Concept explainers
a.
Concept Introduction:
Consolidation: Merger is a combination where two entities merge to take the benefit of synergies where and assets and liabilities of the two entities combine to form a new entity.
the number of shares did P issue to acquire Stork’s assets and liabilities.
a.
Answer to Problem 1.38P
The number of shares issued is
Explanation of Solution
Computation of a number of shares issued:
b.
Concept Introduction:
Consolidation: Merger is a combination where two entities merge to take the benefit of synergies where and assets and liabilities of the two entities combine to form a new entity.
the total market value of the shares issued by P.
b.
Answer to Problem 1.38P
The total market value of the shares issued by P is
Explanation of Solution
Computation of the total market value of the shares issued:
c.
Concept Introduction:
Consolidation: Merger is a combination where two entities merge to take the benefit of synergies where and assets and liabilities of the two entities combine to form a new entity.
the fair value of inventory held by S at the date of combination.
c.
Answer to Problem 1.38P
The fair value of inventory held by Stork at the date of combination is
Explanation of Solution
Computation of fair value of inventory held:
d.
Concept Introduction:
Consolidation: Merger is a combination where two entities merge to take the benefit of synergies where and assets and liabilities of the two entities combine to form a new entity.
the fair value of identifiable net assets held by Stork at the date of combination.
d.
Answer to Problem 1.38P
The fair value of identifiable net assets held by Stork at the date of combination is
Explanation of Solution
Computation of the fair value of identifiable net assets held:
Particulars | Amount | |
Cash | ||
Accounts Receivable | ||
Inventory | ||
Building and Equipment (Net) | ||
Accounts Payable | ||
Bonds Payable | ||
Bonds Premium | ||
Net Assets of Combined Entity | ||
Cash | ||
Accounts Receivable | ||
Inventory | ||
Building and Equipment (Net) | ||
Accounts Payable | ||
Bonds Payable | ||
Bonds Premium | ||
Net Assets of P Inc. | ||
Net Assets of S Company |
e.
Concept Introduction:
Consolidation: Merger is a combination where two entities merge to take the benefit of synergies where and assets and liabilities of the two entities to combine to form a new entity.
the amount of
e.
Answer to Problem 1.38P
The amount of goodwill is
Explanation of Solution
Computation of fair value of identifiable net assets held:
Total Market Value of shares of P Inc. LessNet Assets of S Company
f.
Concept Introduction:
Consolidation: Merger is a combination where two entities merge to take the benefit of synergies where and assets and liabilities of the two entities to combine to form a new entity.
the balance in retained earnings that the combined entity would report immediately following the combination.
f.
Answer to Problem 1.38P
The balance in retained earnings to be reported is
Explanation of Solution
The number is reported in its financial statement by P Inc. of
g.
Concept Introduction:
Consolidation: Merger is a combination where two entities merge to take the benefit of synergies where and assets and liabilities of the two entities combine to form a new entity.
the amount of
g.
Answer to Problem 1.38P
The balance in retained earnings to be reported is
Explanation of Solution
Computation of depreciation amount:
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Chapter 1 Solutions
ADV.FIN.ACCT. CONNECT+PROCTORIO PLUS
- 1. Matray acquired 16,000 ordinary shares of Petros on 1 April 20X9. On 31 December 20X8Petros’s accounts showed a share premium of $4,000 and retained earnings of $15,000. The fairmarket value of non-controlling interest at acquisition was $7,000.Below are the statements of financial position for the two companies as at 31 December 20X9:Matray PetrosNon-current assets:Property, plant and equipment 39,000 33,000Investment in Petros 50,000Current assets 78,000 40,000Total assets 167,000 73,000Equity and liabilitiesEquityOrdinary shares of: $1 each 100,000: 50c each 10,000Share premium 7,000 4,000Retained earnings 40,000 39,000Current liabilities 20,000 20,000Total equity and liabilities 167,000 73,000Required:Prepare the consolidated statement of financial position of Matray as at 31 December 20X9. Assumeprofits have accrued evenly throughout the yeararrow_forwardThe December 31, 20x8, balance sheets for Pint Corporation and its 70 percent-owned subsidiary Saloon