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Placid Lake Corporation acquired 80 percent of the outstanding voting stock of Scenic Inc., on January 1, 2014, when Scenic had a net book value of $400000 Any excess fair value was assigned to

Placid Lake Corporation acquired 80 percent of the outstanding voting stock of Scenic, Inc., on January 1, 2014, when Scenic had a net book value of $400,000. Any excess fair value was assigned to intangible assets and amortized at a rate of $5,000 per year. Placid Lake’s 2015 net income before consideration of its relationship with Scenic (and before adjustments for intra-entity sales) was $300,000. Scenic reported net income of $110,000. Placid Lake declared $100,000 in dividends during this period; Scenic paid $40,000. At the end of 2015, selected figures from the two companies’ balance sheets were as follows:

During 2014, intra-entity sales of $90,000 (original cost of $54,000) were made. Only 20 percent of this inventory was still held within the consolidated entity at the end of 2014. In 2015, $120,000 in intra-entity sales were made with an original cost of $66,000. Of this merchandise, 30 percent had not been resold to outside parties by the end of the year.

Jul 22 2020 View more View Less

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