Accounting
Question 1
Use the data below to answer Parts (a) through (c). Show all calculations in your solutions.
On January 1, 20X2, Haika Inc. purchased 60% of the outstanding voting shares of Selina Co. for $3,000,000. On that date, Selina’s shareholders’ equity consisted of retained earnings of $2,000,000 and ordinary shares of $1,000,000. Selina’s identifiable assets and liabilities had fair values that were equal to their carrying values on January 1, 20X2, except for the following: | Fair value | Carrying value | Inventory | $250,000 | $350,000 |
The statements of financial position of Haika Inc. and Selina Co. on December 31, 20X6, were as follows:
Statements of Financial Position at December 31, 20X6 | | Haika | Selina | Assets | | | | Cash and current receivables | $900,000 | $400,000 | | Temporary investments — HFT | | 1,100,000 | | Inventories | 1,400,000 | 200,000 | | Property, plant and equipment (net) | 2,100,000 | 3,500,000 | | Investment in Selina (at cost) | 3,000,000 | — | | | $7,400,000 | $5,200,000 | | | | | Liabilities and shareholders' equity | | | | Current liabilities | $600,000 | $100,000 | | Long-term liabilities | 2,200,000 | 800,000 | | Deferred tax liabilities | 500,000 | 300,000 | | Ordinary shares | 1,500,000 | 1,000,000 | | Retained earnings | 2,600,000 | 3,000,000 | | | $7,400,000 | $5,200,000 |
Additional information: * Haika carries its investment in Selina on its books using the cost method. * At the beginning of 20X5, Selina sold Haika a machine for its fair value of $700,000. Selina had purchased the machine in 20X2. The book value at the time of the sale to Haika was $490,000. The machine had an estimated remaining useful life of seven years on the date of the intercorporate sale. * At December 31, 20X5, Haika had goods in its inventories that had been purchased from Selina at $60,000 profit to Selina. During 20X6, Haika purchased
Use the data below to answer Parts (a) through (c). Show all calculations in your solutions.
On January 1, 20X2, Haika Inc. purchased 60% of the outstanding voting shares of Selina Co. for $3,000,000. On that date, Selina’s shareholders’ equity consisted of retained earnings of $2,000,000 and ordinary shares of $1,000,000. Selina’s identifiable assets and liabilities had fair values that were equal to their carrying values on January 1, 20X2, except for the following: | Fair value | Carrying value | Inventory | $250,000 | $350,000 |
The statements of financial position of Haika Inc. and Selina Co. on December 31, 20X6, were as follows:
Statements of Financial Position at December 31, 20X6 | | Haika | Selina | Assets | | | | Cash and current receivables | $900,000 | $400,000 | | Temporary investments — HFT | | 1,100,000 | | Inventories | 1,400,000 | 200,000 | | Property, plant and equipment (net) | 2,100,000 | 3,500,000 | | Investment in Selina (at cost) | 3,000,000 | — | | | $7,400,000 | $5,200,000 | | | | | Liabilities and shareholders' equity | | | | Current liabilities | $600,000 | $100,000 | | Long-term liabilities | 2,200,000 | 800,000 | | Deferred tax liabilities | 500,000 | 300,000 | | Ordinary shares | 1,500,000 | 1,000,000 | | Retained earnings | 2,600,000 | 3,000,000 | | | $7,400,000 | $5,200,000 |
Additional information: * Haika carries its investment in Selina on its books using the cost method. * At the beginning of 20X5, Selina sold Haika a machine for its fair value of $700,000. Selina had purchased the machine in 20X2. The book value at the time of the sale to Haika was $490,000. The machine had an estimated remaining useful life of seven years on the date of the intercorporate sale. * At December 31, 20X5, Haika had goods in its inventories that had been purchased from Selina at $60,000 profit to Selina. During 20X6, Haika purchased