On January 1, 2013, Vacker Co. acquired 70% of Carper Inc. by paying $650,000. T
ID: 2446007 • Letter: O
Question
On January 1, 2013, Vacker Co. acquired 70% of Carper Inc. by paying $650,000. This included a $20,000 control premium. Carper reported common stock on that date of $420,000 with retained earnings of $252,000. A building was undervalued in the company's financial records by $28,000. This building had a ten-year remaining life. Copyrights of $80,000 were to be recognized and amortized over 20 years.
Carper earned income and paid cash dividends as follows:
Net income Dividends paid
2013 105,000 54,600
2014 134,400 61,600
2015 154,000 84,000
On December 31, 2015, Vacker owed $30,800 to Carper. There have been no changes in Carper's common stock account since the acquisition. Required: If the equity method had been applied by Vacker for this acquisition, what were the consolidation entries needed as of December 31, 2015?
Explanation / Answer
Fair Value depreciation schedule Assets FV adjustment Amt useful life FV Depreciation/year Building FV adjustment 28,000 10 2800 Intangible asset-Copy right 80,000 20 4000 Consolidation Entries in the book of Vacker Co, Date Account Dr $ Cr $ Dec 31.2015. FV depreciation Buliding 2,800 Equity in Earning from Caper Inc 2,800 Amortization -Copyright 4,000 Equity in Earning from Caper Inc 4,000 ( FV depreciation & Intangible amortization ) Investment in Caper Inc 154,000 Equity in Earning from Caper Inc 154000 (Profit from subsidiary) Cash 84,000 Investment in Caper Inc 84000 (dividend received from subsidiary)