高級會計學(xué)比姆斯第十版答案英文

19-19-19-PAGE30?2009PearsonEducation,Inc.publishingasPrentice?2009PearsonEducation,Inc.publishingasPrenticeHall?2009PearsonEducation,Inc.publishingasPrentice?2009PearsonEducation,Inc.publishingasPrenticeHallChapter1BUSINESSCOMBINATIONSAnswerstoQuestionsAbusinesscombinationisaunionofbusinessentitiesinwhichtwoormorepreviouslyseparateandindependentcompaniesarebroughtunderthecontrolofasinglemanagementteam.StatementNo.141Rdescribesthreesituationsthatestablishthecontrolnecessaryforabusinesscombination,namely,whenoneormorecorporationsbecomesubsidiaries,whenonecompanytransfersitsnetassetstoanother,andwheneachcombiningcompanytransfersitsnetassetstoanewlyformedcorporation.Thedissolutionofallbutoneoftheseparatelegalentitiesisnotnecessaryforabusinesscombination.Anexampleofoneformofbusinesscombinationinwhichtheseparatelegalentitiesarenotdissolvediswhenonecorporationbecomesasubsidiaryofanother.Inthecaseofaparent-subsidiaryrelationship,eachcombiningcompanycontinuesexistasaseparatelegalentityeventhoughbothcompaniesareunderthecontrolofasinglemanagementteam.Abusinesscombinationoccurswhentwoormorepreviouslyseparateandindependentcompaniesarebroughtunderthecontrolofasinglemanagementteam.Mergerandconsolidationinagenericsensearefrequentlyusedassynonymsforthetermbusinesscombination.Inatechnicalsense,however,amergerisatypeofbusinesscombinationinwhichallbutoneofthecombiningentitiesaredissolvedandaconsolidationisatypeofbusinesscombinationinwhichanewcorporationisformedtotakeovertheassetsoftwoormorepreviouslyseparatecompaniesandallofthecombiningcompaniesaredissolved.Goodwillarisesinabusinesscombinationaccountedforundertheacquisitionmethodwhenthecostoftheinvestment(fairvalueoftheconsiderationtransferred)exceedsthefairvalueofidentifiablenetassetsacquired.UnderStatementNo.142,goodwillisnolongeramortizedforfinancialreportingpurposesandwillhavenoeffectonincome,unlessthegoodwillisdeemedtobeimpaired.Ifgoodwillisimpaired,alosswillbereocnized.Abargainpurchaseoccurswhentheacquisitionpriceislessthanthefairvalueoftheidentifiablenetassetsacquired.Theacquirerrecordsthegainfromabargainpurchaseamountasanextraordinarygainduringtheperiodoftheacquisition,underStatementNo.SOLUTIONSTOEXERCISESSolutionE1-1abaadSolutionE1-2[AICPAadapted]aPlantandequipmentshouldberecordedatthe$55,000fairvalue.cInvestmentcost $800,000Less:FairvalueofnetassetsCash$80,000Inventory190,000Propertyandequipment—net560,000Liabilities(180,000)650,000Goodwill$150,000SolutionE1-3Stockholders’equity—PillowCorporationonJanuary3Capitalstock,$10par,300,000sharesoutstanding$3,000,000Additionalpaid-incapital[$200,000+$1,500,000–$5,000]1,695,000Retainedearnings600,000Totalstockholders’equity$5,295,000EntrytorecordcombinationInvestmentinSleep-bank3,000,000Capitalstock,$10par1,500,000Additionalpaid-incapital1,500,000Investmentexpense10,000Additionalpaid-incapitalCash5,00015,000Check:Netassetsperbooks$3,800,000Goodwill1,510,000Less:Expenseofdirectcosts(10,000)Less:Issuanceofstock(5,000)$5,295,000SolutionE1-4JournalentriesonIceAge’sbookstorecordtheacquisitionInvestmentinJester2,550,000Commonstock,$10par1,200,000Additionalpaid-incapital1,350,000Torecordissuanceof120,000sharesof$10parcommonstockwithafairvalueof$2,550,000forthecommonstockofJesterinabusinesscombination.Additionalpaid-incapital 15,000Investmentexpenses 45,000Otherassets 60,000Torecordcostsofregisteringandissuingsecuritiesasareductionofpaid-incapital,andrecorddirectandindirectcostsofcombinationasexpenses.Currentassets1,100,000Plantassets2,200,000Liabilities300,000InvestmentinJester3,000,000Torecordallocationofthe$2,550,000costofJesterCompanytoidentifiableassetsandliabilitiesaccordingtotheirfairvalues,computedasfollows:Cost$2,550,000Fairvalueacquired3,000,000Bargainpurchaseamount$ InvestmentinJester 450,000Gainfrombargainpurchase 450,000Torecordgainfrombargainpurchase.SolutionE1-5JournalentriesonthebooksofDandersCorporationtorecordmergerwithHarrisonCorporationInvestmentinHarrison 530,000Commonstock,$10par 180,000Additionalpaid-incapital 150,000Cash 200,000Torecordissuanceof18,000commonsharesandpaymentofcashintheacquisitionofHarrisonCorporationinamerger.Investmentexpenses 70,000Additionalpaid-incapital 30,000Cash 100,000Torecordcostsofregisteringandissuingsecuritiesandadditionaldirectcostsofcombination.Cash40,000Inventories100,000Othercurrentassets20,000Plantassets—net280,000Goodwill160,000Currentliabilities30,000Otherliabilities40,000InvestmentinHarrison530,000Torecordallocationofcosttoassetsreceivedandliabilitiesassumedonthebasisoftheirfairvaluesandtogoodwillcomputedasfollows:Costofinvestment$530,000Fairvalueofassetsacquired370,000Goodwill$160,000SOLUTIONSTOPROBLEMSSolutionP1-1PreliminarycomputationsFairValue:CostofinvestmentinSainatJanuary2(30,000shares$20)$600,000Bookvalue(440,000)Excessfairvalueoverbookvalue$160,000Excessallocatedto:Currentassets$40,000Remaindertogoodwill120,000Excessfairvalueoverbookvalue$160,000Note:$25,000directcostsofcombinationareexpensed.TheexcessfairvalueofPine’sbuildingsisnotconsidered.PineCorporationBalanceSheetatJanuary2,2009AssetsCurrentassets($130,000+$60,000+$40,000excess-$40,000directcosts)$ Land($50,000+$100,000)150,000Buildings—net($300,000+$100,000)400,000Equipment—net($220,000+$240,000)460,000Goodwill120,000Totalassets$1,320,000LiabilitiesandStockholders’EquityCurrentliabilities($50,000+$60,000)$ Commonstock,$10par($500,000+$300,000)800,000Additionalpaid-incapital[$50,000+($10 30,000shares)—$15,000costsofissuingandregisteringsecurities]Retainedearnings(subtract$25,000expenseddirectcost)Totalliabilitiesandstockholders’equity

