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Afa chapter four excercies

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Question On January 1, 2008, Chariot Company acquired 100 percent of Stryder Company for $220,000 cash. The trial balances for the two companies on December 31, 2008, included the following amounts: ordinary share On the acquisition date, Stryder reported net assets with a book value of $170,000. A total of $10,000 of the acquisition price is applied to goodwill. Which was not impaired during 2008. Stryder's depreciable assets had an estimated economic life of 10 years on the date of consalidation. The difference between fair value and book value of tangible assets is related entirely to buildings and equipment. Chariot used the equity method in accounting for its investment in Stryder. Analysis of receivables and payables revealed that Stryder owed Chariot $10,000 on December 31, 2008. 1 Solution 1-Entry for acquisition at chariot Co. : Investment in s 220000 Cash 2-Entries in the worksheet: Amount paid NBV of S 220000 (170000) Differential Allocated as follow: Building Goodwill 220000 50000 40000 10000 a. Determine the amortization for the excess amount: 40000/10 = 4000 Elimination entries: 1.Recording of differential Building Goodwill Differential 2.Reducing the investment account: Differential Investment in S 3.Elimination of equity method effect: Investment income Dividends Investment in S 2 40000 10000 50000 50000 50000 51000 15000 36000 4.Recording Amortization of differential: Expenses (amortization) Buildings 5.Elimination of investment account: Ordina ...
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