Chapter One Case – 25 points

Discipline:

Accounting

Type of service:
Math/Statistics/Finance Problems

Spacing:
Double spacing

Paper format:
APA

Number of pages:
1 page

Number of sources:
0 source

Paper detalis:

Chapter One Case – 25 points

On January 1, 2015, Smith Company acquired 80,000 shares of BonnLogistics, Inc. for $32 per share. This gave Smith a 35 percentownership of Bonn and Smith utilized the equity method to account forthis acquisition.

As of the date of acquisition, Bonn had assets with a book value of$7,200,000 and liabilities of $1,750,000. Equipment held by Bonnappraised at $50,000 above book value and was considered to have a10-year remaining life. In addition, Bonn’s building was appraised for$1,300,000, but had a book value of $800,000 with a 20-year remaininglife. Any remaining excess cost was attributable to goodwill.Depreciation and amortization utilizes the straight-line method.

Income and dividends for the years ended December 31, 2015, 2016, and2017, are as follows, respectively: Income = $185,000, $275,000,$340,000; Dividends = $32,000, $45,000, $62,000.

In addition, Smith sold inventory to Bonn beginning in 2014 andcontinuing through the year-end date of December 31, 2017. The detailof the transactions and the amount remaining in inventory for Apple atthe end of each year is as follows:

Required:

Prepare a schedule that identifies the allocation of the investmentamount by Smith in the acquisition of Bonn. Make sure to identify theindividual steps / parts a you develop and display the solution. (5points)

Develop a schedule to illustrate the amount of excess amortization associated with the undervalued assets. (2 points)

Prepare a schedule to support any profit in inventory deferral or recognition for