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problem: Bon Air, Inc., acquired 70% (2,800 shares) of the outstanding voting stock of Creedmoor Corporation on January 1, 2004, for dollar 250,000 cash Creedmoor's net assets on that date totaled $230,000, but this balance included three (3) accounts having fair values that differed from their book values:

 

Book Value

Fair Value

Land .............................................................................

$30,000

mce_markernbsp; 40,000

Equipment (14-year life) ................................................

50,000

118,000

Liabilities (10-year life) .................................................

(70,000)

(50,000)

 

 

          Bon Air

Creedmoor

Revenues

mce_markernbsp;  (694,800)

$(250,000)

Operating expenses

            630,000

180,000

Investment income

      (44,200)

               -0-

Net income

 mce_markernbsp; (109,000)

 mce_markernbsp; (70,000)

Retained earnings, 1/1/07

mce_markernbsp;  (760,000)

$(260,000)

Net income

(109,000)

     (70,000)

Dividends paid

68,000

        10,000

Retained earnings, 12/31/07

 mce_markernbsp; (801,000)

 $(320,000)

Current assets

mce_markernbsp;   72,000

mce_markernbsp; 120,000

Investment in Creedmoor Corp

321,800

-0-

Land

241,000

50,000

Buildings (net)

289,000

200,000

Equipment (net)

       165,200

       40,000

Total assets

 $ 1,089,000

 mce_markernbsp; 410,000

Liabilities

mce_markernbsp;  (180,000)

mce_markernbsp;   (50,000)

Common stock

(50,000)

(40,000)

Additional paid-in capital

(58,000)

-0-

Retained earnings, 12/31/07

      (801,000)

   (320,000)

Total liabilities and equities

 $(1,089,000)

 $(410,000)

Consolidated financial statements are being prepared on December 31, 2007. What balance should be reported for each of the following accounts?

Operating Expenses

No controlling Interest in Creedmoor's Net Income

Revenues

Retained Earnings, 1/1/07

Equipment

Liabilities

Common Stock

Net Income

Dividends Paid

Land

Retained Earnings, 12/31/07

No controlling Interest in Creedmoor, 12/31/07

Cost Accounting, Accounting

  • Category:- Cost Accounting
  • Reference No.:- M922366

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