ADV.FIN.ACCT. CONNECT+PROCTORIO PLUS
12th Edition
ISBN: 9781266379017
Author: Christensen
Publisher: INTER MCG
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Question
Chapter 1, Problem 1.6E
a.
To determine
Holding company
Holding company is a company that purchases majority of shares of some other company and gains the control over that company by paying an amount which is known as purchase consideration.
The
b.
To determine
Subsidiary company
Subsidiary company is a company which is controlled and managed by some other company. The company that controls the operation of subsidiary company is known as its parent company.
The journal entry that will be recorded by subsidiary company S when it will receive assets from company P.
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On 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…
Accounting
On January 1, 20X1, Porta Corporation purchased Swick Company's net assets
and assigned goodwill of $81,500 to Reporting Division K. The following assets
and liabilities are assigned to Reporting Division K on the acquisition date:
Carrying Fair
Amount
Value
Cash
15,500
$ 15,500
Inventory
57,500
72,500
Equipment
185,000
205,000
Goodwill
81,500
Accounts
31,500
31,500
Payable
Required:
On December 31, 20X3, Porta must test goodwill for impairment. Determine the
amount of goodwill to be reported for Division K and the amount of goodwill
impairment to be recognized, if any, if Division K's fair value is determined to be
$355,000.
$295,000.
$275,000.
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 34,000 shares of $6 par value common stock. The following Information is
provided on the assets and accounts payable transferred:
Cash
Inventory
Land
Buildings
Equipment
Accounts Payable
Required:
Cost
$ 30,000
84,000
Book Value
$ 30,000
Fair Value
$ 30,000
84,000
84,000
71,000
71,000
101,000
175,000
141,000
242,000
98,000
71,000
114,000
59,000
59,000
59,000
a. Prepare the journal entry that Pab recorded for the transfer of assets and accounts payable to Sollon
b. Prepare the journal entry that Sollon recorded for the receipt of assets and accounts payable from Pab.
Complete this question by entering your answers in the tabs below.
Required A Required B
Prepare the journal entry that Pab recorded for the transfer of assets and accounts payable to Sollon.
Note: If no entry is required for a…
Chapter 1 Solutions
ADV.FIN.ACCT. CONNECT+PROCTORIO PLUS
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. 1.7QCh. 1 - Prob. 1.8QCh. 1 - Prob. 1.9QCh. 1 - Prob. 1.10Q
Ch. 1 - Prob. 1.11QCh. 1 - Prob. 1.12QCh. 1 - Prob. 1.13QCh. 1 - Prob. 1.14QCh. 1 - Within the measurement period following a business...Ch. 1 - Prob. 1.16QCh. 1 - Prob. 1.1CCh. 1 - Prob. 1.2CCh. 1 - Prob. 1.3CCh. 1 - Prob. 1.4CCh. 1 - Risks Associated with Acquisitions Not all...Ch. 1 - Prob. 1.6CCh. 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 - Multiple-Choice Questions Involving Account...Ch. 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 - Balances Reported Following Combination Palm...Ch. 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 - Acquisition in Multiple Steps Peal Corporation...Ch. 1 - Prob. 1.28PCh. 1 - Prob. 1.29PCh. 1 - Prob. 1.30PCh. 1 - Prob. 1.31PCh. 1 - Computation of Account Balances Saspro Division is...Ch. 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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- another 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_forwardSubject: Corporate Accounting Q) The 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 $2,640,000Fair value of liabilities acquired $720,000Total shareholders’ equity of the subsidiary company $800,000Retained earnings of the subsidiary company $1,120,000 Required:(a) Pass the necessary journal entry to record the acquisition (2 marks)(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 $1.50arrow_forwardOn December 31, 20X8, Paragraph Corporation acquired 80 percent of Sentence Company's common stock for $136,000. At the acquisition date, the book values and fair values of all of Sentence's assets and liabilities were equal. Paragraph uses the equity method in accounting for its investment. Balance sheet information provided by the companies at December 31, 20X8, immediately following the acquisition is as follows: Cash Accounts Receivable Inventory Fixed Assets (net) Investment in Sentence Co. Total Debits Accounts Payable Notes Payable Common Stock Retained Earnings Total Credits Assets Paragraph Corporation $ 74,000 120,000 180,000 Total Assets Liabilities and Stockholders' Equity 350,000 136,000 $860,000 Total Liabilities and Stockholders' Equity $ 65,000 350,000 150,000 295,000 $860,000 PARAGRAPH CORPORATION AND SUBSIDIARY Consolidated Balance Sheet December 31, 20X8 Required: Prepare a consolidated balance sheet for Paragraph at December 31, 20X8. Sentence Company $ 20,000…arrow_forward
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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.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. $2,640,000Fair value of liabilities acquired. $720,000Total shareholders’ equity of the subsidiary company $800,000Retained earnings of the subsidiary company $1,120,000 (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 $1.50arrow_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 immediatelyfollowing the acquisition is:Fair value of assets acquired $2,640,000Fair value of liabilities acquired $720,000Total shareholders’ equity of the subsidiary company $800,000Retained earnings of the subsidiary company $1,120,000Required:(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 $1.50arrow_forward
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