Solutions Manual for Advanced Accounting 15th Edition By Hoyle Full Chapters

Solutions Manual for Advanced Accounting 15th Edition By Hoyle Full Chapters . Acquisition price ........................................................................... $2,295,000 Equity income ($750,000 × 30%) .................................................. 225,000 Dividends (90,000 shares × $1.00)................................................ (90,000) Investment in O’Fallon as of December 31.................................. $2.430,000 7. A Acquisition price ........................................................................... $700,000 Income accruals: 2023—$170,000 × 20% ..................................... 34,000 2024—$210,000 × 20% ..................................... 42,000 Amortization (see below): 2023 .................................................... (10,000) Amortization: 2024 ........................................................................ (10,000) Dividends: 2023—$70,000 × 20% ................................................. (14,000) 2024—$70,000 × 20% ................................................. (14,000) Investment in Martes, December 31, 2024 ................................... $728,000 Acquisition price of Martes ............................................................. $700,000 Acquired net assets (book value) ($3,000,000 × 20%) ................. (600,000) Excess cost over book value to patent ................................................... $100,000 Annual amortization (10 year remaining life) ............................... $10,000 8. B Purchase price of Johnson stock .................. $500,000 Book value of Johnson ($900,000 × 40%) ...... (360,000) Cost in excess of book value .................... $140,000 Payment identified with undervalued Remaining life Annual amortization Building ($140,000 × 40%) ................ 56,000 7 yrs. $ 8,000 Trademark ($210,000 × 40%) ............ 84,000 10 yrs. 8,400 Total ................................................... $ -0- $16,400 Chapter 01 - The Equity Method of Accounting for Investments – Hoyle, Schaefer, Doupnik, Advanced Accounting, 15e 1-10 8. (continued) Investment purchase price ............................................ $500,000 Basic income accrual ($90,000 × 40%) .................... 36,000 Amortization (above) ................................................. (16,400) Dividends declared ($30,000 × 40%) ........................ (12,000) Investment in Johnson ................................................... $507,600 9. D The 2023 purchase is reported using the equity method. Purchase price of Max stock ................................................... $600,000 Book value of Max stock ($1,200,000 × 40%) ......................... (480,000) Goodwill .................................................................................... $120,000 Life of goodwill ......................................................................... indefinite Annual amortization ................................................................. $ (-0-) Cost on January 1, 2023 .......................................................... $600,000 2023 Income accrued ($140,000 × 40%) .................................. 56,000 2023 Dividend ($50,000 × 40%) ................................................ (20,000) 2024 Income accrued ($140,000 × 40%) .................................. 56,000 2024 Dividend ($50,000 × 40%) ................................................ (20,000) 2025 Income accrued ($140,000 × 40%) .................................. 56,000 2025 Dividend ($50,000 × 40%) ................................................ (20,000) Investment in Max, 12/31/25..................................................... $708,000 10. D 11. A Gross profit rate (GPR): $15,000 ÷ $75,000 = 20% Inventory remaining at year-end ............................................... $30,000 GPR .............................................................................................. × 20% Gross profit ............................................................................ $ 6,000 Ownership ................................................................................... × 35% Intra-entity gross profit—deferred ....................................... $ 2,100 12. B Purchase price of Steinbart shares .......................................... $530,000 Book value of Steinbart shares ($1,200,000 × 40%)................. (480,000) Chapter 01 - The Equity Method of Accounting for Investments – Hoyle, Schaefer, Doupnik, Advanced Accounting, 15e 1-11 Trade name ................................................................................. $ 50,000 Remaining life of trade name ..................................................... 20 years Annual amortization ................................................................... $ 2,500 2023 Gross profit rate = $30,000 ÷ $100,000 = 30% 2024 Gross profit rate = $54,000 ÷ $150,000 = 36% 2024—Equity income in Steinbart: Income accrual ($110,000 × 40%) .............................................. $44,000 Amortization (above) .................................................................. (2,500) Recognition of 2023 deferred gross profit ($25,000 × 30% GPR × 40% ownership) ............................... 