Reference no: EM132487383

Point 1: Park Corporation acquired the voting stock of Sequoia Company on January 1, 2020 for $25 million in cash and stock. At the date of acquisition, Sequoia's book value totaled $3 million, consisting of $1.6 million in capital stock, $1.8 million in retained earnings, and $400,000 in accumulated other comprehensive losses.

Point 2: Sequoia's reported net assets at the date of acquisition were carried at amounts approximating fair value, except its inventory was overvalued by $500,000 (sold in 2020), its plant assets (10-year life, straight-line) were overvalued by $3,500,000, and its long-term debt (premium amortized over 10 years, straight-line) is undervalued by $100,000. Sequoia also had previously unreported identifiable intangibles (5-year life, straight-line) valued at $5,000,000.

Point 3: It is now December 31, 2020. Sequoia reports net income of $1,200,000 and other comprehensive income of $50,000 for 2020 and declares and pays dividends of $200,000. None of the revaluations are impaired in 2020. Park uses the complete equity method to account for its investment.

Question 1: The balance for acquired identifiable intangibles on the December 31, 2020 consolidated balance sheet is:

Option A. $5,000,000

Option B. $1,000,000

Option C. $4,500,000

Option D. $4,000,000

Question 2: What is the December 31, 2020 balance for Investment in Sequoia, reported on Park's books?

Option A. $25,860,000

Option B. $26,000,000

Option C. $26,060,000

Option D. $25,910,000

Question 3: Eliminating entry (R) debits goodwill in the amount of:

Option A. $19,100,000

Option B. $20,900,000

Option C. $20,100,000

Option D. $21,100,000

Question 4: Eliminating entry (E) credits Investment in Sequoia by:

Option A. $1,500,000

Option B. $3,300,000

Option C. $3,000,000

Option D. $3,600,000