Orion Inc. has a 40 percent interest in Petra Company, reported using the equity method, and carried at $25 million. Orion acquires the remaining stock of Petra for $80 million. The fair value of the equity method investment at the date Orion buys the remaining stock is $22 million. The fair value of Petra’s identifiable net assets is $50 million. What amount of goodwill is recognized when the remaining stock is acquired? Select one: a. $52 million b. $30 million c. $55 million d. $0
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In 2018, Martin Corp. acquired Glynco and recorded goodwill of $45 million. Martin considers Glynco a separate reporting unit. By the end of 2021, the net assets (including goodwill) of Glynco are $324 million and its estimated fair value is $260 million. The amount of the impairment loss that Martin would record for goodwill at the end of 2021 is: a. $0 b. $60 million c. $45 million d. $15 million
Akash M.
Sharp Inc. acquires all of the stock of TranKing Industries for $80,000,000 in cash. The books of TranKing report the following account balances at the date of acquisition (in trial balance format). Date-of-acquisition fair values are also displayed. Current assets: $10,000,000 Property, net: $23,000,000 Liabilities: ($20,200,000) Common stock: ($100,000) Additional paid-in capital: ($4,900,000) Retained earnings: ($8,000,000) Accumulated other comprehensive loss: 200,000 Total: $- TranKing has previously unreported intangible assets valued at $15,000,000 which meet the capitalization requirements of ASC Topic 805. On the consolidation working paper, eliminating entry (R) debits goodwill in the amount of: Select one: a. $58,000,000 b. $42,000,000 c. $58,400,000 d. $42,400,000
On January 1, 2022, Pronto Company acquired all of Speedy Inc.'s voting stock for $33,600,000. Speedy's net assets were reported at amounts approximating book value, but Pronto determined that Speedy had the following previously unreported intangible assets: • Developed technology, fair value $2,800,000, 5-year life • Favorable leases, fair value $1,400,000, 4-year life Speedy's shareholders' equity on January 1, 2022, was $14,000,000. It is now December 31, 2023 (two years later). Speedy reported net income of $1,120,000 in 2022. There are no impairments of identifiable intangibles or goodwill in 2022 or 2023. Pronto uses the complete equity method to report its investment in Speedy on its own books. Speedy's December 31, 2023, trial balance appears below. Dr (Cr) Current assets $28,000,000 Property and equipment, net $70,000,000 Liabilities ($81,200,000) Capital stock ($2,800,000) Retained earnings, January 1 ($12,320,000) Sales revenue ($98,000,000) Cost of goods sold $84,000,000 Operating expenses $12,320,000 $0 Assume Pronto uses the cost method to report its investment in Speedy. On the December 31, 2023, consolidation working paper, an adjusting entry (A) is necessary to increase Investment in Speedy, before continuing with eliminating entries (E), (R), and (O). Adjusting entry (A) increases the investment by Select one: a. $210,000 b. $2,800,000 c. $980,000 d. $1,120,000
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Recommended Textbooks
Horngren’s Cost Accounting
Cost Accounting A Managerial Emphasis
Principles of Accounting Volume 1: Financial Accounting
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