Question q1 willkom corporation bought 100 percent of szabo

Assignment Help Financial Accounting

Reference no: EM13349186

Question :

Q1. Willkom Corporation bought 100 percent of Szabo, Inc., on 1^st January, 2011. On that date, Willkom's equipment (10-year life) has a book value of $300,000 but a fair value of $400,000. Szabo has equipment 10-year life with a book value of $200,000 but a fair value of $300,000. Willkom utilize the equity technique to record to record its investment in Szabo. On 31^st December, 2013, Willkom has equipment with a book value of $210,000 but a fair value of $330,000. Szabo has equipment with a book value of $140,000 but a reasonable value of $270,000. The consolidated balance for the Equipment account as of 31^st December, 2013 is $420,000.

What could be the impact on consolidated balance for the Equipment account as of 31^st December, 2013 if the parent had applied the initial value technique rather than the equity method?

a. The balance in the consolidated Equipment account can't be evaluated for the initial value technique using the information given.

b. No effect: The technique the parent uses is for internal reporting purposes only and has no impact on consolidated totals.

c. The consolidated Equipment account could have a lower reported balance.

d. The consolidated Equipment account could have a higher reported balance

Q2.

Willkom Corporation bought 100% of Szabo, Inc., on January 1, 2011. On that date, Willkom's equipment (10-year life) has a book value of $300,000 but a fair value of $400,000. Szabo has equipment (10-year life) with a book value of $200,000 but a fair value of $300,000. Willkom uses the equity technique to record its investment in Szabo. On 31^st December, 2013, Willkom has equipment with a book value of $210,000 but a fair value of $330,000. Szabo has equipment with a book value of $140,000 but a reasonable value of $270,000. Evaluate the consolidated balance for the Equipment account as of 31^st December, 2013?

Q3.

On 1^st January, 2011, Phoenix Co. acquired 100 percent of the outstanding voting shares of Sedona, Inc. for $600,000 cash. At 1^st January, 2011, Sedona's total assets had a net carrying amount of $420,000. Equipment (eight-year remaining life) was undervalued on Sedona's financial records by $80,000. Any outstanding excess fair over book value was attributed to a customer list developed by Sedona (four-year remaining life), but not recorded on its books. Phoenix applies the equity technique to account for its investment in Sedona. Every year since the acquisition, Sedona has paid a $20,000 dividend. Sedona recorded income of $70,000 in 2011 and $80,000 in 2012.

Selected account balances from the two companies' individual records were as given:

Phoenix Sedona

2013 Revenues $498,000 $285,000

2013 Expenses 350,000 195,000

2013 Income from Sedona 55,000

Retained earnings 12/31/13 250,000 175,000

Reference no: EM13349186

Questions Cloud

Question purpose a brief written proposal to the executive : question purpose a brief written proposal to the executive management team explaining your potential choice or choices

Question national shops inc reported the subsequent amounts : question national shops inc. reported the subsequent amounts on its balance sheet as of 31st december

Question as of the fiscal year ending 30th september 2013 : question as of the fiscal year ending 30th september 2013 crystal beach had 10000000 in 5 serial bonds outstanding. the

Question ginger operates an activity that be eligible as a : question ginger operates an activity that be eligible as a hobby. her profit income is 7000. her expenses add 800 of

Question q1 willkom corporation bought 100 percent of szabo : question q1. willkom corporation bought 100 percent of szabo inc. on 1st january 2011. on that date willkoms equipment

Question hall company had sales in 2012 of 1500000 on 60000 : question hall company had sales in 2012 of 1500000 on 60000 units. variable costs totaled 720000 and fixed costs

Question 1a portray the sectoral and policy-focussed : question 1a portray the sectoral and policy-focussed approaches to human resource planning at the national levelb in

Question the subsequent information is available for the : question the subsequent information is available for the first three years of operations for cooper company1. year

Question 1 what are the pressures that lead managers and : question 1. what are the pressures that lead managers and executives to cook the books?2. what is the boundary between

User Account

All Pages