Please show the steps on how to get to the correct answers. McGuire company acqu
ID: 2559416 • Letter: P
Question
Please show the steps on how to get to the correct answers.
McGuire company acquired 90 percent of Hogan Company on January 1,2010, for $234,000 cash. This amount is reflective of Hogan's total fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following: Fair Value 8,000 18,000 12,000 Book Value $10,000 14,000 5,000 Buildings (10-year life) Equipment (4-year life) Land Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years 44. In consolidation at December 31, 2011, what adjustment is necessary for Hogan's Buildings account? A. $1,440 increase. B. $1,440 decrease C. $1,600 increase. D. $1,600 decrease. E. No adjustment is necessary 46. In consolidation at December 31,2011, what adjustment is necessary for Hogan's Equipment account? A. $2,000 increase. B. $2,000 decrease C. $1,800 increase. D. $1,800 decrease. E. No adiustment is necessary 52. In consolidation at December 31,2011, what net adjustment is necessary for Hogan's Patent account? A. $4,200. B. $5,500. C. 8,8000. D. $6,600. E. No adjustment is necessaryExplanation / Answer
44. Correct answer is 1600 decrease.
Explaination:
1 jan 2010, Adjustment: FV- BV= 8000-10000= 2000 DECREASE
31 Dec 2010, Adjustment: reduction- 2010 excess amortisation of 200, 2000-200=1800 reduction
31 Dec 2011, Adjustment: 2010 BV-2010 excess amortisation I(200), 1800-200=1600 decrease.
46. Correct answer is 2000 Increase.
Explaination:
1 jan 2010,Adjustment: FV - BV, 18000-14000=4000 increase.
31 dec 2010 Adjustment, Fair Value Differential - Amortization for 2010, 4000-1000= 3000 Increase
31 dec 2011 Adjustment: Fair Value Differential - Amortization for 2010 & 2011, 4000-2000= 2000 Increase.
52. correct answer is 6600
Explaination:
1 jan 2010 Adjustment: BV Equity - Fair Value equity at acquition - Identified net FV Increase (building equipment & Land)
= 240000-260000-9000 = 11000 Excess Attribute to patent.
31 dec 2010 Adjustment: Attributed FV patent - Amortization for 2010, 11000-2200 = 8800
31 dec 2011 Adjustment: Attributed FV patent - Amortization for 2010 & 2011, 11000- 4400 = 6600
= (160000+80000) - 260000 - 9000