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Giant acquired all of Small’s common stock on January 1 2011 Over the next few years Giant applied the equity method to the recording of this investment At the date of the original acquisition

Giant acquired all of Small’s common stock on January 1, 2011. Over the next few years, Giant applied the equity method to the recording of this investment. At the date of the original acquisition, $90,000 of the fair-value price was attributed to undervalued land while $50,000 was assigned to equipment having a 10-year remaining life. The $60,000 unallocated portion of the acquisition-date excess fair value over book value was viewed as goodwill. Following are individual financial statements for the year ending December 31, 2015. On that date, Small owes Giant $10,000. Small declared and paid dividends in the same period. Credits are indicated by parentheses.

a. How was the $135,000 Equity in Income of Small balance computed?

b. Without preparing a worksheet or consolidation entries, determine and explain the totals to be reported by this business combination for the year ending December 31, 2015.

Jul 22 2020 View more View Less

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