Pushdown AccountingAssume a parent company acquires its subsidiary by paying $1,200,000 for all of the outstanding voting shares of the investee. On theacquisition date, subsidiary's assets and liabilities have individual fair values that equal their book values, except for property equipmentwith a fair value greater than book value by $150,000 and license with a fair value greater than book value by $250,000. The parent andsubsidiary have the following balance sheets immediately after the acquisition, but before any pushdown adjustments by the subsidiary:Parent SubsidiaryAssets:Cash & receivables$ 800,000$ 100,000Inventory600,000200,000Property & equipment, net2,300,000775,000Equity investment1,200,000Licenses25,000$ 4,900,000$1,100,000Liabilities and stockholders' equity:Current liabilities$ 400,000$ 150,000Other liabilities300,000Note payable350,000Common stock1,670,000100,000APIC1,430,000200,000Retained earnings1,100,000300,000$4,900,000 $1,100,000a. Compute the amount of goodwill implicit in the acquisition of the subsidiary,.b. Assume the subsidiary elects to apply pushdown accounting immediately after the above financial statements were prepared. Providethe journal entries required for the subsidiary to apply pushdown accounting.DescriptionDebitCreditProperty & equipment, netLicensesC. Prepare the consolidation entry or entries on the date of acquisition, assuming the subsidiary applied pushdown accounting.Description[E] Common stockDebitCreditAPICd. Prepare the consolidated balance sheet on the date of acquisition.Consolidated Balance SheetAssets:Cash & receivables$4InventoryProperty & equipment, netLicensesLiabilities and stockholders equity:Current liabilities%24Other liabilitiesNote payableCommon stockAPICRetained earnings

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Pushdown Accounting Assume a parent company acquires its subsidiary by paying $1,200,000 for all of the outstanding voting shares of the investee. On the acquisition date, subsidiary's assets and liabilities have individual fair values that equal their book values, except for property equipm with a fair value greater than book value by $150,000 and license with a fair value greater than book value by $250,000. The parent an subsidiary have the following balance sheets immediately after the acquisition, but before any pushdown adjustments by the subsidia Parent Subsidiary Assets: Cash & receivables S 800,000 $ 100,000 Inventory 600,000 200,000 Property & equipment, net 2,300,000 775,000 Equiry investment 1,200,000 Licenses 25,000 $ 4,900,000 $1,100,000 Liabilities and stockholders' equity: Current liabilities $ 400,000 $ 150,000

Pushdown Accounting Assume a parent company acquires its subsidiary by paying $1,200,000 for all of the outstanding voting shares of the investee. On the acquisition date, subsidiary's assets and liabilities have individual fair values that equal their book values, except for property equipm with a fair value greater than book value by $150,000 and license with a fair value greater than book value by $250,000. The parent an subsidiary have the following balance sheets immediately after the acquisition, but before any pushdown adjustments by the subsidia Parent Subsidiary Assets: Cash & receivables S 800,000 $ 100,000 Inventory 600,000 200,000 Property & equipment, net 2,300,000 775,000 Equiry investment 1,200,000 Licenses 25,000 $ 4,900,000 $1,100,000 Liabilities and stockholders' equity: Current liabilities $ 400,000 $ 150,000

SWFT Corp Partner Estates Trusts

42nd Edition

ISBN:9780357161548

Author:Raabe

Publisher:Raabe

Chapter7: Corporations: Reorganizations

Section: Chapter Questions

Problem 19P

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