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a.
Introduction: Acquisition of Net Assets is a process in which acquiring company acquires all the assets and liabilities of the acquired company in exchange for consideration. In this process, acquiring company records all identifiable assets and liabilities at fair values and any excess of the consideration paid over fair value are recognized as
To prepare:
b.
Introduction: Acquisition of Net Assets is a process in which acquiring company acquires all the assets and liabilities of the acquired company in exchange for consideration. In this process, acquiring company records all identifiable assets and liabilities at fair values and any excess of the consideration paid over fair value are recognized as goodwill.
To prepare: Balance Sheet of Company A after acquiring net assets of Company Z.
c.
Introduction: Acquisition of shares is a process by which controlling interest in a company could be attained by purchasing majority shares of the company. In this process, shares acquired are recorded as investments in the books of the acquiring company.
To prepare: Journal entries to record acquisition of shares of Company Z.
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Chapter 1 Solutions
EBK ADVANCED FINANCIAL ACCOUNTING
- Arizona Corporation acquired the business Data Systems for $320,000 cash and assumed all liabilities at the date of purchase. Data's books showed tangible assets of $260,000, liabilities of $40,000, and stockholders' equity of $220,000. An appraiser assessed the fair market value of the tangible assets at $250,000 at the date of acquisition. Arizona Corporation's financial condition just prior to the acquisition is shown in the following statements model. Required a. Compute the amount of goodwill acquired. b. Record the acquisition in a financial statements model like the preceding one. Complete this question by entering your answers in the tabs below. Required A Required B Record the acquisition in a financial statements model. Note: In the Statement of Cash Flows column, use the initials OA for operating activities, FA for financing activities, or IA for investing activity. Enter any cash outflows or decreases to account balances with a minus sign. Leave cells blank if no input is…arrow_forwardOn December 31, Year 1, P Company obtains control over the net assets of S Company by purchasing 100% of the ordinary shares of S Company. P Company paid for the purchase by issuing ordinary shares with a fair value of $44,000. In addition, P Company paid $1,000 for professional fees to facilitate the transaction. The following information has been assembled just prior to the acquisition date: Show Transcribed Text Goodwill Plant assets (net) Current assets Shareholders' equity Long-term debt Current liabilities Show Transcribed Text (i) the acquisition method (ii) the new-entity method Carrying Amount $ 80,000 50.000 $130,000 $ 75,000 25,000 30.000 3 $130,000 ü P Company 3 Fair Value $ 38,000 90,000 55,000 $ 183,000 $ 29,000 30,000 Carrying Amount $ 20.000 15,000 $35.000 $18,000 7,000 10,000 S Company $35,000 Fair Value $ 22,000 26,000 14.000 $ 62,000 $ 8,000 10,000 Required (a) Prepare a consolidated statement of financial position for P Company and calculate the debt-to-equity ratio…arrow_forwardanother entity when the statement of financial position of amount of assets and liabilities: the acquiree showed net assets of P3,200,000. P4,000,000 cash all of the outstanding ordinary shares of At the current year-end, Clever Company purchased for another entity when the statement of financial position of the acquiree showed net assets of P3,200,000. The acquiree revealed the following fair value and carrying Carrying amount Fair value Property, plant and equipment, net Other assets Long-term debt 5,000,000 500,000 3,000,000 5,750,000 2,800,000 As a result of the trànsaction, what amount should be reported as goodwill at year-end? a. 350,000 b. 250,000 c. 750,000 d. 800,000arrow_forward
- Arizona Corporation acquired the business Data Systems for $310,000 cash and assumed all liabilities at the date of purchase. Data's books showed tangible assets of $320,000, liabilities of $17,000, and stockholders' equity of $303,000. An appraiser assessed the fair market value of the tangible assets at $300,000 and liabilities at $17,000 at the date of acquisition. Arizona Corporation's financial condition just prior to the acquisition is shown in the following statements model. Balance Income Sheet Statement Assets Cash = + Liabilities + Tangible Assets ΝΑ + Stockholders Equity Goodwill Revenue Expenses = + ΝΑ = ΝΑ + Net Income 520,000 + Required 1.Compute the amount of goodwill acquired. 2.Record the acquisition in a financial statements model. Arizona Corporation's financial condition just prior to the acquisition is shown in the financial statements model. 3.Record the acquisition in general journal format. 