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Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2019. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:
2019 2020 2021
Net income $ 100,000 $ 120,000 $ 130,000
Dividends 40,000 50,000 60,000

Assume the partial equity method is applied.

1. How much does Pell record as Income from Demers for the year ended December 31, 2019?

Multiple Choice

a. $80,000.

b. $74,400.

c. $73,000.

d. $42,400.

e. $41,000.

2. How much does Pell record as income from Demers for the year ended December 31, 2020?

Multiple Choice

a. $90,400.

b. $89,000.

c. $50,400.

d. $96,000.

e. $56,000.

3. How much does Pell record as income from Demers for the year ended December 31, 2021?

Multiple Choice

a. $98,400.

b. $56,000.

c. $104,000.

d. $97,000.

e. $50,400.

4. Compute the noncontrolling interest in the net income of Demers at December 31, 2019.

Multiple Choice

a. $20,000.

b. $12,000.

c. $18,600.

d. $10,600.

e. $14,400.

Respuesta :

weaambenyounes29

Answer:

The correct answer is

B ,A , A ,C

Explanation:

1_ 100,000×80%=80,000

   Excess FV Annual Amortization 7,000×80%=5,600

80,000_5,600=74,400

_________________________________

2_120,000×80%=96,000

 Excess FV Annual Amortization  7,000×80%=5,600

96,000_5,600 =90,400

________________________________

3_130,000×80%=104,000

 Excess FV Annual Amortization   7,000×80= 5,600

104,000_5,600=98,400

______________________________

4_100,000×20%=20,000

  Excess FV Annual Amortization 7,000×20%=1,400

20,000_1,400=18,600

GOOD LUCK ❤

abiolataiwo2015

Assume the partial equity method is applied.

  • The amount of income that Pell  should record as income from Demers for the year ended December 31, 2019 is: b. $74,400.
  • The amount of income that Pell should record as income from Demers for the year ended December 31, 2020 is: a. $90,400.
  • The amount of income that Pell should record as income from Demers for the year ended December 31, 2021 is: a. $98,400.
  • The noncontrolling interest in the net income of Demers at December 31, 2019 is: c. $18,600.  

1. Income for 2019:

2019 Income= Net income for 2019 -Excess FV Annual Amortization

2019 Income=($100,000 × .80) -  [($30,000+$40,000÷10)× .80]

2019 Income=($100,000 × .80) -  [($70,000÷10)× .80]

2019 Income=($100,000 × .80) -  ($7,000 × .80)]

2019 Income= $74,400

2. Income for 2020:

2020 Income= Net income for 2020 -Excess FV Annual Amortization

2020 Income=($120,000 × .80) -  [($30,000+$40,000÷10)× .80]

2020 Income=($120,000 × .80) -  [($70,000÷10)× .80]

2020 Income=($120,000 × .80) -  ($7,000 × .80)]

2020 Income= $90,400

3. Income for 2021:

2021 Income=Net income for 2020 -Excess FV Annual Amortization

2021 Income=($130,000 × .80) -  [($30,000+$40,000÷10)× .80]

2021 Income=($130,000 × .80) -  [($70,000÷10)× .80]

2021 Income=($130,000 × .80) -  ($7,000 × .80)]

2021 Income= $98,400

4. 2019 noncontrolling interest in the net income

2019 Noncontrolling Interest in Net income=Net income for 2019-Excess FV Annual Amortization

2019 Noncontrolling Interest in Net income=[$100,000×(100%-80%]-  [($30,000+$40,000÷10)×(100%-80%]

2019 Noncontrolling Interest in Net income=($100,000 × .20) -  [($70,000÷10)× .20]

2019 Noncontrolling Interest in Net income= ($100,000 × .20) - ($7,000 × .20)]

2019 Noncontrolling Interest in Net income = $18,600

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