On January 1, 2021, ABC Co. traded in an old equipment with carrying amount of P,1680,000 for a new equipment with a cash price of P2,050,000. ABC Co. paid a cash difference of P600,000 to acquire the new equipment.
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How much should be recorded as cost of the new equipment acquired and as gain (loss) on exchange? *
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- During 20X1, Craig Company had the following transactions: a. Purchased 300,000 of 10-year bonds issued by Makenzie Inc. b. Acquired land valued at 105,000 in exchange for machinery. c. Sold equipment with original cost of 810,000 for 495,000; accumulated depreciation taken on the equipment to the point of sale was 270,000. d. Purchased new machinery for 180,000. e. Purchased common stock in Lemmons Company for 82,500. Required: 1. Prepare the net cash from investing activities section of the statement of cash flows. 2. CONCEPTUAL CONNECTION Usually, the net cash from investing activities is negative. How can Craig cover this negative cash flow? What other information would you like to have to make this decision?Hamilton Companys balance sheet on January 1, 2019, was as follows: Korbel Company is considering purchasing Hamilton (a privately held company) and discovers the following about Hamilton: a. No allowance for doubtful accounts has been established. A 10,000 allowance is considered appropriate. b. Marketable securities are valued at cost. The current market value is 60,000. c. The LIFO inventory method is used. The FIFO inventory of 140,000 would be used if the company is acquired. d. Land, included in property, plant, and equipment, which is recorded at its cost of 50,000, is worth 120,000. The remaining property, plant, and equipment is worth 10% more than its depreciated cost. e. The company has an unrecorded trademark that is worth 70,000. f. The companys bonds are currently trading for 130,000. g. The pension liability is understated by 40,000. Required: 1. Compute the amount of goodwill if Korbel agrees to pay 500,000 cash for Hamilton. 2. Next Level What are the reasons that the book value of Hamiltons net identifiable assets differ from their market value? 3. Prepare the journal entry to record the acquisition on the books of Korbel assuming Hamilton is liquidated. 4. If Korbel agrees to pay only 400,000 cash, how much goodwill exists? 5. If Korbel pays only 400,000 cash, prepare the journal entry to record the acquisition on its books, assuming Hamilton is liquidated.On January 1, 2020, Ferdie Company entered into a contract to acquire a new machine for its factory. The machine, which has a cash price of P295,000, was paid for as follows: Down payment P80,000 6% Notes payable (payable in four equal annual payments starting December 31, 2020) 200,000 500 ordinary shares of Gemrey Co. P100 par with a market value of P110. 50,000 At what amount should Ferdie initially measure its machine?
- On January 1, 2021, ABC Company sold machinery with carrying amount of P550,000 for P800,000, which is the fair value of the asset on this date, and then immediately leased the machine back for P160,000 annually payable in advance for five years. The implicit rate is 12%. Using four decimal places as PV factors, which of the following will be part of the compound journal entry ABC Company will prepare on January 1, 2021? Debit Cash, P800,000 Credit Lease liability, P645,968 Credit Gain on Sale-Leaseback, P48,315 Debit Right-of-Use Machinery, P444,103On 1 November 2020, Bermuda Ltd acquired all the assets and liabilities (other than cash) of Triangle Ltd. The details on the assets and liabilities of Triangle Ltd were as follows: Carrying Amount Fair Value Cash 30,000 30,000 Equipment 120,000 140,000 Accounts Receivable 25,000 25,000 Furniture 35,000 25,000 Accounts Payable 10,000 10,000 Income tax Payable 19,000 19,000 Annual Leave Payable 14,000 14,000 In addition to the above items, Triangle Ltd had an internally generated brand name with a fair value of $75,000 that was not recognized in its accounts. The consideration Bermuda Ltd paid to Triangle Ltd was $80,000 cash and 20,000 shares. The fair value of each Bermuda Ltd share is $10. Bermuda Ltd paid $20,000 in acquisition-related costs. The tax rate is 30%. Required: Conduct an acquisition analysis for BermudaOn 1 November 2020, Bermuda Ltd acquired all the assets and liabilities (other than cash) of Triangle Ltd. The details on the assets and liabilities of Triangle Ltd were as follows: Carrying Amount Fair Value Cash 30,000 30,000 Equipment 120,000 140,000 Accounts Receivable 25,000 25,000 Furniture 35,000 25,000 Accounts Payable 10,000 10,000 Income tax Payable 19,000 19,000 Annual Leave Payable 14,000 14,000 In addition to the above items Triangle Ltd had an internally generated brand name with a fair value of $75,000 that was not recognised in its accounts. The consideration Bermuda Ltd paid to Triangle Ltd was $80,000 cash and 20,000 shares. The fair value of each Bermuda Ltd share is $10. Bermuda Ltd paid $20,000 in acquisition related costs. Tax rate is 30%.
