Jyra Mitra_x000D_Professor Hyde_x000D_ACCT 450_x000D_20 January 2015

Chapter 1: 15, 29

15
a.
Step I. Purchase Price
Acquisition Rate
Carrying
Step 2. Amount
Assets:
Cash and receivables 110,000
Computing equipment 5,000,000
Patented technology 100,000
Trademark 150,000
Total Assets 5,360,000
Total Liabilities 185,000
Book Value 5,175,000

Difference

Step 3. Purchase Price

Book Value
Excess Net Asset

Step 4. Computing Equipment 20%

Patented Technology 20%
Trademark 20%
Excess Payment Remaining

Step 5. Total Excess Payment

Excess Payment Identified with Specific Asset
Goodwill

b. 2014
Net Income 1,800,000
Ownership Rate 20%
360,000
Computer
Equipment
Value at 20 percent 140,000
Useful Life (in years) 7
20,000

2014 Equity

20,000
260,000
Jyra Mitra_x000D_Professor Hyde_x000D_ACCT 450_x000D_20 January 2015

2015 Equity

20,000
260,000

c. 2014
Dividend Declared 150,000
Ownership Rate 20%
30,000

2014 Investment
2,700,000
360,000

2,750,000

2015 Investment
2,750,000
397,000

2,835,000

29
Step I. Purchase Price
Acquisition Rate

Investment in Kinman Company $ 210,000

Cash

Step 2. Purchase Price

Book Value 40%
Excess Net Asset

Step 3. Building 40%

Royalty Agreement 40%
Excess Payment Remaining

Building
Value at 40 percent 16,000
Useful Life (in years) 10
1,600
Jyra Mitra_x000D_Professor Hyde_x000D_ACCT 450_x000D_20 January 2015

Equity in Kinman Company 3,300

Investment in Kinman Company

Step 4. Total Excess Payment

Excess Payment Identified with Specific Asset
Goodwill

Step 5. Amount of Inventory Remaining

Gross Profit Percentage
Unearned Profit
Harper's Percentage of Ownership
Amount of Adjustment

Equity in Kinman Company 2,000

Investment in Kinman Company Income

Step 6. Net Loss

Comprehensive Loss
Losses
Harper's Percentage of Ownership
Investment Loss

Investment Loss in Kinman Company 16,000

Other Comprehensive Loss in Kinman Com 8,000
Investment in Kinman Company

Step 7. Cash 4,000

Investment in Kinman Company

Step 8. Investment in Kinman Company 16,000

Equity in Kinmon Company

Step 9. Cash 4,800

Investment in Kinman Company

Step 10. Investment in Kinman Company 2,000

Equity in Kinman Company

Step 11. Amount of Inventory Remaining

Gross Profit Percentage
Unearned Profit
Harper's Percentage of Ownership
Amount of Adjustment

Equity in Kinman Company 3,600

Investment in Kinman Company Income
 Jyra Mitra_x000D_Professor Hyde_x000D_ACCT 450_x000D_20 January 2015

2,700,000
20%

Fair Value

110,000
5,700,000
4,000,000
2,000,000
###
185,000
###

2,700,000
1,035,000
1,665,000

140,000
780,000
370,000
1,290,000

1,665,000
1,290,000
375,000

2015
1,985,000
20%
397,000
Patented
Technology
780,000
3
260,000

2014 Equity
360,000
 Jyra Mitra_x000D_Professor Hyde_x000D_ACCT 450_x000D_20 January 2015

80,000

2015 Equity
397,000

117,000

2015
160,000
0
32,000

2014 Investment

20,000
260,000
30,000

2015 Investment

20,000
260,000
32,000

210,000
0

210,000

210,000
160,000
50,000

16,000
34,000
50,000

Royalty
Agreement
34,000
20
1,700
Jyra Mitra_x000D_Professor Hyde_x000D_ACCT 450_x000D_20 January 2015

3,300

50,000
50,000
-

15,000
33%
5,000
40%
2,000

2,000

40,000
20,000
60,000
40%
24,000

24,000

4,000

16,000

4,800

2,000

24,000
38%
9,000
40%
3,600

3,600