EBK ADVANCED FINANCIAL ACCOUNTING
11th Edition
ISBN: 8220102796096
Author: Christensen
Publisher: YUZU
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Chapter 1, Problem 1.4.3E
To determine
To identify: The option that shows correct amount of additional paid in capital.
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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When it purchased Sutton, Inc. on January 1, 20X1, Pavin Corporation issued 500,000 shares of its $5 par voting common stock. On that date the fair value of those shares totaled $4,200,000. Related to the acquisition, Pavin had payments to the attorneys and accountants of $200,000, and stock issuance fees of $100,000. Immediately prior to the purchase, the equity sections of the two firms appeared as follows:
Pavin
Sutton
Common stock
$ 4,000,000
$ 700,000
Paid-in capital in excess of par
7,500,000
900,000
Retained earnings
5,500,000
500,000
Total
$17,000,000
$2,100,000
Immediately after the purchase, the consolidated balance sheet should report retained earnings of:
a.
$6,000,000
b.
$5,800,000
c.
$5,500,000
d.
$5,300,000
On January 1, 2021, OBDURATE Co. acquired 30% ownership interest in STUBBORN, Inc. for P200,000. Because the
investment gave OBDURATE significant influence over STUBBORN, the investment was accounted for under the equity
method in accordance with PAS 28.
From 2021 to the end of 20x3, OBDURATE recognized P100,000 net share in the profits of the associate and P20,000
share in dividends. Therefore, the carrying amount of the investment in associate account on January 1, 20x3, is
P280,000.
On January 1, 20x4, OBDURATE acquired additional 60% ownership interest in STUBBORN, Inc. for P1,600,000. As of this
date, OBDURATE has identified the following:
a.
The previously held 30% interest has a fair value of P360,000.
b. STUBBORN's net identifiable assets have a fair value of P2,000,000.
OBDURATE elected to measure non-controlling interests at the non-controlling interest's proportionate share of
STUBBORN's identifiable net assets.
C.
Requirement: Compute for the goodwill.
Use the following information below to answer questions 1 and 2.
On January 2, 2024, Rainbow, Inc. purchased 18% of Skittles Corporation's common stock
for $120,000. At the time of the investment, the book value and fair value of Skittles' net
assets were equal except for a tract of land which had appreciated by $75,000.
The following additional information was obtained from the financial statements for
Skittles:
Net income-year ended December 31, 2024
Net income-year ended December 31, 2025
Dividends paid to common shareholders in 2024
Dividends paid to common shareholders in 2025
$30,000
$70,000
$
0
$60,000
On December 31, 2024, the fair value of Rainbow's investment in the common stock of
Skittles was $115,000, and on December 31, 2025, its fair value was $140,000.
1. Assume Rainbow does not have significant influence over Skittles. How much would
Rainbow report in its 2025 income statement related to this investment?
A. $60,000
B. $35,800
C. $30,800
D. $12,600
E. $1,800
2. Assume…
Chapter 1 Solutions
EBK 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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