Question

On January 1, 2019, Everlasting, Inc. purchased Comet Corporation for $650,000. On that date the net assets of Comet had a book value of $320,000, and book values were equal to fair values with the following exceptions:

FIFO Inventory --Undervalued, $30,000

Land--Undervalued, $10,000

Equipment (5 year life)--Undervalued, $75,000

Patent (5-year life)--Undervalued, $25,000

During 2019, Everlasting had income from its own operations of $220,000 and Comet had net income of $80,000.

38. What amount of 2019 Equity Income was recognized by Everlasting?

______
39. What is 2019 consolidated net income?

______
40. What amount of goodwill appeared on the consolidated balance sheet at December 31, 2019?
______

Answer 1

A. $30,000

B. $250,000

C. $190,000

Step-by-step explanation:

A. Calculation for What amount of 2019 Equity Income was recognized by Everlasting

Based on the information given the amount of 2019 Equity Income that was recognized by Everlasting will be $30,000 which is FIFO Inventory Undervalued amount.

B. Calculation for 2019 consolidated net income

Everlasting had income from its own operations of $220,000

Add FIFO Inventory --Undervalued, $30,000

Consolidated net income $250,000

C. Calculation for What amount of goodwill appeared on the consolidated balance sheet at December 31, 2019

Cost of Acquisition $650,000

Less: Book value $320,000

FIFO Inventory --Undervalued, $30,000

Land--Undervalued, $10,000

Equipment , $75,000

Patent, $25,000

Goodwill $190,000