Reference no: EM133104936
Problem - Following are financial statements for Moore Company and Kirby Company for 2021:
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Moore
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Kirby
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|
Sales
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(800,000)
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(600,000)
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|
Cost of Goods Sold
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500,000
|
400,000
|
|
Operating and Interest expense
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100,000
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160,000
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|
Equity in Kirby's earnings
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?
|
|
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Net Income
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(40,000)
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Retained earnings 1/1/21
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(1,025,970)
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(550,000)
|
|
Net Income
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?
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(40,000)
|
|
Dividend paid
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130,000
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0
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Retained earnings 12/31/21
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?
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(590,000)
|
|
Cash and receivables
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217,000
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180,000
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|
Inventory
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224,000
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160,000
|
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Investment in Kirby
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?
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0
|
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Equipment (net)
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600,000
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420,000
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Buildings
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1,000,000
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650,000
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Accumulated depreciation Buildings
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(100,000)
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(200,000)
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|
Other Assets
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200,000
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100,000
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Total Assets
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?
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1,310,000
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Liabilities
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(1,138,000)
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(570,000)
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Common Stock
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(600,000)
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(150,000)
|
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Retained earnings, 12/31/21
|
?
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(590,000)
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Total Liabilities and Equity
|
?
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(1,310,000)
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Moore purchased 90% of Kirby on January 1, 2020, for $657,000 in cash. On that date, the 10% non-controlling interest was assessed to have a $73,000 fair value. Also, at the acquisition date, Kirby held equipment (4-yearremaining life) undervalued on the financial records by $20,000and interest-bearing liabilities (5-year remaining life) overvalued by $40,000. The rest of the excess fair value over book value was assigned to previously unrecognized brand names and amortized over a10-year life.
During 2020 Kirby earned Net Income of $80,000 and paid no dividends.
Each year Kirby sells Moore inventory at a 20% gross profit rate. Intra-entity sales were $145,000 in 2020 and $160,000 in 2021. On January 1, 2021, 30% of the 2020 transfers were still on hand and, on December 31, 2021, 40% of the 2021 transfers remained.
Moore sold Kirby a building on January 2, 2020. It had cost Moore $100,000 but had $90,000 in accumulated depreciation at the time of this transfer. The price was $25,000 in cash. At that time the building had a five-year remaining life.
Required -
A. What is the goodwill at the acquisition date?
B. What is the ECOBV amortization?
C. Determine the unrealized gain on the sale of the building from Moore to Kirby in 2020?
D. Determine the unrealized profits on the transfer of inventory from Kirby to Moore in 2020 and 2021?
E. Determine the balance of Investment in Kirby at December 2021. The parent company uses the equity method to account for the investment.
F. Determine the balance of Equity in Kirby's earnings at December 2021.The parent company uses the equity method to account for the investment.
G. Prepare the consolidation journal entries.
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