LOOSE-LEAF ADVANCED FINANCIAL ACCOUNTING
11th Edition
ISBN: 9780077722166
Author: Theodore E. Christensen, David M Cottrell
Publisher: McGraw-Hill Education
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Chapter 1, Problem 1.24P
a.
To determine
To prepare:
Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).
b.
To determine
To prepare: Journal entries that subsidiary company would record.
Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).
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Pab Corporation decided to establish Sollon Company as a wholly owned subsidiary by transferring some of its existing assets and liabilities to the new entity. In exchange, Sollon issued Pab 35,000 shares of $7 par value common stock. The following information is provided on the assets and accounts payable transferred:
Cost
Book Value
Fair Value
Cash
$ 32,000
$ 32,000
$ 32,000
Inventory
83,000
83,000
83,000
Land
69,000
69,000
99,000
Buildings
188,000
147,000
249,000
Equipment
95,000
74,000
123,000
Accounts Payable
58,000
58,000
58,000
Required:
Prepare the journal entry that Pab recorded for the transfer of assets and accounts payable to Sollon
Prepare the journal entry that Sollon recorded for the receipt of assets and accounts payable from Pab.
The PTCL Ltd acquires all issued capital of the S Ltd for a consideration of $1,000,000 cash and 800,000 shares each valued at $1.50. The summary statement of the financial position of the subsidiary company immediately following the acquisition is: Fair value of assets acquired $2,640,000 Fair value of liabilities acquired $720,000 Total shareholders’ equity of the subsidiary company $800,000 Retained earnings of the subsidiary company $1,120,000 Required: (a) Pass the necessary journal entry to record the acquisition (b) Determine the amount of goodwill (or bargain purchase) arising out of the acquisition (c) Pass the necessary consolidation entry to eliminate the subsidiary by the parent company (d) Determine the amount of goodwill (or bargain purchase) arising out of the acquisition if the purchase consideration paid was $1,000,000 cash and 400,000 shares each valued at $1.50.Thanks
A Parent corporation purchased 25% of the outstanding common shares of Subsidiary Limited for $2,500,000 on January 1, 2020.
The following relates to Subsidiary since the acquisition date:
Year
Net Income
Other Comprehensive Income
Dividends Paid
2020
$ 51,800
$11,400
$74,000
2021
148,000
29,600
74,000
Required:
Assume that Parent is a private company. Even though it has significant influence, it chose to use the cost method to account for its investment. Prepare ALL the journal entries that Parent should make regarding this investment in Year 2020 and Year 2021
Chapter 1 Solutions
LOOSE-LEAF ADVANCED FINANCIAL ACCOUNTING
Ch. 1 - What types of circumstances would encourage...Ch. 1 - How would the decision to dispose of a segment of...Ch. 1 - Prob. 1.3QCh. 1 - Prob. 1.4QCh. 1 - Prob. 1.5QCh. 1 - Prob. 1.6QCh. 1 - Prob. 1.8QCh. 1 - Prob. 1.9QCh. 1 - Prob. 1.10QCh. 1 - Prob. 1.11Q
Ch. 1 - Prob. 1.12QCh. 1 - Prob. 1.13QCh. 1 - Prob. 1.14QCh. 1 - Prob. 1.15QCh. 1 - Within the measurement period following a business...Ch. 1 - Prob. 1.17QCh. 1 - Prob. 1.1CCh. 1 - Prob. 1.3CCh. 1 - Prob. 1.4CCh. 1 - Risks Associated with Acquisitions Not all...Ch. 1 - Prob. 1.8CCh. 1 - Prob. 1.1.1ECh. 1 - Prob. 1.1.2ECh. 1 - Prob. 1.1.3ECh. 1 - Multiple-Choice Questions on Complex Organizations...Ch. 1 - Prob. 1.1.5ECh. 1 - Prob. 1.2.1ECh. 1 - Prob. 1.2.2ECh. 1 - Multiple-Choice Questions on Recording Business...Ch. 1 - Prob. 1.2.4ECh. 1 - Multiple-Choice Questions on Recording Business...Ch. 1 - Multiple-Choice Questions on Reported Balances...Ch. 1 - Multiple-Choice Questions on Reported Balances...Ch. 1 - Prob. 1.3.3ECh. 1 - Prob. 1.3.4ECh. 1 - Prob. 1.4.1ECh. 1 - Prob. 1.4.2ECh. 1 - Prob. 1.4.3ECh. 1 - Prob. 1.4.4ECh. 1 - Prob. 1.4.5ECh. 1 - Prob. 1.5ECh. 1 - Prob. 1.6ECh. 1 - Prob. 1.7ECh. 1 - Prob. 1.8ECh. 1 - Prob. 1.9ECh. 1 - Prob. 1.10ECh. 1 - Prob. 1.11ECh. 1 - Goodwill Recognition Spur Corporation reported the...Ch. 1 - Acquisition Using Debentures Planter Corporation...Ch. 1 - Bargain Purchase Using the data resented in E1-13,...Ch. 1 - Prob. 1.15ECh. 1 - Prob. 1.16ECh. 1 - Prob. 1.17ECh. 1 - Prob. 1.18ECh. 1 - Prob. 1.19ECh. 1 - Prob. 1.20ECh. 1 - Prob. 1.21ECh. 1 - Prob. 1.22ECh. 1 - Prob. 1.23ECh. 1 - Prob. 1.24PCh. 1 - Prob. 1.25PCh. 1 - Prob. 1.26PCh. 1 - Prob. 1.27PCh. 1 - Prob. 1.28PCh. 1 - Prob. 1.29PCh. 1 - Prob. 1.30PCh. 1 - Prob. 1.31PCh. 1 - Prob. 1.32PCh. 1 - Prob. 1.33PCh. 1 - Prob. 1.34PCh. 1 - Prob. 1.35PCh. 1 - Business Combination Following are the balance...Ch. 1 - Prob. 1.37PCh. 1 - Prob. 1.38PCh. 1 - Prob. 1.39PCh. 1 - Prob. 1.40P
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- Parent Company acquires a subsidiary by issuing 100,000 common shares with a market value of $25 per share for all of the subsidiary's common stock. The subsidiary's assets and liabilities were recorded at fair values with the exception of equipment undervalued by $225,000. In addition, there were two unrecorded assets: a trademark valued at $175,000 and a customer list valued by the subsidiary at $60,000. The balance sheets of the parent and subsidiary immediately after the acquisition are presented below: Parent Subsidiary Cash $740,000 $420,000 Accounts Receivable 900,000 625,000 Inventory 440,000 750,000 Equity Investment 2,500,000 Property, plant and equipment (net) 3,190,000 1,205,000 $7,770,000 $3,000,000 Accounts payable $125,000 $145,000 Salaries payable 60,000 35,400 Long-Term Notes Payable 700,000 850,000 Common Stock 200,000 150,000 Additional paid-in capital 5,000,000…arrow_forwardThe P Ltd acquires all issued capital of the S Ltd for a consideration of $1,000,000 cash and 800,000 shares each valued at $1.50. The summary statement of the financial position of the subsidiary company immediately following the acquisition is: Fair value of assets acquired $2,640,000 Fair value of liabilities acquired $720,000 Total shareholders’ equity of the subsidiary company $800,000 Retained earnings of the subsidiary company $1,120,000 Required: Pass the necessary journal entry to record the acquisition (2 marks) Determine the amount of goodwill…arrow_forwardCompany 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?arrow_forward
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