Concept explainers
Consolidated statement of cash flow: consolidated entities, as with individual companies, must present a statement of cash flow when they issue a complete set of financial statements. A consolidated statement of
preparation of worksheet to develop consolidated cash flows for 20X6using direct method.
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Chapter 10 Solutions
ADVANCED FINANCIAL ACCOUNTING IA
- Pretzel Corporation acquired 100 percent of Stick Company’s outstanding shares on January 1, 20X7. Balance sheet data for the two companies immediately after the purchase follow: As indicated in the parent company balance sheet, Pretzel purchased $59,000 of Stick’s bonds from the subsidiary at par value immediately after it acquired the stock. An analysis of intercompany receivables and payables also indicates that the subsidiary owes the parent $8,000. On the date of combination, the book values and fair values of Stick’s assets and liabilities were the same. Record the basic consolidation entryarrow_forward1. Assume X Corp creates a subsidiary, Y Corp, and invests $500,000 cash in exchange for all of the $1 par common stock (2,000 shares).)What would journal entries X and Y make at the time of the investment?Answer: 2. X Corporation created Y Corporation with a transfer of $1,000 cash. During Y Corp.’s first year of operations, it generated a net loss of $50 and paid no dividends. During Y Corp.’s second year of operations, it generated net income of $100 and paid cash dividends of $30. Required:A. Pass journal entries in the books of X corp. in year 1 and year 2 using equity method.B. What is the balance of investment account at the end of year 2 using equity method?C. Pass journal entries in the books of X corp. in year 1 and year 2 using cost Method.D. What is the balance of investment account at the end of year 2 using cost method?Answer: 3. X Corp. Acquired 100% of common stock of Y Corp. Paying $ 2 Million in return for 50 Thousand common stock with $ 1 par value. Y Corp.…arrow_forwardPab 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 $7 par value common stock. The following information is provided on the assets and accounts payable transferred: Cash Inventory Land Buildings Equipment Accounts Payable Required A Required: 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 B View transaction list Cost $ 38,000 89,000 61,000 174,000 99,000 45,000 A 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 transaction/event, select "No journal entry required" in the first account field. Journal entry…arrow_forward
- BP (SME A) and BTS (SME B) each acquired 30% of the outstanding shares of Big Hit Corporation for P202.000, including the transaction cost of P2.000. BP and BTS agreed to a joint control over Big Hit. During the year. Big Hit reported the following: . Profit for the year - P20,000 • Dividends declared - P4.000 It was determined after a thorough test that due to economic changes, there was an adverse effect to Big Hit during the year. Hence, there appears to be impairment of the investment in the said entity. Assuming that BP elected to carry the 1 point investment in Big Hit using the Cost Method and the Fair Value of Big Hit at year end P196,000 and cost to sell amounts to P1,800, How much is the impairment loss to be recognized by BP in its investment in Bighit? A. 0 B. 2,000 C. 7,800 D. 5,800 Assuming that BP elected to use the Fair Value method and the fair value of Bighit at yearend is P196,000 and cost to sell amounts to P1,800. How much is the net…arrow_forwardCorvus Company has gained control over the operations of Glaive Corporation by acquiring 75% of its outstanding capital stock for P4,650,000. This amount includes a control premium of P225,000. Data from the balance sheets of the two entities included the following amounts as of the date of acquisition: Corvus Company Glaive Corporation Cash 1,012,500 800,000 Accounts Receivable, net 2,770,000 675,000 Inventory 1,600,000 1,200,000 Land 3,000,000 2,400,000 Building 6,750,000 3,400,000 Accumulated Depreciation - Building (1,687,500) (1,700,000) Equipment 800,000 250,000 Accumulated Depreciation…arrow_forwardCorvus Company has gained control over the operations of Glaive Corporation by acquiring 75% of its outstanding capital stock for P4,650,000. This amount includes a control premium of P225,000. Data from the balance sheets of the two entities included the following amounts as of the date of acquisition: Corvus Company Glaive Corporation Cash 1,012,500 800,000 Accounts Receivable, net 2,770,000 675,000 Inventory 1,600,000 1,200,000 Land 3,000,000 2,400,000 Building 6,750,000 3,400,000 Accumulated Depreciation - Building (1,687,500) (1,700,000) Equipment 800,000 250,000 Accumulated Depreciation…arrow_forward
