Chapter 1 Problem 11-31 to 35
Problem 11-31 Answer A
Acquisition cost 5,160,000
Net assets acquired (30% x 11,800,000) 3,540,000
Excess of cost 1,620,000
Attributable to depreciable assets (30% x 2,600,000) 780,000
Attributable to goodwill 840,000
Acquisition cost 5,160,000
Share in net income (30% x 3,600,000) 1,080,000
Share in dividends (30% x 400,000) ( 120,000)
Amortization (780,000/4) ( 195,000)
Investment balance – December 31 5,925,000
Problem 11-32 Answer B
Acquisition cost 2,560,000
Net assets acquired (40% x 5,000,000) 2,000,000
Excess of cost 560,000
150
Attributable to equipment (40% x 800,000) 320,000
Attributable to building (40% x 600,000) 240,000
560,000
Acquisition cost 2,560,000
Net income (40% x 1,600,000) 640,000
Cash dividend (40% x 1,000,000) ( 400,000)
Amortization of excess:
Equipment (320,000 / 4) ( 80,000)
Building (240,000 / 12) ( 20,000)
Carrying value of investment – 12/31/2008 2,700,000
Problem 11-33 Answer A
Net income 5,000,000
Less: Preference dividend (10% x 2,000,000) 200,000
Net income to ordinary shares 4,800,000
Investment income (50% x 4,800,000) 2,400,000
Problem 11-34
Question 1 – Answer B
Share in 2008 net income (30% x 800,000) 240,000
Question 2 – Answer B
Acquisition cost 2,000,000
Share in net income – 2008 240,000
Cash dividends – 2008 (30% x 500,000) ( 150,000)
Book value – December 31, 2008 2,090,000
Question 3 – Answer B
Book value – December 31, 2008 2,090,000
Share in net income up to June 30, 2009 (30% x 1,000,000) 300,000
Book value – June 30, 2009 2,390,000
Sales price 1,500,000
Book value sold (2,390,000 x ½) 1,195,000
Gain on sale 305,000
151
Problem 11-35 Answer C
Acquisition cost (30,000 x 120) 3,600,000
Deficit on January 1, 2008 (30% x 500,000) ( 150,000)
Carrying value of investment – 1/1/2008 3,450,000
Net income for 2008 (30% x 700,000) 210,000
Net income for 2009 (30% x 800,000) 240,000
Cash dividend on 12/31/2009 (30% x 400,000) ( 120,000)
Carrying value of investment – 12/31/2009 3,780,000
Another approach
Acquisition cost 3,600,000
Share in retained earnings – 12/31/2009 (30% x 600,000) 180,000
Carrying value of investment – 12/31/2009 3,780,000
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