Reference no: EM132678534
Problem 1: Derry Ltd. owns 60% of the common shares of Kell Co. At the beginning of 20X1, Kell sold a machine with a book value of $350,000 to Derry for $410,000. When Derry prepares its consolidated financial statements for 20X1, it credits the machine account by $60,000. What account(s) should it debit in this journal entry?
Option A. Retained earnings by $60,000
Option B. Investment in Kell by $60,000
Option C. Investment in Kell by $24,000 and NCI by $24,000
Option D. Retained earnings by $36,000 and NCI by $24,000
Problem 1: DC Company purchased 100% of the outstanding common shares of FA Company on December 31, 20X3, for $170,000. At that date, FA had $100,000 of outstanding common shares and retained earnings of $30,000. It was agreed that the net assets were fairly valued except that the fair value of the capital assets exceeded their net book value by $20,000 and the carrying value of the inventory exceeded its fair value by $10,000. The capital assets had a remaining useful life of eight years as of the acquisition date and have no salvage value. Inventory turns over four times a year. What adjustment should be made to the consolidated financial statements for the year ended December 31, 20X6, for the fair value increment related to the capital assets?
Option A. Amortization expense on the capital assets for 20X6 will be increased by $2,500
Option B. Amortization expense on the capital assets for 20X6 will be increased by $7,500
Option C. The retained earnings at January 1, 20X6, will be increased by $20,000
Option D. Retained earnings at the end of 20X6 will be increased by $12,500
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