SolutionP1-2PreliminarycomputationsFairValue:CostofacquiringSeabird$825,000Fairvalueofassetsacquiredandliabilitiesassumed670,000GoodwillfromacquisitionofSeabird$155,000PelicanCorporationBalanceSheetatJanuary2,2009AssetsCurrentassetsCash[$150,000+$30,000-$140,000expensespaid]$ Accountsreceivable—net[$230,000+$40,000fairvalue]270,000Inventories[$520,000+$120,000fairvalue]640,000PlantassetsLand[$400,000+$150,000fairvalue]550,000Buildings—net[$1,000,000+$300,000fairvalue]1,300,000Equipment—net[$500,000+$250,000fairvalue]750,000Goodwill155,000Totalassets$3,705,000LiabilitiesandStockholders’EquityLiabilitiesAccountspayable[$300,000+$40,000]$ Notepayable[$600,000+$180,000fairvalue]780,000Stockholders’equityCapitalstock,$10par[$800,000+(33,000sharesOtherpaid-incapital$10)]1,130,000[$600,000-$40,000+($825,000-$330,000)]1,055,000Retainedearnings(subtract$100,000expenseddirectcosts)Totalliabilitiesandstockholders’equity

SolutionP1-3Persisissues25,000sharesofstockforSineco’soutstandingshares1a InvestmentinSineco 750,000Capitalstock,$10par 250,000Otherpaid-incapital 500,000Torecordissuanceof25,000,$10parshareswithamarketpriceof$30pershareinabusinesscombinationwithSineco.Investmentexpenses30,000Otherpaid-incapital20,000Cash50,000TorecordcostsofcombinationinabusinesscombinationwithSineco.Cash10,000Inventories60,000Othercurrentassets100,000Land100,000Plantandequipment—net350,000Goodwill180,000Liabilities50,000InvestmentinSineco750,000Torecordallocationofinvestmentcosttoidentifiableassetsandliabilitiesaccordingtotheirfairvaluesandtheremaindertogoodwill.Goodwilliscomputed:$750,000cost-$570,000fairvalueofnetassetsacquired.1b PersisCorporationBalanceSheetJanuary2,2009(afterbusinesscombination)AssetsCash[$70,000+$10,000]$ Inventories[$50,000+$60,000]110,000Othercurrentassets[$100,000+$100,000]200,000Land[$80,000+$100,000]180,000Plantandequipment—net[$650,000+$350,000]1,000,000Goodwill160,000Totalassets$1,750,000LiabilitiesandStockholders’EquityLiabilities[$200,000+$50,000] $ 250,000Capitalstock,$10par[$500,000+$250,000]750,000Otherpaid-incapital[$200,000+$500,000-$20,000]680,000Retainedearnings(subtract$30,000directcosts)70,000Totalliabilitiesandstockholders’equity$1,750,000SolutionP1-3(continued)Persisissues15,000sharesofstockforSineco’soutstandingshares2a InvestmentinSineco(15,000shares $30) 450,000Capitalstock,$10par 150,000Otherpaid-incapital 300,000Torecordissuanceof15,000,$10parcommonshareswithamarketpriceof$30pershare.Investmentexpense30,000Otherpaid-incapital20,000Cash50,000TorecordcostsofcombinationintheacquisitionofSineco.Cash10,000Inventories60,000Othercurrentassets100,000Land100,000Plantandequipment—net350,000Liabilities50,000InvestmentinSineco570,000TorecordSineco’snetassetsatfairvalues.InvestmentinSineco GainonbargainpurchaseTorecordgainonbargainpurchaseandadjustInvestmentinSinecotoreflecttotalfairvalue.

