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Nascent Inc acquires 60 percent of Sea-Breeze Corporation for $414000 cash on January 1 2010 The remaining 40 percent of the Sea-Breeze shares traded near a total value of $276000 both before

Nascent Inc acquires 60 percent of Sea-Breeze Corporation for $414000 cash on January 1 2010 The remaining 40 percent of the Sea-Breeze shares traded near a total value of $276000 both before

Nascent, Inc., acquires 60 percent of Sea-Breeze Corporation for $414,000 cash on January 1,

2010. The remaining 40 percent of the Sea-Breeze shares traded near a total value of $276,000 both before and after the acquisition date. On January 1, 2010, Sea-Breeze had the following assets and liabilities:

 

 

 

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . .

Boo alue

$150,000

Fai alue

$150,000

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

200,000

200,000

Buildings (net) (6-year life) . . . . . . . . . . . . . . . .

300,000

360,000

Equipment (net) (4-year life) . . . . . . . . . . . . . . .

300,000

280,000

Patent (10-year life) . . . . . . . . . . . . . . . . . . . . .

–0–

100,000

Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(400,000)

(400,000)

 

The companies’ financial statements for the year ending December 31, 2013, follow:

 

 

 

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Nascent

$ (600,000)

 

Sea-B eeze

$ (300,000)

Operating expenses . . . . . . . . . . . . . . . . . . . . .

410,000

 

210,000

Investment income . . . . . . . . . . . . . . . . . . . . . .

(42,000)

 

–0–

Net income . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (232,000)

 

$ (90,000)

Retained earnings, 1/1/13 . . . . . . . . . . . . . . . . .

$ (700,000)

 

$ (300,000)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(232,000)

 

(90,000)

Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . .

92,000

 

70,000

Retained earnings, 12/31/13 . . . . . . . . . . . . .

$ (840,000)

 

$ (320,000)

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 330,000

 

$ 100,000

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

220,000

 

200,000

Buildings (net) . . . . . . . . . . . . . . . . . . . . . . . . . .

700,000

 

200,000

Equipment (net) . . . . . . . . . . . . . . . . . . . . . . . .

400,000

 

500,000

Investment in Sea-Breeze . . . . . . . . . . . . . . . . .

414,000

 

–0–

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2,064,000

 

$ 1,000,000

Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (500,000)

 

$ (200,000)

Common stock . . . . . . . . . . . . . . . . . . . . . . . . .

(724,000)

 

(480,000)

Retained earnings, 12/31/13 . . . . . . . . . . . . . . .

(840,000)

 

(320,000)

Total liabilities and equities . . . . . . . . . . . . . .

$(2,064,000)

 

$(1,000,000)

Answer the following questions:

a. How can the accountant determine that the parent has applied the initial value method?

b. What is the annual excess amortization initially recognized in connection with this acquisition?

c. If the parent had applied the equity method, what investment income would the parent have recorded in 2013?

d. What is the parent’s portion of consolidated retained earnings as of January 1, 2013?

e. What is consolidated net income for 2013 and what amounts are attributable to the control- ling and noncontrolling interests?

f. Within consolidated statements at January 1, 2010, what balance is included for the subsid- iary’s Buildings account?

g. What is the consolidated Buildings reported balance as of December 31, 2013?

Tripti 10-Jul-2020

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