Company contained the following summarized amounts: Assets Cash and Receivables Inventory Buildings and Equipment (net) Investment in Saloon Company Total Assets Liabilities and Equity Accounts Payable Common Stock Retained Earnings Total Liabilities and Equity PINT CORPORATION AND SALOON COMPANY Balance Sheets December 31, 20x8 view transaction list Consolidation Worksheet Entries A B < Pint acquired the shares of Saloon Company on January 1, 20X7. On December 31, 20X8, assume Pint sold Inventory to Saloon during 20X8 for $105,000 and Saloon sold Inventory to Pint for $309,000. Pint's balance sheet contains Inventory Items purchased from Saloon for $100,000. The Items cost Saloon $60,000 to produce. In addition, Saloon's Inventory contains goods it purchased from Pint for $27,000 that Pint had produced for $16,200. Assume Saloon reported net Income of $72,000 and dividends of $14,400.…arrow_forwardUse the following information in answering the next item(s): IRON MAN CORP. acquired 80% of RUST CORP.'s outstanding shares. The statements of financial position of both entities immediately after the acquisition are shown below: IRON MAN CORP. 430,000 1,570,000 2,000,000 RUST CORP. Investment in subsidiary (at cost) 750,000 750,000 Other assets Assets Liabilities Ordinary share capital Retained earnings Liabilities and Stockholders' equity At the date of purchase, the fair value of RUST's assets was P50,000 more than the aggregate carrying amounts. Non-controlling interest is measured under the proportionate share method. 750,000 1,000,000 250,000 2,000,000 400,000 310,000 40,000 750,000 8. How much is the goodwill in the consolidated balance sheet prepared immediately after the acquisition? 110,000 120,000 С. 140,000 160,000 А. В. D. 9. In the consolidated balance sheet prepared immediately after the acquisition, the consolidated total assets should amount to: 2,910,000 2,480,000 C.…arrow_forward
- Bean Corporation purchased 17% of the outstanding shares of common stock of Williams Corporation as a long-term investment. Subsequently, Williams Corporation reported net income and declared and paid cash dividends. What journal entry would Bean Corporation use to record the purchase of Williams Corporation common stock? debit Investment--Williams Corporation; credit Income of Williams Corporation debit Cash; credit Investment--Williams Corporation debit Cash: credit Dividend Revenue Odebit Investment--Williams Corporation; credit Casharrow_forwardCompany A purchased a certain number of Company B's outstanding voting shares at $25 per share as a long-term investment. Company B had outstanding 32,000 shares of $12 par value stock. Complete the following table relating to the measurement and reporting by Company A after acquisition of the shares of Company B stock. Required: a. What level of ownership by Company A of Company B is required to apply the method? b. What events should cause Company A to recognize revenue related to the investment in Company B? c. After the acquisition date, how should Company A change the balance of the investment account with respect to the stock owned in Company B (other than for the disposal of the investments)? Additional information: Net income reported by Company B in the first year Dividends declared by Company B in the first year Market price of Company B stock at the end of the first year d. At acquisition, the investment account on the books of Company A should be debited for what amount? e.…arrow_forwardBean Corporation purchased 35% of the outstanding shares of common stock of Williams Corporation as a long-term investment. Subsequently, Williams Corporation reported net income. What journal entry would Bean Corporation use to record its share of the earnings of Williams Corporation? debit Cash: credit Dividend Revenue debit Investment in Williams Corporation Stock: credit Cash debit Cash: credit Investment in Williams Corporation debit Investment in Williams Corporation; credit Income of Williams Corporationarrow_forward
