ADVANCED ACCOUNTING CHAPTERS 15-19
12th Edition
ISBN: 9781337046251
Author: FISCHER
Publisher: CENGAGE C
expand_more
expand_more
format_list_bulleted
Question
Chapter 1, Problem 1.6P
To determine
Introduction: Acquisition is a corporate term used to represent purchase of another company and gaining the ownership of the company.
To prepare: Acquisition entry (and all necessary entries) in the books of acquiring company along with value analysis.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Tweeden Corporation is contemplating the acquisition of the net assets of Sylvester Corporation in anticipation of expandingits operations. The balance sheet of Sylvester Corporation on December 31, 2015, is as attached:n appraiser for Tweeden determined the fair values of Sylvester’s assets and liabilities to be as shown as in attachment 2The agreed-upon purchase price is $580,000 in cash. Acquisition costs paid in cash total $20,000.Using the above information, do value analysis and prepare the entry on the books of Tweeden Corporation to acquire the net assets of Sylvester Corporation on December 31, 2015.
Moon Company is contemplating the acquisition of Yount, Inc., on January 1, 2015. If Moon acquires Yount, it will pay $730,000 in cash to Yount and acquisition costs of $20,000. The January 1, 2015, balance sheet of Yount, Inc., is anticipated to be as attached:Fair values agree with book values except for the inventory and the depreciable fixed assets, which have fair values of $70,000 and $400,000, respectively. Your projections of the combined operations for 2015 are as follows: Combined sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $200,000 Combined cost of goods sold, including Yount’s beginning inventory, at book value, which will be sold in 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,000 Other expenses not including depreciation of Yount assets . . . . . . . . . . . . . . . . . . . . . . . . 25,000Depreciation on Yount fixed assets is…
On October 1, 2017, the Puppy Eyes Company acquired the net assets of The Cat Love Company when the fair value of Cat Love’s net assets was P116 million and their carrying amount was P120 million. The consideration transferred comprised P200 million in cash transferred at acquisition date, plus another P60 million in cash to be transferred 11 months after the acquisition date if a specified profit target being met by Cat Love. At the acquisition date there was only a low probability of the profit target being met, so the fair value of the additional consideration liability was P10 million.
In the event the profit target was met and the P60 million cash was transferred, what amount should Puppy Eyes present for Goodwill in its statement of Financial position on December 31, 2017, according to IFRS 3 Business Combinations?
Group of answer choices
84 million
144 million
94 million
140 million
Chapter 1 Solutions
ADVANCED ACCOUNTING CHAPTERS 15-19
Ch. 1 - Prob. 1UTICh. 1 - Prob. 3UTICh. 1 - Prob. 4UTICh. 1 - Prob. 5UTICh. 1 - Prob. 6UTICh. 1 - Prob. 7UTICh. 1 - Prob. 8UTICh. 1 - Prob. 9UTICh. 1 - Prob. 10UTICh. 1 - Prob. 1.1E
Ch. 1 - Prob. 1.2ECh. 1 - Prob. 1.3ECh. 1 - Prob. 2ECh. 1 - Prob. 5.1ECh. 1 - Prob. 5.2ECh. 1 - Prob. 6ECh. 1 - Lake craft Company has the following balance...Ch. 1 - Prob. 8.2ECh. 1 - Prob. 8.3ECh. 1 - Prob. 9.1ECh. 1 - Prob. 9.2ECh. 1 - Prob. 1A.1.1AECh. 1 - Prob. 1A.1.2AECh. 1 - Prob. 1.2PCh. 1 - Prob. 1.3.1PCh. 1 - Prob. 1.4PCh. 1 - Jack Company is a Corporation that was organized...Ch. 1 - Prob. 1.6PCh. 1 - Prob. 1.7.1PCh. 1 - Prob. 1.7.2PCh. 1 - Prob. 1.8PCh. 1 - Prob. 1.10.A1PCh. 1 - Prob. 1.11PCh. 1 - Prob. 1.12PCh. 1 - Prob. 1.13.2PCh. 1 - Prob. 1A.1.1APCh. 1 - Prob. 1A.1.2APCh. 1 - (Note: The use 01 a financial calculator or Excel...Ch. 1 - Frontier does not have publicly traded stock. You...Ch. 1 - Frontier does not have publicly traded stock. You...Ch. 1 - Prob. 1.1B.3CCh. 1 - Prob. 1.1CCCh. 1 - Prob. 1.2.1CCh. 1 - Prob. 1.2.2CCh. 1 - Case 1-2 Disney Acquires Marvel Entertainment On...
