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Hoyle - 13E - Chapter 1 - Class Problems - Solutions

This document contains solutions to problems from Chapter 1 of an accounting textbook. Problem 1 involves calculating the purchase price and year-end balance of an investment in Jones Corp, which resulted in $50,000 of goodwill. Problem 2 shows the acquisition and year-end balance of an investment in Bolivar Co, which assigned $250,000 of the purchase price to a patent amortized over 10 years.

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117 views2 pages

Hoyle - 13E - Chapter 1 - Class Problems - Solutions

This document contains solutions to problems from Chapter 1 of an accounting textbook. Problem 1 involves calculating the purchase price and year-end balance of an investment in Jones Corp, which resulted in $50,000 of goodwill. Problem 2 shows the acquisition and year-end balance of an investment in Bolivar Co, which assigned $250,000 of the purchase price to a patent amortized over 10 years.

Uploaded by

yun lee
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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ACCT 8130, Prof.

Siva Nathan
Solutions for Class Problems for Chapter 1 (Hoyle)
Revised Fall 2018

Problem # 1:

Investment in Jones 500,000


Cash 500,000

Equity in Investee Income (goes to I/S) 15,000


Investment in Jones 15,000
(25% of $60,000 loss)

Cash 25,000
Investment in Jones 25,000
(25% of $100,000)

1) Purchase price $ 500,000


Fair Value of Net Assets ($1,800,000 × 25%) (450,000)
Goodwill $ 50,000

2) Investment in Jones Corp.:


Acquisition price $ 500,000
2018 equity loss accrual ($60,000 × 25%) ( 15,000)
2018 dividends ($100,000 × 25%) ( 25,000)
Balance at December 31, 2018 $ 460,000

1
Problem # 2:

Investment in Bolivar 1,200,000


Cash 1,200,000

Investment in Bolivar 124,800


Equity in Investee Income 124,800
(40% of $312,000)

Cash 38,400
Investment in Bolivar 38,400
(40% of 96,000) - Dividends

Equity in Investee Income 25,000


Investment in Bolivar 25,000
(Amortization of Patent)
1,200,000 - 950,000 = 250,000 assigned to Patent (Fair Value > Book Value)
250,000/10 = 25,000

Investment in Bolivar Co.:


Acquisition price $ 1,200,000
E quity income ($312,000 × 40%) 124,800
Dividends ($96,000 × 40%) ( 38,400)
Excess patent amortization ($1,200,000 – $950,000 ÷ 10) ( 25,000)
Balance at December 31, 2018 $ 1,261,400

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