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The Krause Corporation acquired 80 percent of the 100,000 outstanding voting shares of Leahy, Inc., for $6.80 per share on January 1, 2012. The...

The Krause Corporation acquired 80 percent of the 100,000 outstanding voting shares of Leahy, Inc., for $6.80 per share on January 1, 2012. The remaining 20 percent of Leahy’s shares also traded actively at $6.80 per share before and after Krause’s acquisition. An appraisal made on that date determined that all book values appropriately reflected the fair values of Leahy’s underlying accounts except that a building with a 5-year life was undervalued by $84,000 and a fully amortized trademark with an estimated 10-year remaining life had a $81,000 fair value. At the acquisition date, Leahy reported common stock of $100,000 and a retained earnings balance of $254,000.
Following are the separate financial statements for the year ending December 31, 2013:

Krause
Corporation Leahy, Inc.
Sales $ (751,000 ) $ (409,250 )
Cost of goods sold 249,000 177,000
Operating expenses 287,000 128,250
Dividend income (16,000 ) 0
________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________
Net income $ (231,000 ) $ (104,000 )
________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________
Retained earnings, 1/1/13 $ (753,000 ) $ (324,000 )
Net income (above) (231,000 ) (104,000 )
Dividends paid 80,000 20,000
________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________
Retained earnings, 12/31/13 $ (904,000 ) $ (408,000 )
________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________
Current assets $ 147,000 $ 186,000
Investment in Leahy, Inc. 544,000 0
Buildings and equipment (net) 900,000 405,000
Trademarks 147,000 145,000
________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________
Total assets $ 1,738,000 $ 736,000
________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________
Liabilities $ (514,000 ) $ (228,000 )
Common stock (320,000 ) (100,000 )
Retained earnings, 12/31/13 (above) (904,000 ) (408,000 )
________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________
Total liabilities and equities $ (1,738,000 ) $ (736,000 )
________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________
________________________________________
Note: Parentheses indicate a credit balance.
C. If instead the noncontrolling interest shares of Leahy had traded for $5.19 surrounding Krause's acquisition date, what is the impact on goodwill?
Goodwill decreases to…………………..
The Krause Corporation acquired 80 percent of the 100,000 outstanding voting shares of Leahy, Inc., for $6.80 per share on January 1, 2012. The remaining 20 percent of Leahy’s shares also traded actively at $6.80 per share before and after Krause’s acquisition. An appraisal made on that date determined that all book values appropriately reflected the fair values of Leahy’s underlying accounts except that a building with a 5-year life was undervalued by $84,000 and a fully amortized trademark with an estimated 10-year remaining life had a $81,000 fair value. At the acquisition date, Leahy reported common stock of $100,000 and a retained earnings balance of $254,000. Following are the separate financial statements for the year ending December 31, 2013: Krause Corpora tion Leahy, Inc. Sales $ (751,00 0 ) $ (409,25 0 ) Cost of goods sold 249,000 177,000 Operati ng expense s 287,000 128,250 Dividen d income (16,000) 0 Net income $ (231,00 0 ) $ (104,00 0 ) Retaine d earning s, 1/1/13 $ (753,00 0 ) $ (324,00 0 ) Net income (above) (231,00 0 ) (104,00 0 ) Dividen ds paid 80,000 20,000 Retaine d earning s, 12/31/1 3 $ (904,00 0 ) $ (408,00 0 ) Current assets $147,000 $186,000 Investm ent in Leahy, 544,000 0
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Inc. Buildin gs and equipm ent (net) 900,000 405,000 Tradem arks 147,000 145,000 Total assets $ 1,738,0 00 $736,000 Liabiliti es $ (514,00 0 ) $ (228,00 0 ) Commo n stock (320,00 0 ) (100,00 0 ) Retaine d earning s, 12/31/1 3 (above) (904,00 0 ) (408,00 0 ) Total liabilitie s and equities $ (1,738,0 00 ) $ (736,00 0 ) Note: Parentheses indicate a credit balance. C. If instead the noncontrolling interest shares of Leahy had traded for $5.19 surrounding Krause's acquisition date, what is the impact on goodwill? Goodwill decreases to…………………. .
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The Krause Corporation acquired 80 percent of the 100,000 outstanding voting shares of Leahy, Inc., for $6.80 per share on January 1, 2012. The remaining 20
percent of Leahy’s shares also traded...

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