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Question: Haynes, Inc., obtained 100 percent of Turner Company's common stock on January 1, 2014, by issuing 8,400 shares of $10 par value common stock. Haynes's shares had a $15 per share fair value. On that date, Turner reported a net book value of $78,850. However, its equipment (with a five-year remaining life) was undervalued by $9,450 in the company's accounting records. Also, Turner had developed a customer list with an assessed value of $37,700, although no value had been recorded on Turner's books. The customer list had an estimated remaining useful life of 10 years.

The following figures come from the individual accounting records of these two companies as of December 31, 2014:


Haynes Turner
  Revenues
$ (664,000 )

$ (336,000)
  Expenses

452,000



128,000
  Investment income

Not given



0
  Dividends declared

110,000



100,000

The following figures come from the individual accounting records of these two companies as of December 31, 2015:


Haynes Turner
  Revenues
$ (779,000 )

$ (392,250)
  Expenses

474,600



160,900
  Investment income

Not given



0
  Dividends declared

120,000



80,000
  Equipment

592,000



332,000

a. What balance does Haynes's Investment in Turner account show on December 31, 2015, when the equity method is applied?

b. What is the consolidated net income for the year ending December 31, 2015?

c. What is the consolidated equipment balance as of December 31, 2015?

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M92572606

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