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 11,300 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 $126,000. However, its equipment (with a five-year remaining life) was undervalued by $8,200 in the company’s accounting records. Also, Turner had developed a customer list with an assessed value of $35,300, 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?

Would this answer be affected by the investment method applied by the parent?

Prepare entry *C for each of the following methods. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Haynes, Inc., obtained 100 percent of Turner Company’s common stock on January 1, 2014, by issuing 11,300 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 $126,000. However, its equipment (with a five-year remaining life) was undervalued by $8,200 in the company’s accounting records. Also, Turner had developed a customer list with an assessed value of $35,300, 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

acquisition fair value 169500 book value -126000 excess of fair value over book value 43500 excess fair value assigned to specific accounts based on fair value life annual excess amortization equipment 8200 5 1640 customer list 35300 10 3530 5170 Acquisition fair value 169500 2014 income accrual 2014 dividends paid -80000 2014 ammortization 5170 2015 income accrual 0 2015 dividend paid -90000 2015 ammortization 5170 9840 net income of haynes 162000 net icnome of turner 187000 ammortization expense -5170 consolidated net income 343830 equipment balances haynes 512000 equipment balances turner 367000 allocation based fair 43500 consolidated equipment 922500 Parent's choice of an investment method has no impact on consolidatedtotals.

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