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Haynes Inc obtained 100 percent of Turner Company’s common stock on January 1 2012 by issuing 9000 shares of $10 par value common stock Haynes’s shares had a $15 per share fair value On that

Haynes Inc obtained 100 percent of Turner Company’s common stock on January 1 2012 by issuing 9000 shares of $10 par value common stock Haynes’s shares had a $15 per share fair value On that

Haynes, Inc., obtained 100 percent of Turner Company’s common stock on January 1, 2012, by issuing 9,000 shares of $10 par value common stock. Haynes’s shares had a $15 per share fair value. On that date, Turner reported a net book value of $100,000. However, its equipment (with a five-year remaining life) was undervalued by $5,000 in the company’s accounting re- cords. Also, Turner had developed a customer list with an assessed value of $30,000, although

no value had been recorded on Turner’s books. The customer list had an estimated remaining useful life of 10 years.

The following figures come from the individual accounting records of these two companies as of December 31, 2012:

 

Haynes

ner

Revenues

$(600,000)

$(230,000)

Expenses

Investment income

Dividends paid

440,000

Not given

80,000

120,000

–0–

50,000

 

The following figures come from the individual accounting records of these two companies as of December 31, 2013:

 

 

 

Revenues

Haynes

$(700,000)

ner

$(280,000)

Expenses

460,000

150,000

Investment income

Not given

–0–

Dividends paid

90,000

40,000

Equipment

500,000

300,000

 

 

a. What balance does Haynes’s Investment in Turner account show on December 31, 2013, when the equity method is applied?

What is the consolidated net income for the year ending December 31, 2013?

What is the consolidated equipment balance as of December 31, 2013? How would this answer be affected by the investment method applied by the parent?

d. If Haynes has applied the initial value method to account for its investment, what adjust- ment is needed to the beginning of the Retained Earnings on a December 31, 2013, consoli- dation worksheet? How would this answer change if the partial equity method had been in use? How would this answer change if the equity method had been in use?

Tripti 09-Jul-2020

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