Question

Explanation Show my answ! 14 Problem 3-23 (LO 3-1, 3-4) 2.31 ints awarded Following are selected account balances from Penske Company and Stanza Corporation as of December 31, 2018: Scored Stanza (632,000 158.000 210,000 eBook Print Revenues Cost of goods sold Depreciation expense Investment income Dividends declared Retained earnings 1/1/18 Current assets Copyrights Royalty agreements Investment in stanza Liabilities Common stock Additional paid-in capital Penske (708,000) 252.800 159,000 Not given 80.000 (758,000) 400,000 1,060,000 690,000 Not given (690,000) (600,000) ($20 par) (150,000) 60,000 (206,000) 536.000 419.000 1,112,000 References (1,377.000) (200,000) ($10 par) (80,000) Note: Parentheses indicate a credit balance. On January 1, 2018, Penske acquired all of Stanza's outstanding stock for $757.000 fair value in cash and common stock. Penske also paid $10,000 in stock issuance costs. At the date of acquisition copyrights (with a six-year remaining life) have a $510,000 book value but a fair value of $654,000. a. As of December 31, 2018, what is the consolidated copyrights balance? b. For the year ending December 31, 2018, what is consolidated net income? c. As of December 31, 2018, what is the consolidated retained earnings balance? d. As of December 31, 2018, what is the consolidated balance to be reported for goodwill?

Answer 1

1) Consolidate copyright balances: Fair value should be recorded for the subsidiary .

Penske - 1,060,000

Stanza - 654,000

Total = 1,714,000

2) Net Income : Consolidated Income = 6,20,200 (356200+264000)

	Penake	Stanza
Revenue	7,08,000	6,32,000
cost of good sold	-2,52,800	-1,58,000
Depreciation Expense	-1,59,000	-2,10,000
+Dividend Income	60,000
Net Income	3,56,200	2,64,000

3)  

Retained Earning
Opening balance	7,58,000	2,06,000
+Net Income	3,56,200	2,64,000
-Dividend Declared	-80,000	-60,000
As on 31.12.18	10,34,200	4,10,000
Consolidated Income		14,44,200

4)  

Calculation of goodwill
Purchase consideration		757000
+ NCI at the acquisition DATE		0
- The fair value of net assets acquired		-654000
Goodwill		103000