- On January 1, 2021, ABC Company sold machinery with carrying amount of P550,000 for P800,000, which is the fair value of the asset on this date, and then immediately leased the machine back for P160,000 annually payable in advance for five years. The implicit rate is 12%. Using four decimal places as PV factors, which of the following will be part of the compound journal entry ABC Company will prepare on January 1, 2021? A. Debit Cash, P800,000 B. Credit Lease liability, P645,968 C. Credit Gain on Sale-Leaseback, P48,315 D. Debit Right-of-Use Machinery, P444,103On January 1, 2020, William Corp. (qualifies as SME) paid cash of P600,000 for all the outstanding shares of Kate Company. The carrying value of the assets and liabilities of Kate on January 1, 2020 follow:Accounts Receivable P90,000Inventory 180,000Plant & Equipment (net of Accumulated Depreciation of P220,000) 320,000Goodwill 100,000Liabilities 120,000On January 1, 2020 Kate inventory had a fair value of P150,000 and plant & equipment (net) had a fair value of P380,000. Cost of arranging the combination are as follows: legal fees for combination, P30,000; finder’s fee, P50,000; other miscellaneous direct costs, P20,000.Net income of William and Kate for 2020 amounts to P158,000…On January 1, 2020, AMI Corporation purchased the non-cash net assets of Sheffield Ltd. for $8,087,900. Following is the statement of financial position of Sheffield Ltd. from the company's year-end the previous day: Sheffield Ltd.Statement of Financial PositionAs at December 31, 2019 Cash $630,000 Accounts receivable 554,000 Inventory 2,510,000 Property, plant, and equipment (net) 2,070,000 Land 2,570,000 $8,334,000 Accounts payable $324,000 Common shares 2,520,000 Retained earnings 5,490,000 $8,334,000 As part of the negotiations, AMI and Sheffield agreed on the following fair values for the items on Sheffield's statement of financial position: Accounts receivable $552,400 Inventory 2,265,000 Property, plant, and equipment 1,870,000 Land 3,620,000 Accounts payable 313,500 Prepare the journal entry on the books of AMI Corporation to record the purchase, assuming that instead of buying the net assets of…
- On June 30, 2021, ABC Corp. purchased a P3,000,000 face valuebonds with P2,925,067.05 cash. The interest rate is 10%, payablesemiannually every June 30 and Dec. 31. The remaining term as ofacquisition date is three years. ABC purchased it for bothcontractual cashflows and trading purpose, and hence initiallydesignated it as FA‐FV‐OCI. The effective interest rate is 11%. Withinthe year 2022, there was a change in the purpose of holding theinvestment to maturity. As of the end of the years 2022 and 2023,the bonds were valued at P2,950,000 and P2,975,000 respectively.1. What is the compound journal entry to record thereclassification and update the related accounts? Includethe date and explanation.On June 30, 2021, ABC Corp. purchased a P3,000,000 face valuebonds with P2,925,067.05 cash. The interest rate is 10%, payablesemiannually every June 30 and Dec. 31. The remaining term as ofacquisition date is three years. ABC purchased it for bothcontractual cashflows and trading purpose, and hence initiallydesignated it as FA‐FV‐OCI. The effective interest rate is 11%. Withinthe year 2022, there was a change in the purpose of holding theinvestment to maturity. As of the end of the years 2022 and 2023,the bonds were valued at P2,950,000 and P2,975,000 respectively. What is the compound journal entry to record thereclassification and update the related accounts? Includethe date and explanation.The related data of Estonia Company: On March 2, 2021, Aruba Inc. declared a cash dividend of P750,000, on which Estonia Company had an 18% ownership. The date of record is March 31, 2021, and the date of payment is April 30, 2021. On May 30, 2021, Estonia Company received a property dividend with a carrying amount of P70,000. The fair value of the property on that date is P80,000 and the fair value on June 30, 2021, which is the date of payment is P89,500. On July 15, 2021, Australia Company declared a liquidating dividend of P500,000, of which Estonia had a 15% interest. How much is the dividend income reported in the Income Statement in 2021?