Haynes, Inc., obtained 100 percent of Turner Company’s common stock on January 1

Question

Haynes, Inc., obtained 100 percent of Turner Company’s common stock on January 1, 2014, by issuing 8,500 shares of $10 par value common stock. Haynes’s shares had a $15 per share fair value. On that date, Turner reported a net book value of $88,750. However, its equipment (with a five-year remaining life) was undervalued by $7,250 in the company’s accounting records. Also, Turner had developed a customer list with an assessed value of $31,500, although no value had been recorded on Turner’s books. The customer list had an estimated remaining useful life of 10 years.

    The following figures come from the individual accounting records of these two companies as of December 31, 2014:

    The following figures come from the individual accounting records of these two companies as of December 31, 2015:

What balance does Haynes’s Investment in Turner account show on December 31, 2015, when the equity method is applied?

What is the consolidated net income for the year ending December 31, 2015?

What is the consolidated equipment balance as of December 31, 2015?

Haynes, Inc., obtained 100 percent of Turner Company’s common stock on January 1, 2014, by issuing 8,500 shares of $10 par value common stock. Haynes’s shares had a $15 per share fair value. On that date, Turner reported a net book value of $88,750. However, its equipment (with a five-year remaining life) was undervalued by $7,250 in the company’s accounting records. Also, Turner had developed a customer list with an assessed value of $31,500, although no value had been recorded on Turner’s books. The customer list had an estimated remaining useful life of 10 years.

    The following figures come from the individual accounting records of these two companies as of December 31, 2014:

Explanation / Answer

Details Amt Purchase consideration paid By Haynes (8500 shares @$15 Fair Value)        127,500 Net Book Value Turner Jan 1.2014.           88,750 Add FV Adjustments FV Adjusted useful Life Depreciation/Amortizatin per year Add : FV uplift Equipment             7,250                      5                1,450 Add : Fv Customer list           31,500                    10                3,150 Total Adjusted Net Value        127,500 Net Income Turner             2,014              2,015 revenue        275,000         348,750 Expense        130,000         163,100 Net Income Turner        145,000         185,650 Dividend Declared           70,000            50,000 Haynes Invetsment Value Details Amt$ Investment value Jan 1.2014        127,500 Add : Equity Income 2014        145,000 Less : Depreciation/Amort FV adjustment           (4,600) Less : Didiend received        (70,000) Investment in Turner Value Dec 312014.        197,900 a Haynes Invetsment Value Dec 31. 2015. Details Amt$ Opening Value Jan 1.2015. Invetsment in turner        197,900 Add : Equity Income 2015        185,650 Less : Depreciation/Amort FV adjustment           (4,600) Less : Didiend received        (50,000) Investment in Turner Value Dec 31.2015.        328,950 b Consolidated Net Income 2015 Net Income for Haynes        414,800 Add Equity Income Turner        185,650 Less : Depreciation/Amort FV adjustment           (4,600) Net Consolidated income 2015        595,850 c Consolidated Equipment Balance 2015 Equipment Balance        905,000 Less FV Adjustment Depreciation and amortization 2014 & 2015           (9,200) Consolidated Balance        895,800

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