120,000Fairvalueofnetassetsacquired$570,000Investmentcost(Fairvalueofconsideration)450,000GainonBargainPurchase$120,0002b PersisCorporationBalanceSheetJanuary2,2009(afterbusinesscombination)AssetsCash[$70,000+$10,000]$ Inventories[$50,000+$60,000]110,000Othercurrentassets[$100,000+$100,000]200,000Land[$80,000+$100,000]180,000Plantandequipment—net[$650,000+$350,000]1,000,000Totalassets$1,570,000Liabilitiesandstockholders’equityLiabilities[$200,000+$50,000]$ Capitalstock,$10par[$500,000+$150,000]650,000Otherpaid-incapital[$200,000+$300,000-$20,000]480,000Retainedearnings(subtract$30,000directcosts190,000andadd$120,000Gainfrombargainpurchase)Totalliabilitiesandstockholders’equity

$1,570,000SolutionP1-4ScheduletoallocateinvestmentcosttoassetsandliabilitiesInvestmentcost(fairvalue),January1FairvalueacquiredfromSen($360,000 100%)Excessfairvalueovercost(bargainpurchasegain)Allocation:Cash$ Receivables—net20,000Inventories30,000Land100,000Buildings—net150,000Equipment—net150,000Accountspayable(30,000)Otherliabilities(70,000)Gainonbargainpurchase(60,000)Totals$ PhuleCorporationBalanceSheetatJanuary1,2009(aftercombination)

360,000$60,000AssetsLiabilitiesCash$ Accountspayable$ Receivables—net60,000Notepayable(5years)200,000Inventories150,000Otherliabilities170,000Land145,000Liabilities490,000Buildings—net350,000Equipment—net330,000Stockholders’EquityCapitalstock,$10par300,000Otherpaid-incapital100,000Retainedearnings*170,000Stockholders’equity510,000Totalassets$1,060,000Totalequities$1,060,000*Retainedearningsreflectsthe$60,000gainonthebargainpurchase.SolutionP1-5JournalentriestorecordtheacquisitionofDawnCorporationInvestmentinDawnCapitalstock,$10par2,500,0001,000,000Otherpaid-incapital1,000,000Cash500,000TorecordacquisitionofDawnfor100,000sharesofcommonstockand$500,000cash.Investmentexpense100,000Otherpaid-incapital50,000Cash150,000Torecordpaymentofcoststoregisterandissuethesharesofstock($50,000)andothercostsofcombination($100,000).Cash240,000Accountsreceivable360,000Notesreceivable300,000Inventories500,000Othercurrentassets200,000Land200,000Buildings1,200,000Equipment600,000Accountspayable300,000Mortgagepayable,10%600,000InvestmentinDawn2,700,000TorecordthenetassetsofDawnatfairvalue.InvestmentinDawn 200,000Gainonbargainpurchase 200,000ToadjustInvestmentaccounttototalfairvalueandrecognizethegainfromthebargainpurchase.GainonBargainPurchaseCalculationAcquisitionprice$2,500,000Fairvalueofnetassetsacquired2,700,000Gainonbargainpurchase$ SolutionP1-5(continued)CelistiaCorporationBalanceSheetatJanuary2,2009(afterbusinesscombination)AssetsCurrentAssetsCash $2,590,000Accountsreceivable—net 1,660,000Notesreceivable—net 1,800,000Inventories 3,000,000Othercurrentassets 900,000 $9,950,000PlantAssetsLand$2,200,000Buildings—net10,200,000Equipment—net10,600,00023,000,000Totalassets$32,950,000LiabilitiesandStockholders’EquityLiabilitiesAccountspayable$1,300,000Mortgagepayable,10%5,600,000$6,900,000Stockholders’EquityCapitalstock,$10par$11,000,000Otherpaid-incapital8,950,000Retainedearnings*6,000,00026,050,000Totalliabilitiesandstockholders’equity$32,950,000Subtract$100,000directcombinationcostsandadd$200,000gainonbargainpurchase.RESEARCHCASE1.Journalentrytorecordtheacquisition(inmillionsof$)InvestmentinTarget50,000Commonstock,$0.10par100Additionalpaid-incapital49,900TorecordacquisitionofTargetfor1billionsharesofcommonstockhavingafairvalueof$50pershare.Cash240,000Accountsreceivable360,000Notesreceivable300,000Inventories500,000Othercurrentassets200,000Land190,000Buildings1,140,000Equipment570,000Accountspayable300,000Mortgagepayable,10%600,000InvestmentinTarget2,600,000Assigntheexcessoffairvalueoverbookvalueofassetsandliabilitiesasshowninthefollowingallocationschedule:Acquisitionprice$50,000ExcessfairvalueofassetsacquiredInventory(10%)625Land(20%)987Buildingsandimprovements(20%)3,222Fixturesandequipment(20%)711Computerhardwareandsoftware(20%)43821,859Goodwill$ TotalcurrentTotalcurrentliabilities51,75411,11762,8712.ConsolidatedBalanceSheetatJanuary31,2007(millions,exceptfootnotes)WAL-MARTTARGETDRCRCONSOLI-DATEDAssetsCashandcashequivalents7,3738138,186Accountsreceivable,net2,8406,1949,034Inventory33,6856,25462540,564Othercurrentassets2,6901,4454,135TotalcurrentassetsPropertyandequipment46,58814,70661,294Land18,6124,93498724,533Buildingsandimprovements64,05216,1103,22283,384Fixturesandequipment25,1683,55371129,432Computerhardwareandsoftware2,1884382,626Construction-in-progress1,5961,596Transportationequipment1,9661,966Accumulateddepreciation(24,408)(6,950)(31,358)Propertyandequipment,net85,39021,431106,821PropertyUnderCapitalLease5,3925,392Less:Accumulatedamortization(2,342)(2,342)PropertyUnderLease-net3,0503,050Goodwill13,75928,14141,900InvestmentinTarget50,00050,0000Othernon-currentassets2,4061,2123,618Totalassets201,19337,349238,542Liabilitiesandshareholders'investmentCommercialPaper2,5702,570Accountspayable28,0906,57534,665Accruedandothercurrentliabilities14,6752,75817,433Incometaxespayable7064221,128Currentportionoflong-termdebtandnotespayable5,4281,3626,790Currentobligationscapitalleases285285Long-termdebt27,2228,67535,897Longtermcapitalleases3,5133,513Deferredincometaxes4,9715775,548NoncontrollingInterest2,1602,160Othernon-currentliabilities1,3471,347Shareholders'investmentCommonstock5137272513Additionalpaid-in-capital52,7342,3872,38752,734Retainedearnings55,81813,41713,41755,818Accumulatedothercomprehensiveincome(loss)2,508(243)2,265Totalshareholders'investment111,57315,633127,206Totalliabilitiesandshareholders'investment201,19337,34950,00050,000238,542Chapter2STOCKINVESTMENTS—INVESTORACCOUNTINGANDREPORTINGAnswerstoQuestionsOnlytheinvestor’saccountsareaffectedwhenoutstandingstockisacquiredfromexistingstockholders.Theinvestorrecordstheinvestmentatitscost.Sincetheinvesteecompanyisnotapartytothetransaction,itsaccountsarenotaffected.Bothinvestorandinvesteeaccountsareaffectedwhenunissuedstockisacquireddirectlyfromtheinvestee.Theinvestorrecordstheinvestmentatitscostandtheinvesteeadjustsitsassetandowners’equityaccountstoreflecttheissuanceofpreviouslyunissuedstock.Goodwillarisingfromanequityinvestmentof20percentormoreisnotrecordedseparatelyfromtheinvestmentaccount.Undertheequitymethod,theinvestmentpresentedononelineofthebalancesheetinaccordancewiththeone-lineconsolidationconcept.Dividendsreceivedfromearningsaccumulatedbeforeaninvestmentisacquiredtreatedasdecreasesintheinvestmentaccountbalanceunderthefairvalue/costmethod.Suchdividendsareconsideredareturnofapartoftheoriginalinvestment.Theequitymethodofaccountingforinvestmentsincreasestheinvestmentaccountfortheinvestor’sshareoftheinvestee’sincomeanddecreasesitfortheinvestor’sshareoftheinvestee’slossesandfordividendsreceivedfromtheinvestee.Inaddition,theinvestmentandinvestmentincomeaccountsareadjustedforamortizationofanyinvestmentcost-bookvaluedifferentialsrelatedtotheinterestacquired.Adjustmentstotheinvestmentandinvestmentincomeaccountsarealsoneededforunrealizedprofitsandlossesfromtransactionsbetweentheinvestorandinvesteecompanies.AfairvalueadjustmentisoptionalunderSFASNo.159.Theequitymethodisreferredtoasaone-lineconsolidationbecausetheinvestmentaccountisreportedononelineoftheinvestor’sbalancesheetandinvestmentincomeisreportedononelineoftheinvestor’sincomestatement(exceptwhentheinvesteehasextraordinaryorcumulative-effecttypeadjustments).Inaddition,theinvestmentincomeiscomputedsuchthattheparentcompany’sincomeandstockholders’equityareequaltotheconsolidatednetincomeandconsolidatedstockholders’equitythatwouldresultifthestatementsoftheinvestorandinvesteewereconsolidated.Iftheequitymethodofaccountingisappliedcorrectly,theincomeoftheparentcompanywillgenerallyequalthecontrollinginterestshareofconsolidatednetincome.Thedifferenceintheequitymethodandconsolidationliesinthedetailreported,butnotintheamountofincomereported.Theequitymethodreportsinvestmentincomeononelineoftheincomestatementwhereasthedetailsofrevenuesandexpensesarereportedintheconsolidatedincomestatement.Theinvestmentaccountbalanceoftheinvestorwillequalunderlyingbookvalueoftheinvesteeif(a)theequitymethodiscorrectlyapplied,(b)theinvestmentwasacquiredatbookvaluewhichwasequaltofairvalue,thepoolingmethodwasused,orthecost-bookvaluedifferentialshaveallbeenamortized,and(c)therehavebeennointercompanytransactionsbetweentheaffiliatedcompaniesthathavecreatedinvestmentaccount-bookvaluedifferences.Theinvestmentaccountbalancemustbeconvertedfromthecosttotheequitywhenacquisitionsincreasetheinterestheldto20percentormore.Theamountofadjustmentisthedifferencebetweentheinvestmentincomereportedunderthemethodinprioryearsandtheincomethatwouldhavebeenreportediftheequitymethodofaccountinghadbeenused.Changesfromthecosttotheequitymethodofaccountingforequityinvestmentsarechangesinthereportingentitythatrequirerestatementofprioryears’financialstatementswhentheeffectismaterial.Theone-lineconsolidationisadjustedwhentheinvestee’sincomeincludesextraordinaryitems,gainsorlossesfromdiscontinuedoperations,orcumulative-effecttypeadjustments.Inthiscase,theinvestor’sshareoftheinvestee’sordinaryincomeisreportedasinvestmentincomeunderaone-lineconsolidation,buttheinvestor’sshareofextraordinaryitems,cumulative-effecttypeadjustments,andgainsandlossesfromdiscontinuedoperationsiscombinedwithsimilaritemsoftheinvestor.Theremaining15percentinterestintheinvesteeisaccountedforunderthefairvalue/costmethod,andtheinvestmentaccountbalanceimmediatelyafterthesalebecomesthenewcostbasis.Yes.Whenaninvesteehaspreferredstockinitscapitalstructure,theinvestorhastoallocatetheinvestee’sincometopreferredandcommonstockholders.Then,theinvestortakesupitsshareoftheinvestee’sincomeallocatedtocommonstockholdersinapplyingtheequitymethod.Theallocationisnotnecessarywhentheinvesteehasonlycommonstockoutstanding.Goodwillimpairmentlossesarecalculatedbybusinessreportingunits.Foreachreportingunit,thecompanymustfirstdeterminethefairvaluesofnetassets.Thefairvalueofthereportingunitistheamountatwhichitcouldbepurchasedinacurrentmarkettransaction.Thismaybebasedonmarketprices,discountedcashflowanalyses,orsimilarcurrenttransactions.Thisisdoneinthesamemannerasisdonetooriginallyrecordacombination.Anyexcessmeasuredfairvalueisthefairvalueofgoodwill.Thecompanythencomparesthegoodwillfairvalueestimatetothecarryingvalueofgoodwilltodetermineiftherehasbeenanimpairmentduringtheperiod.Yes.Impairmentlossesforsubsidiariesarecomputedasoutlinedinthesolutiontoquestion13.Companiescomparefairvaluestobookvaluersforequitymethodinvestmentsasawhole.Firmsmayrecognizeimpairmentsforequitymethodinvestmentsasawhole,butperformnoseparategoodwillimpairment.InitialimpairmentlossesrecordeduponadoptionofSFAS142aretreatedasthecumulativeeffectofanaccountingchange.Impairmentlossesresultingfromsubsequentannualreviewsareincludedinthecalculationofincomefromoperations.16171819 SOLUTIONSTOEXERCISESSolutionE2-11d2c3c4d5bSolutionE2-2[AICPAadapted]dbdbGrade’sinvestmentisreportedatits$300,000costbecausetheequitymethodisnotappropriateandbecauseGrade’sshareofMedium’sincomeexceedsdividendsreceivedsinceacquisition[($260,00015%)>$20,000].cDividendsreceivedfromZafaconforthetwoyearswere$10,500($70,00015%-allin2009),butonly$9,000(15%ofZafacon’sincomeof$60,000forthetwoyears)canbeshownonTorquel’sincomestatementasdividendincomefromtheZafaconinvestment.Theremaining$1,500reducestheinvestmentaccountbalance.c[$50,000+$150,000+($300,00010%)]7a8dInvestmentbalanceJanuary2$250,000Add:IncomefromPod($100,00030%)30,000InvestmentinPodDecember31$280,000SolutionE2-3Bowman’spercentageownershipinTrevorBowman’s20,000shares/(60,000+20,000)shares=25%GoodwillInvestmentcostBookvalue($1,000,000+$500,000)25%

$500,000(375,000)GoodwillSolutionE2-4IncomefromMedleyfor2009ShareofMedley’sincome($200,0001/2year30%)

$125,000$30,000SolutionE2-51 IncomefromOakeyShareofOakey’sreportedincome($800,00030%)$ 240,000Less:Excessallocatedtoinventory(100,000)Less:Depreciationofexcessallocatedtobuilding years)IncomefromOakey$ 90,0002InvestmentaccountbalanceatDecember31CostofinvestmentinOakey$2,000,000Add:IncomefromOakey90,000Less:Dividends($200,000x30%)(60,000)InvestmentinOakeyDecember31$2,030,000AlternativesolutionUnderlyingequityinOakeyatJanuary1($1,500,000/.3)$5,000,000Incomelessdividends600,000UnderlyingequityDecember315,600,000Interestowned30%BookvalueofinterestownedDecember311,680,000Add:Unamortizedexcess350,000InvestmentinOakeyDecember31$2,030,000SolutionE2-6JournalentryonMartin’sbooksInvestmentinNeighbors($300,000x40%)120,000Lossfromdiscontinuedoperations20,000IncomefromKelly140,000Torecognizeincomefrom40%investmentinNeighbors.SolutionE2-71aDividendsreceivedfromBennett($120,00015%)$ 18,000Shareofincomesinceacquisitionofinterest2008($20,00015%)(3,000)2009($80,00015%)(12,000)Excessdividendsreceivedovershareofincome$ 3,000InvestmentinBennettJanuary3,2008$ 50,000Less:Excessdividendsreceivedovershareofincome(3,000)InvestmentinBennettDecember31,2009$ 47,0002 bCostof10,000of40,000sharesoutstanding$1,400,000Bookvalueof25%interestacquired($4,000,000stockholders’equityatDecember31,2008+$1,400,000fromadditionalstockissuance)25%1,350,000Excessfairvalueoverbookvalue(goodwill)$ 50,0003 