Knowledge Booster
Similar questions
- On May 1, 2015, Zoe Inc. purchased Branta Corp. for $15,000,000 in cash. They only received $12,000,000 in net assets. In 2016, the market value of the goodwill obtained from Branta Corp. was valued at $4,000,000, but in 2017 it dropped to $2,000,000. Prepare the journal entry for the creation of goodwill and the entry to record any impairments to it in subsequent years.arrow_forwardDetermination of Acquisition Cost In January 2019, Cordova Company entered into a contract to acquire a new machine for its factory. The machine, which has a cash price of 215,000, was paid for as follows: Required: 1. Determine the cost of the machine. What principle guides the determination of the cost of the machine? 2. Prepare the journal entry to record the acquisition of the machine. 3. Next Level How would your answer change, if at all, if the 215,000 cash price were not available?arrow_forwardHamilton Companys balance sheet on January 1, 2019, was as follows: Korbel Company is considering purchasing Hamilton (a privately held company) and discovers the following about Hamilton: a. No allowance for doubtful accounts has been established. A 10,000 allowance is considered appropriate. b. Marketable securities are valued at cost. The current market value is 60,000. c. The LIFO inventory method is used. The FIFO inventory of 140,000 would be used if the company is acquired. d. Land, included in property, plant, and equipment, which is recorded at its cost of 50,000, is worth 120,000. The remaining property, plant, and equipment is worth 10% more than its depreciated cost. e. The company has an unrecorded trademark that is worth 70,000. f. The companys bonds are currently trading for 130,000. g. The pension liability is understated by 40,000. Required: 1. Compute the amount of goodwill if Korbel agrees to pay 500,000 cash for Hamilton. 2. Next Level What are the reasons that the book value of Hamiltons net identifiable assets differ from their market value? 3. Prepare the journal entry to record the acquisition on the books of Korbel assuming Hamilton is liquidated. 4. If Korbel agrees to pay only 400,000 cash, how much goodwill exists? 5. If Korbel pays only 400,000 cash, prepare the journal entry to record the acquisition on its books, assuming Hamilton is liquidated.arrow_forward
- ABC Co. is contemplating on acquiring XYZ Inc. The following information was gathered through a diligence audit: The actual earnings of XYZ, Inc. for the past 5 years are shown below: Year Earnings 2015 2,400,000 2016 2,600,000 2017 2,700,000 2018 2,500,000 2019 3,600,000 Total 13,800,000 Earnings in 2019 included an expropriation gain of ₱800,000. The fair value of XYZ net assets as of the end of 2019 is ₱20,000,000. The industry average rate of return is 12%. Probable duration of “excess earnings” is 5 years. How much is the estimated goodwill under the capitalization of average earnings method? Use a capitalization rate of 12.5%. How much is the estimated goodwill under the present value of average excess earnings method? Use a discount rate of 10%.arrow_forwardABC Co. is contemplating on acquiring XYZ Inc. The following information was gathered through a diligence audit: The actual earnings of SXYZ, Inc. for the past 5 years are shown below: Year Earnings 2015 2,400,000 2016 2,600,000 2017 2,700,000 2018 2,500,000 2019 3,600,000 Total 13,800,000 Earnings in 2019 included an expropriation gain of ₱800,000. The fair value of XYZ net assets as of the end of 2019 is ₱20,000,000. The industry average rate of return is 12%. Probable duration of “excess earnings” is 5 years. How much is the estimated goodwill under the multiples of average excess earnings method? How much is the estimated goodwill under the capitalization of average excess earnings method? Use a capitalization rate of 25%.arrow_forwardOn January 1, 2022 the Aquila Co. acquired 100% of the Taurus Co. when the fair value of Taurus net assets was P4,000,000 and their carrying amount was P3,500,000. The consideration transferred consisted of P4,400,000 in cash transferred at the acquisition date, plus another P200,000 in cash to be transferred 10 months after (November 1, 2022) the acquisition date if a specified profit target was met by Taurus.At the acquisition date, there was only a low probability, around 40% of the profit target is being met.On November 1, 2022, additional P200,000 was paid by Aquila to Taurus after the latter met the specified profit target.How much is the goodwill to be reported on December 31, 2022? a. P480,000 b. P600,000 c. P980,000 d. P400,000arrow_forward