520,000 NA Statement of Cash Flows ΝΑ = ΝΑ ΝΑarrow_forwardPuncho Company is acquiring the net assets of Semos Company in exchange for common stock valued at $900,000. The Semos identifiable net assets have book and fair values of $400,000 and $800,000, respectively. Compare accounting for the acquisition (including assignment of the price paid) by Puncho with accounting for the sale by Semos.arrow_forwardAllerton Company acquires all of Deluxe Company's assets and liabilities for cash on January 1, 2024, and subsequently formally dissolves Deluxe. At the acquisition date, the following book and fair values were available for the Deluxe Company accounts: Items Current assets Building Land Trademark Goodwill Liabilities Common stock Retained earnings View transaction list Required: a. and b. Prepare Allerton's journal entry to record its acquisition of Deluxe in its accounting records assuming the following cash exchange amounts: $157,000 and $92,000. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Journal entry worksheet Next >arrow_forward
- Allerton Company acquires all of Deluxe Company’s assets and liabilities for cash on January 1, 2018, and subsequently formally dissolves Deluxe. At the acquisition date, the following book and fair values were available for the Deluxe Company accounts:Prepare Allerton’s entry to record its acquisition of Deluxe in its accounting records assuming the following cash exchange amounts:1. $145,000.2. $110,000.arrow_forwardIn a pre-2009 business combination, Acme Company acquired all of Brem Company's assets and liabilities for cash. After the combination, Acme formally dissolved Brem. At the acquisition date, the following book and fair values were available for the Brem Company accounts: Items Current assets Equipment Trademark Liabilities View transaction list Book Values $ 88,400 131,000 Common stock Retained earnings In addition, Acme paid an investment bank $29,200 cash for assistance in arranging the combination. (74,400) (100,000) (45,000) Required: a. Using the legacy purchase method for pre-2009 business combinations, prepare Acme's entry to record its acquisition of Brem in its accounting records assuming the cash amounts of $668,400 and $457,400 were paid to the former owners of Brem. b. How would these journal entries change if the acquisition occurred post-2009 and therefore Acme applied the acquisition method? Note: If no entry is required for a transaction/event, select "No Journal entry…arrow_forwardIf 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: REQUIREMENTS:A. GoodwillB. Consolidated Total Assets at the date of acquisitionC. Consolidated Total Liabilities at the date of acquisitionD. Consolidated Equity at the date of acquisitionarrow_forward
- Acquiring net assets that do not constitute a business Assume on January 1, 2022 an investor company paid $1,485 to an investee company in exchange for the following assets and abilities transferred from the investee company: Asset (Liability) Estimated Fair Value Production equipment $525 Factory Licenses In addition, the investor provided to the seller contingent consideration with a fair value of $150 and the investor paid an additional $60 of transaction costs to an unaffiliated third party. The contingent consideration is not a derivative financial instrument. The fair values are measured in accordance with FASB ASC 820: Fair Value Measurement. 600 375 Assume the net assets transferred from the investee do not qualify as a "business," as that term is defined in FASB ASC Master Glossary At what amount will Goodwill be reported in the financial statements of the acquiring company on January 1, 20227 Select one: 0 145 Ob$135 O CSIS d.10arrow_forwardPhoenix Corporation acquired the business Sun Systems for $315,000 cash and assumed all liabilities at the date of purchase. Sun’s books showed tangible assets of $330,000, liabilities of $18,000, and stockholders’ equity of $312,000. An appraiser assessed the fair market value of the tangible assets at $305,000 and liabilities at $18,000 at the date of acquisition. Phoenix Corporation’s financial condition just prior to the acquisition is shown in the following statements model. Required 1 Compute the amount of goodwill acquired. 2 Record the acquisition in general journal format.arrow_forward5. On January 1, 20x1, DIAPHANOUS Co. acquired all of the identifiable assets and assumed all of the liabilities of TRANSPARENT, Inc. by paying cash of P4,000,000. On this date, the identifiable assets acquired and liabilities assumed have fair values of P6,400,000 and P3,600,000, respectively. Additional information:In addition to the business combination transaction, the following have also transcribed during the negotiation period: a. After the business combination, TRANSPARENT will enter into liquidation and DIAPHANOUS agreed to reimburse TRANSPARENT for liquidation costs estimated at P80,000. b. DIAPHANOUS agreed to reimburse TRANSPARENT for the appraisal fee of a building included in the identifiable assets acquired. The agreed reimbursement is P40,000.c. DIAPHANOUS entered into an agreement to retain the top management of TRANSPARENT for continuing employment. On acquisition date, DIAPHANOUS agreed to pay the key employees signing bonuses totaling P400,000.d. To persuade, Mr.…arrow_forward
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