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White raven [17]
3 years ago
11

Harper, Inc. acquires 40 percent of the outstanding voting stock of Kinman Company on January 1, 2017, for $210,000 in cash. The

book value of Kinman’s net assets on that date was $400,000, although one of the company’s buildings, with a $60,000 carrying amount, was actually worth $100,000. This building had a 10-year remaining life. Kinman owned a royalty agreement with a 20-year remaining life that was undervalued by $85,000. Kinman sold inventory with an original cost of $60,000 to Harper during 2017 at a price of $90,000. Harper still held $15,000 (transfer price) of this amount in inventory as of December 31, 2017. These goods are to be sold to outside parties during 2018. Kinman reported a $40,000 net loss and a $20,000 other comprehensive loss for 2017. The company still manages to declare and pay a $10,000 cash dividend during the year. During 2018, Kinman reported a $40,000 net income and declared and paid a cash dividend of $12,000. It made additional inventory sales of $80,000 to Harper during the period. The original cost of the merchandise was $50,000. All but 30 percent of this inventory had been resold to outside parties by the end of the 2018 fiscal year. Prepare all journal entries for Harper for 2017 and 2018 in connection with this investment. Assume that the equity method is applied.
Business
1 answer:
Damm [24]3 years ago
7 0

Answer:

Harper investment      160,000

building over fair value 16,000

royalty over fair value  34,000

                         cash              200,000

----

<u>2017 entries:</u>

loss on Harper Investment  32,000

              Harper investment                32,000

---

Cash    4,000

              Harper investment                4,000

----

Unrealized gain 2,000

  Harper Investment 2,000

---

royalty over fair value 1,700

bulding over fair value 1,600

         harper investment          3,300

---

<u>2018 entries:</u>

Harper Investment 16,000

  Gain on Harper Investent 16,000

----

Cash    4800

              Harper investment                4800

----

Unrealized gain 1,600

  Harper Investment 1,600

---

royalty over fair value 1,700

bulding over fair value 1,600

         harper investment          3,300

Explanation:

400,000 x 40% = 160,000

40,000 increase infair value of building x 40% = 16,000

royalty 85,000 x 40% = 34,000

total equity value 200,000

payment of           200,000

no goodwill.

<u>amortization:</u>

building: 16,000 / 10 = 1,600

royalty: 34,000 / 20 = 1,700

2017

loss: 60,000 x 40% = (32,000)

dividends 10,000 x 40% = (4,000)

unrealized gain: it kept 15,000/90,000 = 0.1667 = 16.67%

90,000 - 30,000 = 30,000 gain x 16.67% = 5,000 unrealized gain

5,000 x 40% = 2,000

2018

income 40,000 x 40% = 16,000

dividends 12,000 x 40% = (4,800)

unrealized gain kept 30%

80,000 - 50,000 = 30,000 x 30% = 9,000

the company has 40% so 9,000 x 40% = 3,600 unrealized

as we recognize 2,000 before we adjust for the difference of 1,600

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Answer:

Klean Fiber Company

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Direct materials                                  $2.04         $511,020

Direct labor                                           0.40          100,200

Variable manufacturing overhead       1.04         260,520

Fixed manufacturing overhead            1.02         255,510

Total costs                                         $4.50      $1,127,250

Fixed manufacturing overhead           1.02          255,510

Incremental costs                             $3.48         $871,740

Explanation:

a) Data:

Full Capacity = 1,031,000

The per unit and the total costs at full capacity for Y-Go:

                                                 Per Undergarment       Total

Direct materials                                  $2.04         $2,103,240

Direct labor                                           0.40              412,400

Variable manufacturing overhead       1.04           1,072,240

Fixed manufacturing overhead            1.44           1,484,640

Variable selling expenses                    0.34            350,540

Totals                                                  $5.26       $5,423,060

b: In her decision to accept or reject the special order for 250,500 units of Y-Go undergarments by the U.S. Army, the Klean Fiber Company will only consider the relevant incremental unit cost of $3.48 and not the whole unit cost of $5.26.  The $3.48 cost excludes the fixed overheads or the selling and administrative expenses.

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Oxford Company has limited funds available for investment and must ration the funds among four competing projects. Selected info
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Answer: Please refer to Explanation,

Explanation:

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= Net Present Value / Investment Required.

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= 473,750/ 860,000

= 0.55

Project B

= 354,930/ 675,000

= 0.53

Project C

= 170,895 / 560,000

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Project D

= 169,190 / 760,000

= 0.22

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a. Project A

b. Project B

c. Project C

d. Project D

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a. Project A

b. Project B

c. Project C

d. Project D

- According to Internal Rate of Return

a. Project A

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4 0
2 years ago
What is the budgeted cost of goods sold given the following for next budget
Andreas93 [3]

Answer:

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4 0
3 years ago
Markson Company had the following results of operations for the past year: Sales (8,000 units at $20) $ 160,000 Variable manufac
AveGali [126]

Answer:

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Unit relevant cost = Total variable cost/Units produced

Total variable costs = 86,000 + 12,000 =$98000

Unit relevant cost = 98,000/8,000 = $12.25

<em>Note that fixed costs are irrelevant, whether or not the special order is accepted the fixed manufacturing and administrative expenses would be incurred</em>. <em>Hence, they are excluded from the computation.</em>

                                                                                                         $

Revenue from the special order ( $14× 2,000)  =                        28,000

Relevant costs of special order ( $12.25 × 2,000)                    (24,500)

Cost of special tools                                                                     <u> (1,600)</u>

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2 years ago
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Answer:

b and c

Explanation:

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8 0
3 years ago
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