- Reck Company is considering the acquisition of Clock Inc. To assess the amount it might be willing to pay, Reck makes the following computations and assumptions.A. Clock, Inc. has identifiable assets with a total fair value of OMR 9,000,000 and liabilities of OMR 6,500,000. The assets include office equipment with a fair value approximating book value, buildings with a fair value 30% higher than book value, and land with a fair value 50% higher than book value. The remaining lives of the assets are deemed to be approximately equal to those used by Clock Inc.B. Clock Inc.'s pretax incomes for the years 2018 through 2020 were OMR 580,000, OMR 420,000, and OMR 350,000, respectively. Reck believes that an average of these earnings represents a fair estimate of annual earnings for the indefinite future. However, it may need to consider adjustments for the following items included in pretax earnings:Depreciation on Buildings (each year) 380,000Depreciation on Equipment…arrow_forwardOn August 27, 2015, Celgene Corporation acquired all of the outstanding stock of Receptos, Inc., in exchange for $7.6 billion in cash. Referring to Celgene's 2015 financial statements and its July 14, 2015, press release announcing the acquisition, answer the following questions regarding the Receptos acquisition. How will Celgene account for the in-process research and development product rights acquired in the Receptos combination?arrow_forwardParker Company acquires an 80% interest in Sargent Company for $300,000 in cash on January 1, 2015, when Sargent Company has the following balance sheet: (attached)The excess of the price paid over book value is attributable to the fixed assets, which have a fair value of $250,000, and to goodwill. The fixed assets have a 10-year remaining life. Parker Company uses the simple equity method to record its investment in Sargent Company. The following trial balances of the two companies are prepared on December 31, 2015: Parker Sargent Current Assets . . . . . . . . . . . . . . . . . . . . . . . . 10,000 130,000 Depreciable Fixed A . . . . . . . . . . . . . . . . . . 400,000 200,000 Accumulated Depreciation . . . .. . . . . . . (106,000) (20,000) Investment in Sargent . .. .. . . . . . . . . . . . . 316,000 Current Liabilities. . . . . . . . . . . . . . . . . . . . . (60,000)…arrow_forward
- On July 2014, Thunder Company is committed to a plan to sell a disposal group that represents a significant portion of its regulated operations. The sale requires regulatory approval, which could extend the period required to complete the sale beyond one year. Actions necessary to obtain that approval cannot be initiated until after a buyer is known and a firm purchase commitment is obtained. However, a firm purchase commitment is highly probable within one year. The noncurrent assets of disposal group have a carrying value of P4,000,000 and liabilities of P1,000,000. The total fair market value as of December 31, 2014 of the disposal group is P4,800,000. If the sale is completed within one year, the estimated cost to sell is P200,000, but if the sale will extend beyond one year, the present value of the estimated cost to sell is P180,000. If the sale will extend beyond one year, what amount of gain or loss should the company report in its 2014 profit or loss?arrow_forwardAlpha Company used debentures with a par valueof $660,000 to acquire 100% of Zeta, on January 1, 2013. On that date the fair value of the debentures issued was $644,000. The following balance sheet data were reported by Zeta at the point of the acquisition: Historical Cost Fair Value Cash and Receivabled 80,000 75,000 Inventory 145,000 200,000 Land 75,000 75,000 Plant & Equipment 450,000 350,000 Less: Accumulated Depreciation -170,000 Total Assets 580,000 700,000 Accounts Payable 50,000 50,000 Common Stock 100,000 Additional Paid i n Capital 60,000 Retained Earnings 370,000 Total Liabilities & Equity 580,000 Prepare the entry to record the above transaction.arrow_forwardOn January 1, 2025, John Paul Jones Corp. purchased 30% of Sky Tech Inc. for $45 million. This acquisition gave John Paul Jones significant influence over Sky Tech. At the date of acquisition, the book value of Sky Tech's net assets was $75 million and their fair value was $90 million. The difference was attributed to the fair value of equipment exceeding book value, and the remaining useful life of this equipment was 5 years. For 2025, Sky Tech reported a net income of $75 million and declared and paid $20 million in dividends. Relative to its investment in Sky Tech, the amount of investment income reported by John Paul Jones Corp. on it’s year end December 31, 2025 income statement is: $6 million. $16.5 million. $22.5 million. $21.6 million. The total amount that John Paul Jones Corp. would report for its investment in Sky Tech Inc. on itsDecember 31, 2025 balance sheet is: $67.5 million. $61.5 million. $60.6 million. $66.6 million. Assume John Paul cannot exercise significant…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Auditing: A Risk Based-Approach (MindTap Course L...
Accounting
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Cengage Learning