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Started on Wednesday, 25 November 2020, 10:02 AM
State Finished
Completed on Wednesday, 25 November 2020, 10:56 AM
Time taken 53 mins 30 secs
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Question 1
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On September 1, 2013, Beck Corporation acquired an 80% interest in Johnsen
Corporation for $700,000. Johnsen’s stockholders’ equity at January 1, 2013 consisted
of $200,000 of Common Stock and $600,000 of Retained Earnings. The book values of
its assets and liabilities were equal to their respective fair values on this date. All excess
purchase cost was attributed to goodwill.
During 2013, Johnsen uniformly earned $78,000 and paid dividends of $9,000 on each
of four dates: February 1, June 1, August 1, and December 1.
Required: Compute the following:
1. Implied goodwill associated with Johnsen Corporation based on Beck’s purchase
price on September 1, 2013.
2. Beck’s income from Johnsen for 2013.
3. Preacquisition income for Beck Corporation and Subsidiary for 2013.
4. Noncontrolling interest share for 2013.
5. What is the balance in Beck’s Investment in Johnsen account at December 31, 2013?
1. Implied goodwill associated with Johnsen Corporation based on Beck’s purchase
price on September 1, 2013.
Cost of investment $700,000
Total stockholders equity, Jan. 1 $800,000
Add: Net income($78,000 8/12) 52,000
Less: Dividends($9,000 x 3) (27,000)
Total stockholders equity, Sep. 1 $825,000
Implied fair value of investment:
($700,000/0.8) $875,000
Total stockholders equity, Sep. 1 (825,000)
Implied goodwill $50,000
2. Beck’s income from Johnsen for 2013.
Income from Johnsen ($78,000 x 1/3 x 80%)= $20,800
3. Preacquisition income for Beck Corporation and Subsidiary for 2013.
($78,000 x 8/12) = $52,000
4. Noncontrolling interest share for 2013.
($78,000 x 20% x 4/12) = $5,200
5. What is the balance in Beck’s Investment in Johnsen account at December 31, 2013?
Investment at December 31, 2013:
$700,000 + $20,800 $ 720.800
$9,000 (80%) (7.200)
Investment at December 31, 2013 $713,600
Question 2
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Great Corporation acquired a 90% interest in SOS Corporation at its $810,000 book
value on December 31, 2013. A summary of the stockholders’ equity for SOS at the end
of 2013 and 2014 is as follows:
12/31/13 12/31/14
Capital stock, $10 par $600,000 $600,000
Additional paid-in capital 30,000 30,000
Retained Earnings 270,000 420,000
Total stockholders’ equity $900,000 $1,050,000
On January 1, 2015, SOS sold 10,000 new shares of its $10 par value common stock for
$45 per share.
If SOS sold the additional shares to the general public, Great’s Investment in
SOS account after the sale would be
Select one:
a. $1,225,000
b. $1,245,000
