Question :
21.On January 1, 2015, Simpson Company purchased all of the : 1241884
21.On January 1, 2015, Simpson Company purchased all of the assets and assumed all of the liabilities of Dobson Company for $400,000. Dobson’s balance sheet showed total assets of $450,000 and total liabilities of $210,000 of this date. An appraiser determined all assets except for land are valued at fair market value. The land is worth $20,000 more than its book value.
A.Calculate goodwill in connection with this business combination.
B.Prepare the journal entry to record the combination.
22.On May 6, 2015, Galen Company purchased equity securities. At December 31, 2015, three investments were still owned by Galen. The names, cost, and fair values at December 31, 2015, are indicated below.
Name
Acquisition Cost
Fair Value
Guy Company
$10,000
$8,000
Nordic Company
$3,000
$4,500
Vernon Company
$7,000
$7,800
The investments have clearly determinable fair values. Galen can’t exercise significant influence on any of these investments. Galen has determined that the Guy stock will be held until 2016. Galen intends to sell the Vernon stock by January 2, 2016, for short-term profits. Galen has no idea how long it will hold the Nordic stock. Show how these investments and any related yearend adjustments will be reported by completing the balance sheet below at December 31, 2015.
Balance Sheet at December 31, 2015:
Current Assets
Long-Term Investments
Shareholders’ Equity
23.On December 31, 2015, Celtic Inc. acquired a 24% interest in Romano Corp. for $100,000 and appropriately applied the equity method. During 2015, Romano had net income of $400,000 and paid cash dividends of $50,000. How much will Celtic report for the year ending December 31, 2016 on its income statement? Show your work.
24.On January 1, 2015, Danner Company purchased all of the assets and assumed all of the liabilities of Clancy Company for cash of $80,000. Clancy’s balance sheet showed total assets of $120,000 and total liabilities of $70,000. The equipment had a fair market value on the same date of $10,000 instead of the $6,000 reported on the balance sheet. Calculate goodwill in connection with this business combination. Prepare the journal entry to record the combination.
25.On December 31, 2015, Rory Corp. acquired an 18% interest in Batson Corp. for $100,000 and appropriately applied the cost method. During 2016, Batson had net income of $200,000 and paid cash dividends of $50,000. On the last day of 2016, Rory sold one-half of its investment in Batson Corp. for $180,000. How much should Rory report on its income statement for the year ending December 31, 2016? Show your work.