dTheinvestmentinMonroebalanceremainsattheoriginalcost.4 cIncomebeforeextraordinaryitem$ 200,000Percentowned40%IncomefromKrazyProducts$ 80,000SolutionE2-8PreliminarycomputationsCostof40%interestJanuary1,2008$2,400,000Bookvalueacquired($4,000,00040%)(1,600,000)Excessfairvalueoverbookvalue$ 800,000ExcessallocatedtoInventories$100,00040%$ 40,000Equipment$200,00040%80,000Goodwillfortheremainder680,000Excessfairvalueoverbookvalue$ 800,000Raython’sunderlyingequityinTreaton($5,500,00040%)$2,200,000Add:Goodwill680,000InvestmentbalanceDecember31,2012 $2,880,000AlternativecomputationRaython’sshareofthechangeinTreaton’sstockholders’equity($1,500,00040%)$ Less:Excessallocatedtoinventories($40,000100%)(40,000)Less:Excessallocatedtoequipment($80,000/4years4years)(80,000)Increaseininvestmentaccount480,000Originalinvestment2,400,000InvestmentbalanceDecember31,2012$2,880,000SolutionE2-91 IncomefromRunnerShareofincometocommon($400,000-$30,000preferreddividends)30%

$ 111,0002 InvestmentinRunnerDecember31,2009NOTE:The$50,000directcostsofacquiringtheinvestmentmustbeexpensedwhenincurred.Theyarenotapartofthecostoftheinvestment.InvestmentcostAdd:IncomefromRunner111,000Less:DividendsfromRunner($200,000dividends-$30,000dividendstopreferred)30%(51,000)InvestmentinRunnerDecember31,2009SolutionE2-101 IncomefromTree($300,000–$200,000)25%InvestmentincomeOctober1toDecember31$ 2 InvestmentbalanceDecember31InvestmentcostOctober1$ Add:IncomefromTree25,000Less:DividendsInvestmentinTreeatDecember31$ SolutionE2-11PreliminarycomputationsGoodwillfromfirst10%interest:Costofinvestment$ Bookvalueacquired($420,00010%)(42,000)Excessfairvalueoverbookvalue$ Goodwillfromsecond10%interest:Costofinvestment$ Bookvalueacquired($500,00010%)(50,000)Excessfairvalueoverbookvalue$ 1 CorrectingentryasofJanuary2,2009toconvertinvestmenttotheequitybasisAccumulatedgain/lossonstockavailableforSale50,000ValuationallowancetorecordSASatfair50,000valueToremovethevaluationallowanceenteredonDecember31,2009underthefairvaluemethodforanavailableforsalesecurity.InvestmentinTwizzle8,000Retainedearnings8,000Toadjustinvestmentaccounttoanequitybasiscomputedasfollows:ShareofTwizzle’sincomefor2009$ Less:Shareofdividendsfor2009(12,000)$ 2IncomefromTwizzlefor2009IncomefromTwizzleonoriginal10%investment$ IncomefromTwizzleonsecond10%investment10,000IncomefromTwizzle$ 19-19-19-PAGE33SolutionE2-12PreliminarycomputationsStockholders’equityofTallonDecember31,2008Saleof12,000previouslyunissuedsharesonJanuary1,2009Stockholders’equityafterissuanceonJanuary1,2009Costof12,000sharestoRiverBookvalueof12,000sharesacquired$630,000 12,00036,000sharesExcessfairvalueoverbookvalueExcessisallocatedasfollowsBuildings$60,00012,00036,000GoodwillExcessfairvalueoverbookvalueJournalentriesonRiver’sbooksJanuary1InvestmentinTall 250,000CashTorecordacquisitionoitrestinTall.During2009Cash 30,000InvestmentinTallTorecorddividendsreceivedfromTall($00December31InvestmentinTall 38,000IncomefromTallTorecordinvestmentincomefromTallcomputedasfollows:ShareofTall’sincome($1200Depreciationonbuilding($20,000/10years)IncomefromTall2009PearsonEducation,Inc.publishingasPrenticeHall

$380,000250,000$630,000$250,000210,000$40,000$20,00020,000$40,000250,00030,00038,000$40,000(2,000)$38,00019-19-19-PAGE46?2009PearsonEducation,Inc.publ