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Discuss what investment accounting method does hiram use

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Reference no: EM131812349

On january 1,2013, hiram corporation acquired all the outstanding stock of terrrier company, by issuing 9000 shares of its $30 par value
Common stock. At the acquisition date, the stock was trading at $50 per share. Additionally.hiram paid $10,000 to sandler o'neal to represent them in the transaction and $10,000 to kpmg for accounting services.

At january 1, 2013, terrier had retained earnings of $230,000 and total book value of $360,000. Your ananlysis of terrier's assets and
Liabilities revealed that its property, plant and equipment was undervalued by $60,000 and has a remaining useful life of 6 years. Terrier
Also has a trademark that you determined has a fair value of$30,000 with a ten year life

Required: prepare the journal entry to record the above purchase, if you decide to keep terrier as a separate entity.

Determine the amount of the excess purchase price and how the excess is allocated

Following are the separate financial statements for hiram and terrier as of december 31,2013. Prepare a consolidation worksheet

For these two companies as of December 31,2013

  Hiram Terrier
Income statement Dr Cr
Revenues 610000 370000
Expenses 385000 220000
Dividend income 5000  
   net income 230000 150000
     
Retained earnings    
Rfetained earnings boy 880000 230000
Net income 230000 150000
Dividends paid 90000 5000
Retained earnings eoy 1020000 375000
     
Balance sheet    
Cash 130000 15000
Receivables 380000 220000
Inventory 560000 280000
Investment in sub 450000  
     
Land 460000 240000
Property, plant , equipment 920000 220000
  total assets 2900000 975000
     
Liabilities 780000 470000
Common stock 800000 100000
Paid in capital 300000 30000
Retained earnings 12/31/2007 1020000 375000
  total liabilities and equity 2900000 975000

What investment accounting method does hiram use to account for its investment in terrier? How do you know?

Reference no: EM131812349

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