Haynes, Inc., obtained 100 percent of Turner Company’s common stock on January 1
ID: 2438537 • Letter: H
Question
Haynes, Inc., obtained 100 percent of Turner Company’s common stock on January 1, 2014, by issuing 9,000 shares of $10 par value common stock. Haynes’s shares had a $20 per share fair value. On that date, Turner reported a net book value of $100,000. However, its equipment (with a five-year remaining life) was overvalued by $5,000 in the company’s accounting records. Also, Turner had developed a customer list with an assessed value of $30,000, although no value had been recorded on Turner’s books. The customer list had an estimated remaining useful life of 10 years. Turner’s land was undervalued by 10,000. Turner’s patent, which has 10 years of useful life remaining, was undervalued by 15,000.
The following figures come from the individual accounting records of these two companies as of December 31, 2014
Haynes
Turner
Revenues
$
(700,000
)
$
(28,000
)
Expenses
460,000
15,000
Investment income
Not given
0
Dividends declared
90,000
4,000
The pre-acquisition balance sheets of the two companies are presented below:
Haynes
Turner
Current Assets
$
100,000
$
50,000
Land
$200,000
$50,000
Equipment
$300,000
$30,000
Patent
$150,000
$20,000
Total Assets
$750,000
$150,000
Liabilities
$350,000
$50,000
Common Stock
$50,000
$50,000
Additional Paind-in Capital
$150,000
Retained Earnings
$200,000
$50,000
A. What is the balance of the investment account of Hayes right after this acquistion? Write down the relevant journal entries and the affected accounts
B. What is the consolidated balance sheet numbers for Haynes and Turner on December 31, 2014? Please fill out the table below and write down the according journal entries
Haynes
Turner
Consolidated Balance
Current Assets
$
100,000
$
50,000
Land
$200,000
$50,000
Equipment
$300,000
$30,000
Patent
$150,000
$20,000
Total Assets
$750,000
$150,000
Liabilities
$350,000
$50,000
Common Stock
$50,000
$50,000
Additional Paind-in Capital
150,000
Retained Earnings
$200,000
$50,000
Haynes, Inc., obtained 100 percent of Turner Company’s common stock on January 1, 2014, by issuing 9,000 shares of $10 par value common stock. Haynes’s shares had a $20 per share fair value. On that date, Turner reported a net book value of $100,000. However, its equipment (with a five-year remaining life) was overvalued by $5,000 in the company’s accounting records. Also, Turner had developed a customer list with an assessed value of $30,000, although no value had been recorded on Turner’s books. The customer list had an estimated remaining useful life of 10 years. Turner’s land was undervalued by 10,000. Turner’s patent, which has 10 years of useful life remaining, was undervalued by 15,000.
The following figures come from the individual accounting records of these two companies as of December 31, 2014
Haynes
Turner
Revenues
$
(700,000
)
$
(28,000
)
Expenses
460,000
15,000
Investment income
Not given
0
Dividends declared
90,000
4,000
Explanation / Answer
A)
Acquisition fair value--$ 135000(9000*15)
Book value- $(100000)
So excess turner book value will be (135000-100000)=$35000
Equipment $5000 divided by 5 years=$1000
Customer list with assessed value=$30000 divided by 10 years=$3000
So amortization amount will be(1000+3000)=$4000
Acquisition fair value=$135000
2014 income(28000-15000)=$13000
2014 dividend =($4000)
2014 amortization=($4000)
So investment turner account of hayes is (135000+13000-4000-4000)=$140000
Journal entry will be
1.1.2014. Retained earnings. Account.......dr. $ 4000
To investment turner account. $ 4000
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.