- Armadillo Enterprises acquired the following equity investmentsat the beginning of year 1 as trading investments. Description Number of shares Market price per share Total price Finestra Company 15,000 x $25 $387,500 BVD Company 20,000 X$18 $360,000 Market values at theend of Years 1 &2 are presented below: Market/Fair Value End of year 1 End of year 2 Finestra Company $19 $23 BVD Company |$22 $28 REQUIREMENTS: Prepare the journal entry to record the acquisition of theinvestments. Prepare the adjusting journal entry required at the end of year1. Armadillo Enterprises sells 15,000 shares of BVD Company for $16at the beginning of year 2. Prepare the journal entry to record thesale. Prepare the adjusting journal entry required at the end of year2. Assume that ArmadilloEnterprises now holds these investments asavailable-for-sale. Prepare the journal entry to record the acquisition of theinvestments. Prepare the adjusting journal entry required at the end of year1. Armadillo Enterprises…arrow_forwardWhen are ordinary shares issued as part of a business combinationincluded in the EPS calculation? A. From the midpoint of the accounting yearB. From the end of the accounting periodC. The beginning of the accounting periodD. From the date of acquisitionarrow_forwardRequired information [The following information applies to the questions displayed below.] On January 4, David Company acquired all of the net assets (assets and liabilities) of William Company for $134,000 cash. The two companies merged, with David Company surviving. On the date of acquisition, William's balance sheet included the following. Balance Sheet at January 4 Cash Property and equipment (net) Total assets Liabilities Common stock (par $5) Retained earnings Total liabilities and stockholders' equity The property and equipment had a fair value of $55,000. William also owned an internally developed patent with a fair value of $5,000 (thus, not recorded as an asset on William's balance sheet). The book values of the cash and liabilities were equal to their fair values. Required: 1. How much goodwill was involved in this merger? William Company $40,000 70,000 $110,000 $12,000 22,000 76,000 $110,000 Goodwillarrow_forward
- Question 3: On June 10, 20X8, Tower Corporation acquired 100 percent of Brown Company's common stock. Summarized balance sheet data for the two companies immediately after the stock acquisition are as follows: Item Cash Accounts Receivable Inventory Buildings & Equipment (net) Investment in Brown Stock Total Accounts Payable Bonds Payable Common Stock Retained Earnings Total Tower Corp. $ 15,000 30,000 80,000 120,000 100,000 $345,000 $ 25,000 150,000 55,000 115,000 $345,000 Brown Company Book Value $ 5,000 10,000 20,000 50,000 $85,000 $3,000 25,000 20,000 37,000 $85,000 Fair Value $5,000 10,000 25,000 70,000 $110,000 $3,000 25,000 $ 28,000 Required: Give the consolidation entries required to prepare a consolidated balance sheet immediately after the acquisition of Brown Company shares. Worksheet is not required.arrow_forwardThe trial balances for Wallace Corporation and Au Inc. at December 31, Year 4, just before the transaction described below, were as follows: Current assets Land Other tangible assets Liabilities Common shares Retained earnings, 1/1/Year 4 Revenues Expenses Land Other tangible assets Liabilities On December 31, Year 4, Wallace purchased all of the outstanding shares of Au Inc. by issuing 39,000 common shares with a market value of $25 per share. The carrying amounts of Au Inc.'s assets and liabilities were equal to fair value except for the following: Fair Value $527,000 354,000 339,000 Walla $307,000 627,000 527,000 427,000 227,000 627,000 827,000 647,000 Required: What are the balances for the land, other tangible assets, goodwill, investment in common shares, liabilities, common shares, and revenues after the transaction noted above on: (Leave no cells blank - be certain to enter "0" wherever required. Omit $ sign in your response.) (a) Wallace's separate entity financial statements…arrow_forwardOn January 1, 20X2, Plend Corporation acquired all of Stork Corporation's assets and liabilities by issuing shares of its common stock. Partial balance sheet data for the companies prior to the business combination and immediately following the combination are as follows: Plend Corporation Stork Corporation Combined Entity Book Value Book Value Assets Cash $ 52,000 $ 22,000 $ 74,000 Accounts Receivable 72,000 42,000 112,000 Inventory 62,000 47,000 120,000 Buildings and Equipment (net) 312,000 122,000 454,000 Goodwill ? Total Assets $ 498,000 $ 233,000 $ ? Liabilities and Equities Accounts Payable $ 44,000 $ 26,000 $ 70,000 Bonds Payable 162,000 82,000 244,000 Bond Premium 6,000 6,000 Common Stock, $5 par 112,000 52,000 139,500 Additional Paid-In Capital 77,000 40,000 335,500 Retained Earnings 97,000 33,000 ? Total Liabilities and Equities $ 498,000 $ 233,000 $ ? Required: What number of shares did Plend issue to acquire…arrow_forward