3,000 Deferral of 2024 intra-entity gross profit ($45,000 × 36% GPR × 40% ownership ................................ (6,480) Equity income in Steinbart—2024 ....................................... $38,020 13. (6 minutes) (Investment account after one year) Purchase price ................................................................................. $1,160,000 Basic 2024 equity accrual ($260,000 × 40%) .................................. 104,000 Amortization of copyright: Excess payment ($1,160,000 – $820,000 = $340,000) to copyright allocated over 10 year remaining life ............. (34,000) Dividends (50,000 × 40%) ................................................................ (20,000) Investment account balance at year end ....................................... $1,210,000 14. (7 minutes) a. Purchase price ............................................................................ $2,290,000 Equity income accrual ($720,000 × 35%) .................................. 252,000 Other comprehensive loss accrual ($100,000 × 35%).............. (35,000) Dividends (20,000 × 35%) ........................................................... (7,000) Investment in Sharon at December 31, 2024 ............................ $2,500,000 b. Equity in Earnings of Sharon = $252,000 (does not include OCI share which is reported separately). 15. (15 minutes) (Investment account after 2 years) a. Acquisition price ........................................................................ $2,700,000 Chapter 01 - The Equity Method of Accounting for Investments – Hoyle, Schaefer, Doupnik, Advanced Accounting, 15e 1-12 Book value acquired ($5,175,000 × 20%) .................................. 1,035,000 Excess payment ......................................................................... $1,665,000 Excess fair value: Computing equipment ($700,000 × 20%) 140,000 Excess fair value: Patented technology ($3,900,000 × 20%) 780,000 Excess fair value: Trademark ($1,850,000 × 20%) .............. 370,000 Goodwill ...................................................................................... $ 375,000 Amortization: Computing equipment ($140,000 ÷ 7) .................................. $ 20,000 Patented technology ($780,000 ÷ 3) ..................................... 260,000 Trademark (indefinite)........................................................... -0- Goodwill (indefinite) .............................................................. -0- Annual amortization ................................................................... $280,000 b. Basic equity accrual 2023 ($1,800,000 × 20%) ......................... $360,000 Amortization—2023 (above) ...................................................... (280,000) Equity in 2023 earnings of Sauk Trail ....................................... $ 80,000 Basic equity accrual 2024 ($1,985,000 × 20%) ......................... $397,000 Amortization—2024 (above) ...................................................... (280,000) Equity in 2024 earnings of Sauk Trail ....................................... $117,000 c. Acquisition price ........................................................................ $2,700,000 Equity in 2023 earnings of Sauk Trail (above) ......................... 80,000 Dividends—2023 ($150,000 × 20%) ........................................... (30,000) Investment in Sauk Trail, 12/31/23 ............................................ $2,750,000 Investment in Sauk Trail, 12/31/23 ............................................ $2,750,000 Equity in 2024 earnings of Sauk Trail (above) ......................... 117,000 Dividends—2024 ($160,000 × 20%) ........................................... (32,000) Investment in Sauk Trail, 12/31/24 ............................................ $2,835,000 16. (10 minutes) (Investment account after 2 years with fair value accounting included) a. Acquisition price ........................................................................ $60,000 Chapter 01 - The Equity Method of Accounting for Investments – Hoyle, Schaefer, Doupnik, Advanced Accounting, 15e 1-13 Book value—assets minus liabilities ($125,000 × 40%) .......... 50,000 Excess payment ......................................................................... $10,000 Value of patent in excess of book value ($15,000 × 40%) ....... 6,000 Goodwill ...................................................................................... $ 4,000 Amortization: Patent ($6,000 ÷ 6) ...................................................................... $1,000 Goodwill ...................................................................................... -0- Annual amortization ................................................................... $1,000 Acquisition price ........................................................................ $60,000 Basic equity accrual 2023 ($30,000 × 40%) .............................. 12,000 Dividends—2023 ($10,000 × 40%) ............................................. (4,000) Amortization—2023 (above) ...................................................... (1,000) Investment in Chestnut, 12/31/23 .............................................. $67,000 Basic equity accrual —2024 ($50,000 × 40%) ........................... 