- On February 1, 20x1, Paco Corp. acquired outstanding ordinary shares of School Inc. for cash. The incomplete working paper elimination entries on that date for the consolidated of statement of financial position of Paco Corp. and School Inc. are shown below: WPEE 1 Shareholders' equity - School Inc. 1,453,500 Investment in School Inc. 1,235,475 Non-controlling interest 218,025 WPEE 2 Inventories 33,150 Equipment 280,500 Goodwill ? Investment in School Inc. 349,775 Non-controlling interest ? Assuming NCI is measured at NCI proportionate share, the cash consideration excludes control premium amounting to P25,000, what is the amount of goodwill?arrow_forwardOn February 1, 20x1, Paco Corp. acquired outstanding ordinary shares of School Inc. for cash. The incomplete working paper elimination entries on that date for the consolidated of statement of financial position of Paco Corp. and School Inc. are shown below: WPEE 1 Shareholders' equity - School Inc. 1,453,500 Investment in School Inc. 1,235,475 Non-controlling interest 218,025 WPEE 2 Inventories 33,150 Equipment 280,500 Goodwill ? Investment in School Inc. 349,775 Non-controlling interest ? Assuming NCI is measured at fair value, the cash consideration includes control premium of P20,000, what is the amount of goodwill?arrow_forwardCorvus Company has gained control over the operations of Glaive Corporation by acquiring 75% of its outstanding capital stock for P4,650,000. This amount includes a control premium of P225,000. Data from the balance sheets of the two entities included the following amounts as of the date of acquisition: Corvus Company Glaive Corporation Cash 1,012,500 800,000 Accounts Receivable, net 2,770,000 675,000 Inventory 1,600,000 1,200,000 Land 3,000,000 2,400,000 Building 6,750,000 3,400,000 Accumulated Depreciation - Building (1,687,500) (1,700,000) Equipment 800,000 250,000 Accumulated Depreciation…arrow_forward
- Corvus Company has gained control over the operations of Glaive Corporation by acquiring 75% of its outstanding capital stock for P4,650,000. This amount includes a control premium of P225,000. Data from the balance sheets of the two entities included the following amounts as of the date of acquisition: Corvus Company Glaive Corporation Cash 1,012,500 800,000 Accounts Receivable, net 2,770,000 675,000 Inventory 1,600,000 1,200,000 Land 3,000,000 2,400,000 Building 6,750,000 3,400,000 Accumulated Depreciation - Building (1,687,500) (1,700,000) Equipment 800,000 250,000 Accumulated Depreciation…arrow_forwardGumiho Corporation acquired Forest Company through an exchange of common shares. All of Forest's assets and liabilities were immediately transferred to Gumiho. Gumiho's common stock was trading at P20 per share at the time of exchange. Following selected information is also available. Par value of shares outstanding Additional Paid-in Capital Before Acquisition P400,000 P700,000 After Acquisition P500,000 P1,100,000 Based on the proceeding information, what is the number of shares was issued at the time of the exchange? 25,000 35,000 20,000 10,000 The Alhambra Company had these accounts at the time it was acquired by Kingdom Co.: Cash P 108,000 Accounts Receivable 1,371,000 Inventories 360,000 PPE 1,948,200 Accounts Payable 1,052,400 Kingdom Co. paid P4,200,000 for net assets of Alhambra Company. It has determined the fair market values of investment and PPE were P399,000 and P2,700,000, respectively. An assumed contingent liability arising from past events with a fair value amounting…arrow_forwardMan merged with San Corporation in a business combination in which San issued 30,000 shares of its $5 par (current fair value $20 a share) common stock to stockholders of Man in exchange for all their outstanding common stock. The journal entry for the merger includes: a. Debit to investment in common stock of Man company $ 600,000. b. Debit to investment in common stock of Man company $ 450,000. c. Debit to investment in common stock of Man company $ 150,000. d. Debit to investment in common stock of Man company $ 300,000.arrow_forward
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