Homework Answers
| a | Investment in Chen | 70000 | |
| To investment revenue | 70000 | ||
| (record income from Chen) | |||
| Cash | 50000 | ||
| To investments in Chen | 50000 | ||
| (Dividend received) | |||
| Investment revenue | 30000 | ||
| To investment in Chen | 30000 | ||
| (excess amortisation entry) | |||
| b | Investment in Chen | ||
| Add: Investment revenue | 70000 | ||
| Less: Dividend | 50000 | ||
| Less: investment revenue | 30000 | ||
| It will decrease investment in Chen on asset by 10000 | |||
| Increase cash by 50000 | |||
| Investment Revenue | 70000 | ||
| Less amortisation | 30000 | ||
| Balance | 40000 | ||
| It will 40000 as income from subsidiary | |||
| Reatianed earnings will increase by 40000 | |||
| c | Investment in Chen | 70000 | |
| To investment revenue | 70000 | ||
| (record income from Chen) | |||
| Cash | 50000 | ||
| To investments in Chen | 50000 | ||
| (Dividend received) | |||
| There will be no effect of excess amortisation in partial equity method | |||
| d | Investment in Chen | ||
| Add: Investment revenue | 70000 | ||
| Less: Dividend | 50000 | ||
| It will increase investment in Chen on asset by 20000 | |||
| Increase cash by 50000 | |||
| Investment Revenue | 70000 | ||
| It will 70000 as income from subsidiary | |||
| Reatianed earnings will increase by 70000 | |||
| e | Cost method | ||
| Cash | 50000 | ||
| To dividend income | 50000 | ||
| (dividend income) | |||
| There will be no effect of income or excess amortisation | |||
| f | No change in initial investment | ||
| Cash increase by 50000 | |||
| Retained earnings increase by 50000 |
| Revenue | Income | Amortisation | |||
| Equity Method | 70000 | -30000 | 40000 | Dividends only decrease investment amount | |
| Partial equity Method | 70000 | 0 | 70000 | Dividends only decrease investment amount | |
| Initail cost method | (dividend only) | 50000 | Dividends are treated as revenue and no effect on investment |
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3. Wang acquires 100% of Chen on January 1, 2010 and will operate Chen as a...
Davis acquires 100% of Ramos on January 1st, 2009. Ramos will be operated as a separate...
Davis acquires 100% of Ramos on January 1st, 2009. Ramos will be operated as a separate subsidiary. Davis will use the equity method to account for its investment in Ramos. In 2013, Davis has net income of $400,000 and pays dividends of $100,000. Ramos has NI of $200,000 and pays dividends of $75,000. At acquisition date, Davis has a building with a. BV of $800,000 and FV of $900,000. Both buildings have a remaining useful life of 10 years (assume...
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Adams, Inc., acquires Clay Corporation on January 1, 2017, in exchange for $510,000 cash. Immediately after the acquisition, the two companies have the following account balances. Clay's equipment (with a five-year remaining life) is actually worth $440,000. Credit balances are indicated by parentheses. Current assets Investment in Clay Equipment Liabilities Common stock Retained earnings, 1/1/17 Adams $ 300,000 510,000 600,000 (200,000) (350,000) (860,000) Clay $ 220,000 0 390,000 (160,000) (150,000) (300,000) In 2017, Clay earns a net income of $55,000...
Please bold answer in explanation Herbert, Inc., acquired all of Rambis Company's outstanding stock on January...
Please bold answer in explanation
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Herbert, Inc., acquired all of Rambis Company's outstanding stock on January 1, 2020, for $574,000 in cash. Annual excess amortization of $12,000 results from this transaction. On the date of the takeover, Herbert reported retained earnings of $400,000, and Rambis reported a $200,000 balance. Herbert reported internal net income of $40,000 in 2020 and $50,000 in 2021 and declared $10,000 in dividends each year. Rambis reported net income of $20,000 in 2020 and $30,000 in 2021 and declared $5,000 in...
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Herbert, Inc., acquired all of Rambis Company’s outstanding stock on January 1, 2017, for $607,000 in cash. Annual excess amortization of $13,200 results from this transaction. On the date of the takeover, Herbert reported retained earnings of $441,000, and Rambis reported a $234,000 balance. Herbert reported internal net income of $60,250 in 2017 and $72,150 in 2018 and declared $10,000 in dividends each year. Rambis reported net income of $21,800 in 2017 and $33,700 in 2018 and declared $5,000 in...
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Chapman Company obtains 100 percent of Abernethy Company's stock on January 1, 2017 As of that date, Abernethy has the following trial balance Accounts payable Accounts receivable 5 56,780 s 43,800 Additional paid-in capital Buildings (net) (4-year remaining life) Cash and short-term investments Common stock Equipment (net) (s-year remaining life) Inventory Land Long-term liabilities (mature 12/31/20) Retained earnings, 1/1/17 Supplies 5e,869 143,000 80,250 250,8e 295,00 110,580 112,600 171,e00 268,750 11,988 Totals 796,450796,450 During 2017, Abernethy reported net income of $122.500...
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Chapman Company obtains 100 percent of Abernethy Company's stock on January 1, 2017. As of that date, Abernethy has the following trial balance: Debit Credit $ 51,500 $ 46,500 50,000 190,000 67,750 Accounts payable Accounts receivable Additional paid-in capital Buildings (net) (4-year remaining life) Cash and short-term investments Common stock Equipment (net) (5-year remaining life) Inventory Land Long-term liabilities (mature 12/31/20) Retained earnings, 1/1/17 Supplies Totals 250,000 442,500 107,000 93,500 166,500 448,250 19,000 $966,250 $966,250 During 2017, Abernethy reported net...
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Please bold answer in explanation
Herbert, Inc., acquired all of Rambis Company's outstanding stock on January 1, 2020. for $631,000 in cash. Annual excess amortization of $14,100 results from this transaction. On the date of the takeover. Herbert reported retained earnings of $415,000, and Rambis reported a $258,000 balance. Herbert reported internal net income of $45,750 in 2020 and $58.450 in 2021 and declared $10,000 in dividends each year. Rambis reported net income of $23.500 in 2020 and $36.200 in...
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