20,000 Dividends—2024 ($15,000 × 40%) ............................................. (6,000) Amortization—2024 (above) ...................................................... (1,000) Investment in Chestnut, 12/31/24 .............................................. $80,000 b. Dividend income ($15,000 × 40%) ............................................. $ 6,000 Increase in fair value ($75,000 – $68,000) ................................. 7,000 Investment income under fair value accounting—2024 .......... $13,000 17. (10 minutes) (Equity entries for one year, includes intra-entity transfers but no gross profit deferral) Purchase price of Burks stock .................................................. $210,000 Book value of Burks stock ($360,000 × 40%) ........................... (144,000) Unidentified asset (goodwill) ..................................................... $ 66,000 Life ............................................................................................... indefinite Annual amortization ................................................................... $ -0- No intra-entity profit exists at year’s end because all of the transferred merchandise was used during the period. 17. (continued) Investment in Burks, Inc. .......................................... 210,000 Cash (or a Liability) .............................................. 210,000 To record acquisition of a 40 percent interest in Burks. Chapter 01 - The Equity Method of Accounting for Investments – Hoyle, Schaefer, Doupnik, Advanced Accounting, 15e 1-14 Investment in Burks, Inc. .......................................... 32,000 Equity in Investee Income ................................... 32,000 To recognize 40 percent income earned during period by Burks, an equity method investment. Dividend Receivable .................................................. 10,000 Investment in Burks, Inc. ..................................... 10,000 To record investee dividend declaration. Cash ............................................................................ 10,000 Dividend Receivable. ........................................... 10,000 To record collection of dividend from investee. 18. (25 Minutes) (Equity entries for one year, includes prospective application of equity method) JANUARY 1, 2024 (Date significant influence is attained) Purchase price of 30% of Seida’s stock ...................................... $600,000 Fair value of original 10% investment in Seida ........................... 200,000 Total fair value of 40% investment in Seida ................................ 800,000 Book value of Seida stock ($1,850,000 × 40%) ............................ (740,000) Fair value in excess of book value ............................................... $ 60,000 Excess cost assigned to undervalued land ($120,000 × 40%)....................................................................... (48,000) Trademark ...................................................................................... $ 12,000 Remaining life of Trademark ........................................................ ÷ 8 years Annual Amortization ..................................................................... $ 1,500 Journal Entries: To record acquisition of Seida stock. Investment in Seida ................................................... 600,000 Cash ...................................................................... 600,000 Investment in Seida ................................................... 120,000 Equity in Investee Income ................................... 120,000 To record income for the year: 40% of the $300,000 reported income. Equity in Investee Income ........................................ 1,500 Investment in Seida ............................................. 1,500 Chapter 01 - The Equity Method of Accounting for Investments – Hoyle, Schaefer, Doupnik, Advanced Accounting, 15e 1-15 To record 2024 amortization. Dividend Receivable .................................................. 44,000 Investment in Seida ............................................. 44,000 To record dividend declaration from Seida (40% of $110,000). Cash ............................................................................ 44,000 Dividend Receivable ............................................ 44,000 To record collection of dividend from investee. 19. (7 minutes) (Deferral of intra-entity gross profit) Ending inventory ($200,000 – $85,000) ............................................... $115,000 Gross profit percentage (GP $80,000 ÷ Sales $200,000) .................... × 40% Gross profit on sale to Eckerle ............................................................ $ 46,000 Ownership ............................................................................................. × 30% Intra-entity gross profit—deferred ....................................................... $ 13,800 Entry to Defer Intra-entity Gross Profit: Equity in Investee Income ............................................ 13,800 Investment in Eckerle .............................................. 13,800 20. (10 minutes) (Reporting of equity income and transfers)