Harper acquires 40 percent of the outstanding voting stock of kinman company on january 1, 2014, for $243,700 in cash. the book value of kinman’s net assets on that date was $460,000, although one of the company’s buildings, with a $74,200 carrying amount, was actually worth $118,450. this building had a 10-year remaining life. kinman owned a royalty agreement with a 20-year remaining life that was undervalued by $105,000.
kinman sold inventory with an original cost of $126,000 to harper during 2014 at a price of $180,000. harper still held $20,400 (transfer price) of this amount in inventory
harper acquires 40 percent of the outstanding voting stock of kinman company on january 1, 2014, for $243,700 in cash. the book value of kinman’s net assets on that date was $460,000, although one of the company’s buildings, with a $74,200 carrying amount, was actually worth $118,450. this building had a 10-year remaining life. kinman owned a royalty agreement with a 20-year remaining life that was undervalued by $105,000.
kinman sold inventory with an original cost of $126,000 to harper during 2014 at a price of $180,000. harper still held $20,400 (transfer price) of this amount in inventory as of december 31, 2014. these goods are to be sold to outside parties during 2015.
kinman reported a $50,600 net loss and a $28,300 other comprehensive loss for 2014, the company still manages to declare a $18,000 cash dividend during the year.
during 2015, kinman reported a $57,800 net income and declared cash dividend of $20,000. it made additional inventory sales of $134,000 to harper during the period. the original cost of the merchandise was $83,750. all but 30 percent of this inventory had been resold to outside parties by the end of the 2015 fiscal year.