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- Company Aero is about to acquire 100% of company Berry. Company Berry has identifiable net assets with book value of $300,000 and $500,000 respectively. As payment Company Aero will issue common stock with a fair value of $75,000. How should the transaction be recorded if the acquisition is:a) An acquisition of net assets?b) An acquisition of Company B’s common stock and Company B remains a separate legal entity?Pillow Company is purchasing an 80% interest in the common stock of Sleep Company. Sleep’s balance sheet amounts at book and fair values are as follows:Account Book Value Fair ValueCurrent Assets . . . . . . . . . . . . $ 200,000 $ 250,000Fixed Assets . . . . . . . . . . . . . . 350,000 800,000Liabilities . . . . . . . . . . . . . . . . (200,000) (200,000)Use valuation analysis schedules to determine what adjustments to recorded values of Sleep Company’s accounts will be made in the consolidation process (including the creation of new accounts), if the price paid for the 80% is:a. $800,000.b. $600,000.4-On January 2, 2019, Moonshine, Inc. acquired Cambridge as a wholly-owned subsidiary, paying an excess of $400,000 over the book value of Hudson's net assets. One-half of the excess was attributable to equipment with a 4-year life, leaving the remainder as goodwill. The parent uses the equity method of pre-consolidation Equity investment bookkeeping. The 2020 financial statements for the two companies are presented below. Moonshine, Inc. Cambridge Sales $2,500,000 $600,000 Cost of goods sold -1,800,000 -350,000 Gross profit 700,000 250,000 Operating expenses -386,000 -82,000 Equity income 118,000 0 Net Income $432,000 $168,000 Retained Earnings, 1/1/20 $2,400,000 $160,000 Net income 432,000 168,000 Dividends -103,000 -19,500 Retained Earnings, 12/31/20 $2,729,000 $308,500 Cash and receivables $1,250,000 $47,500 Inventory 1,540,000 98,000 Equity…
- On July 19, 2021, SUNOB acquired 60% of the outstanding shares of YSAE. The business combination resulted to a gain on bargain purchase of P200,000. The consideration paid was exactly the fair value for the 60% outstanding stocks, and the fair value of the non-controlling interest is not given. Fair value of the net assets of YSAE amounted to P1,000,000 on that date. How much is the gain on acquisition attributable to SUNOB? Zero 600,000 200,000 120,000On September 18, 2020, OPQ Co. acquired all of TUV Inc.’s P400,000 identifiable assets and P100,000 liabilities. Book values of TUV’s assets and liabilities equal their fair values except for an overvalued Building. As a consideration, OPQ Co. issued its own shares of stock with a market value of P320,000. The merger resulted into P140,000 goodwill. Assuming OPQ Co. had P1,000,000 total assets prior to the combination, compute the total assets immediately after the merger.If PROMDI Co., a new company would acquire the net assets of CARDO Co and SYANO Co. PROMDI Co will be issuing 30,000 shares to CARDO and 12,000 shares to SYANO. The following is the balance sheet of PROMDI Co, followed by the fair values and additional unpaid costs incurred by PROMDI in the acquisition: CARDO COMPANY Book Value Fair Value Book Value Fair Value Cash P500,000 P500,000 Accounts Payable P450,000 P440,000 Accounts Receivable 250,000 240,000 Mortgage Payable 200,000 220,000 Inventory 155,000 200,000 Ordinary Shares 595,000 - Fixed Assets (Net) 600,000 520,000 Retained Earnings 260,000 - SYANO COMPANY Book Value Fair Value Book Value Fair Value Cash P300,000 P300,000 Accounts Payable P350,000 P340,000 Accounts Receivable 150,000 160,000 Mortgage Payable 200,000 220,000 Inventory 125,000 100,000 Ordinary…
- 48.On January 1, 2020, XYZ, Inc. acquired for $ 1,000,000 100% of the voting shares of ABC, Inc. As of December 31, 2020, the market value of the shares was $ 1,450,000. XYZ bought this investment with the objective of retaining it for an indefinite time. Which of the following statements is true regarding XYZ's investment and financial statements? Select one: a. This investment requires the XYZ and ABC financial statements to be consolidated and the investment account does not appear in the Statement of Financial Position. b. In XYZ's unconsolidated books, the investment is reported at amortized cost. c. This investment requires the financial statements of ABC and XYZ to be consolidated, and the investment account is reported as a long-term asset in the Consolidated Statement of Position. d. In XYZ's unconsolidated books, the investment is classified as Available for sale.Pillow Company is purchasing a 100% interest in the common stock of Sleep Company. Sleep’s balance sheet amounts at book and fair values are as follows: Account Book Value Fair Value Current Assets . . . . . . . . . . . . $ 200,000 $ 250,000 Fixed Assets . . . . . . . . . . . . . . . . 350,000 800,000 Liabilities . . . . . . . . . . . . . . . . . .(200,000) (200,000) Use valuation analysis schedules to determine what adjustments to recorded values of Sleep Company’s accounts will be made in the consolidation process (including the creation of new accounts), if the price paid for the 100% is: a. $1,000,000. b. $500,000.On Jan 1, 2019, Rudd Company acquired 100% of the common stock of Wilton Company. At that time, Rudd held land with a book value of $100,000 and a fair value of $260,000; Wilton held land with a book value of $50,000 and fair value of $600,000. at what amount would land be reported in Rudd Company balance sheet prepared immediately after the merger ? Select one: a. 860,000 b. 550,000 c. 700,000 d. 590,000
- 2-On Jan 2, 2020, Parent sells to its wholly owned investee equipment that had cost $250,000. The selling price was $180,000 and accumulated depreciation on that date was $75,000. The subsidiary depreciates the equipment over its remaining life of 10 years. Required: a. Compute the difference between the annual depreciation expense when Parent owned the equipment and depreciation expense recorded by the subsidiary.b. Compute the gain on sale recorded by the parent.c. Prepare the consolidation entries for 2020 related to the equipment sale.d. Prepare the consolidation entries for 2022 related to the equipment sale.5-On January 2, 2018, Moving Motors, Inc. acquired Bourland Enterprises as a wholly-owned subsidiary, paying an excess of $800,000 over the book value of Bourland's net assets. Part of the excess was attributable to a building with a 7-year life undervalued by $350,000. The rest was goodwill. The parent uses the equity method of pre-consolidation Equity investment bookkeeping. The 2020 financial statements for the two companies are presented below. Moving Motors, Inc. Bourland Enterprises Sales revenue $1,875,000 $781,000 Cost of goods sold -658,000 -451,000 Gross profit 1,217,000 330,000 Operating expenses -325,000 -129,000 Equity income 151,000 0 Net Income $1,043,000 $201,000 Retained Earnings, 1/1/20 $2,307,000 $475,500 Net income 1,043,000 201,000 Dividends -75,000 -23,400 Retained Earnings, 12/31/20 $3,275,000 $653,100 Cash and receivables $491,240…Assume that Company A acquires 70 per cent of Company B for a cash price of $14 million when the share capital and reserves of Company B are: Share capital$8 millionRetained earnings$2 million $10 millionPass the necessary consolidation journal entries and the journal entries to record the non-controlling interest if the non-controlling interest in the acquirer is measured at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets
