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klasskru [66]
3 years ago
5

On January 1, 2016, Phoenix Co. acquired 100 percent of the outstanding voting shares of Sedona Inc. for $784,000 cash. At Janua

ry 1, 2016, Sedona’s net assets had a total carrying amount of $548,800. Equipment (eight-year remaining life) was undervalued on Sedona’s financial records by $95,000. Any remaining excess fair over book value was attributed to a customer list developed by Sedona (four-year remaining life), but not recorded on its books. Phoenix applies the equity method to account for its investment in Sedona. Each year since the acquisition, Sedona has declared a $34,000 dividend. Sedona recorded net income of $113,000 in 2016 and $124,100 in 2017.
Selected account balances from the two companies’ individual records were as follows:

Phoenix Sedona
2018 Revenues $ 648,000 $ 335,000
2018 Expenses 412,000 234,000
2018 Income from Sedona 54,075
Retained earnings 12/31/18 347,075 236,500
What is consolidated net income for Phoenix and Sedona for 2018?

What is Phoenix’s consolidated retained earnings balance at December 31, 2018?

On its December 31, 2018, consolidated balance sheet, what amount should Phoenix report for Sedona’s customer list?
Business
1 answer:
stiv31 [10]3 years ago
4 0

Answer:

a) Consolidated net income for Phoenix and Sedona for 2018

Phoenix revenues                      $648,000

-Phoenix expenses                    ($412,000)

Phoenix Net Income                  $236,000

2018 Income from Sedona        <u>$54,075</u>

Consolidated net income for   $290,075

Phoenix and Sedona for 2018  

b) Phoenix’s consolidated retained earnings balance at December 31, 2018

Phoenix’s consolidated retained earnings balance at December 31, 2018  = $347,075.00  (same as Phoenix because of equity method use)  

c) What amount should Phoenix report for Sedona’s customer list?

Consideration transferred at fair value      $784,000

Book value acquired                                   <u>($548,800)</u>

Excess fair over book value                        $235,200

To Equipment                                               <u>$95,000   </u>

To customer list (4 year life)                        <u> $140,200 </u>

Three years since acquisition of customer list = $140,200/4 years = $35,050. Hence, Phoenix report $35,050 as Sedona’s customer list.

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Budgeted cash disbursements are the payments that the company expects to make in a specific period of time.

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The _____________ is the contract that seals the deal when you buy a car.
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Hoi Chong Transport, Ltd., operates a fleet of delivery trucks in Singapore. The company has determined that if a truck is drive
Natali [406]

Answer:

1. Variable cost is $0.061 or 6.1 cents per unit

  Fixed Cost is $12,654

2. Y = $12,654 + $0.061X

3. $21,316

Explanation:

1.

Cost at 171,000 km = 171,000 x $13.5/100 = $23,085

Cost at 114,000 km = 114,000 x $17.2/100 = $19,608

High low method separates the fixed cost and variable cost using net of Highest activity level and Lowest activity level and net of their relevant costs.

According to High low method

Variable cost per unit = ( Highest activity cost - Lowest activity cost ) / ( Highest Activity - Lowest activity )

Variable cost per unit  = ( $23,085 - $19,608 ) / ( 171,000 - 114,000 )

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Fixed operating cost = Total cost - Total Variable cost = $19,608 - ( 114,000 x $0.061 ) = $12,654

2.

Y = a + bX.

Y = Total cost

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b = Variable cost per unit = $0.061 or 6.1 cents

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