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Question;1. The;Income Statements of Ruger Inc. and Nina Co. are;Ruger;Nina;Sales;$1,000,000;$400,000;Cost of Goods Sold;500,000;150,000;Gross;Profit;500,000;250,000;Sales and Administration Expenses;300,000;170,000;Net;Income;$;200,000;$ 80,000;==========;========;Dividends Paid;$60,000;$20,000;Compute;Ruger's Net Income based upon the following ownership of Nina Co.;a.;10%;b.;40%;c. 80%;2-7;2.;Supernova Company had the following summarized;balance sheet on December 31, 20X1;Assets;$;200,000;Accounts;receivable....................................;Inventory..............................................;450,000;Property and plant (net)...............................;600,000;Goodwill...............................................;150,000................................................Total;$1,400,000;==========;Liabilities;and Equity;$;600,000;Notes payable..........................................;Common stock, $5;par...................................;300,000;Paid-in capital in excess of;par.......................;400,000;Retained earnings......................................;100,000................................................Total;$1,400,000;==========;The fair;value of the inventory and property and plant is $600,000 and $850,000;respectively.;Assume that;Redstar Corporation exchanges 45,000 of its $3 par value shares of common;stock, when the fair price is $4/share, for 100% of the common stock of;Supernova Company. Redstar incurred direct acquisition costs of $5,000 and;stock issuance costs of $5,000.;Required;1. What;journal entry will Redstar Corporation record for the investment in Supernova?;2. Prepare a;supporting determination and distribution of excess schedule;3. Prepare;Redstar's elimination and adjustment entry for the acquisition of Supernova.;2-8;2;3.;On December 31, 20X1, Priority Company purchased 80%;of the common stock of Subsidiary Company for $1,550,000. On this date;Subsidiary had total owners' equity of $650,000 (common stock $100,000, other;paid-in capital, $200,000, and retained earnings, $350,000). Any excess of cost;over book value is due to the under or overvaluation of certain assets and;liabilities. Assets and liabilities with differences in book and fair values;are provided in the following table:........................;Book;Fair;Current Assets;Value;Value;$500,000;$800,000;Accounts;Receivable...................;200,000;150,000;Inventory.............................;800,000;800,000;Land..................................;100,000;600,000;Buildings (net).......................;700,000;900,000;Current;Liabilities...................;800,000;875,000;Long-Term Debt........................;850,000;930,000;Remaining excess, if any, is due to goodwill.;Required;a.;Using the information above and on the separate;worksheet, prepare a schedule to determine and distribute the excess of cost;over book value.;b. Complete;the Figure 2-1 worksheet for a consolidated balance sheet as of December 31;20X1.;2-10;Chapter 2;4.;On December 31, 20X1, Parent Company purchased 80%;of the common stock of Subsidiary Company for $280,000. On this date;Subsidiary had total owners' equity of $250,000 (common stock $20,000, other;paid-in capital, $80,000, and retained earnings, $150,000). Any excess of cost;over book value is due to the under or overvaluation of certain assets and;liabilities. Inventory is undervalued $5,000. Land is undervalued $20,000.;Buildings and equipment have a fair value which exceeds book value by $30,000.;Bonds payable are overvalued $5,000. The remaining excess, if any, is due to;goodwill.;Required;a.;Using the information above and on the separate;worksheet, prepare a schedule to determine and distribute the excess of cost;over book value. Use the parent company concept (pro rata fair value approach);in any revaluation of net assets.;b. Complete;the Figure 2-2 worksheet for a consolidated balance sheet as of December 31;20X1.;2-11;Chapter 2

 

Paper#44352 | Written in 18-Jul-2015

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