common stock outstanding of $50,000, and retained
During its inception, Devon Company purchased land for $100,000 and a building for $180,000.
After exactly 3 years, it transferred these assets and cash of $50,000 to a newly created
subsidiary, Regan Company, in exchange for 15,000 shares of Regan's $10
Advanced Accounting Final ACC405
On December 31, 20X9, Add-On Company acquired 100 percent of Venus Corporation's
common stock for $300,000. Balance sheet information Venus just prior to the acquisition is
given here:
Cash and Receivables
Inventory
$35,00
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Roller Corporation purchased 100 percent ownership of Steam Company o
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Power Corporation owns 75 percent of Swift Companys stock. Swift prov
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1. On January 2, 20X3, Kean Company purchased
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1. Perez Inc. owns 80 percent of Senior Inc. During 20X2, Perez sol
Amount Paid
Book value of assets
Book value of liabilities
$
626,000
371,000
Book value of net assets
Adjustment for research and development costs
255,000
44,000
Adjusted book value
Fair value of patent rights
Goodwill recorded
211,000
130,000
104,000
51
Starting questions: What is a differential? How is a differential treated by an investor in
computing income from an investee under (a) the cost method and (b) equity method reporting?
What conditions must exist for a negative differential to occur?
What
Earth Company owns 100 percent of the capital stock of both Mars Corporation and Venus
Corporation. Mars purchases merchandise inventory from Venus at 125 percent of Venus's cost.
During 20X8, Venus sold inventory to Mars that it had purchased for $25,000
On January 3, 20X9, Jane Company acquired 75 percent of Miller Company's outstanding
common stock for cash. The fair value of the noncontrolling interest was equal to a proportionate
share of the book value of Miller Company's net assets at the date of ac
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Sun Corporation concluded the fair value of Tender Company was $66,00
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Grant Company acquired all of Bedford Corporation's assets and liabil
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Foster Corporation established Kline Company as a wholly owned subsid
1.
What types of investments in common stock are accounted for using (a) the equity
method and (b) the cost method? How is the receipt of a dividend treated under the
equity method? under the cost method?
The types of investments in common stock that are
Big Corporation receives management consulting services from its 92 percent owned subsidiary,
Small Inc. During 20X7, Big paid Small $125,432 for its services. For the year 20X8, Small
billed Big $140,000 for such services and collected all but $7,900 by
Sharp Company will acquire 90 percent of Moore Company in a business combination. The total
consideration has been agreed on, but the nature of Sharp's payment has not. It is expected that on the
date the business combination is to be consummated, the fai
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