Consolidation following acquisition: when a company purchases another company’s common stock, the subsidiary is viewed as being part of the consolidated entity only from the time stock is acquired. When a subsidiary is acquired during a fiscal period rather than at the beginning or at the end, the results of the subsidiary’s operations are included in the consolidated statements only for the portion of the year that the parent owned the stock. The subsidiary’s revenues, expenses, gains and losses for the portion of the fiscal period prior to acquisition is excluded from the consolidated financial statements. the journal entries that P theaters would record in 20X1 for investment in S.

Question

Want to see the full answer?

Answer 1

Question

Chapter 10, Problem 10.26P

a.

To determine

Consolidation following acquisition:when a company purchases another company’s common stock, the subsidiary is viewed as being part of the consolidated entity only from the time stock is acquired. When a subsidiary is acquired during a fiscal period rather than at the beginning or at the end, the results of the subsidiary’s operations are included in the consolidated statements only for the portion of the year that the parent owned the stock. The subsidiary’s revenues, expenses, gains and losses for the portion of the fiscal period prior to acquisition is excluded from the consolidated financial statements.

the journal entries that P theaters would record in 20X1 for investment in S.

b.

To determine

Consolidation following acquisition: when a company purchases another company’s common stock, the subsidiary is viewed as being part of the consolidated entity only from the time stock is acquired. When a subsidiary is acquired during a fiscal period rather than at the beginning or at the end, the results of the subsidiary’s operations are included in the consolidated statements only for the portion of the year that the parent owned the stock. The subsidiary’s revenues, expenses, gains and losses for the portion of the fiscal period prior to acquisition is excluded from the consolidated financial statements.

The consolidation entries for December 31, 20X1.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

On 1 January 2019, Company P purchased 80% of the equity of Company S. The following transactions arose at the acquisition date. Issue of P’s shares - 1,200,000 shares [Note b] Immediate cash payment - $400,000 Deferred cash payment - $1,000,000 payable 2 years later Due diligence fees paid to lawyers - $20,000 Equipment transferred - $40,000 (fair value=book value) Note: P’s effective interest rate was 5% per annum. P’s share price is $1.25 The fair value of non-controlling interests at acquisition date was $640,000. Share capital and Retained earnings of S were $1,000,000 and $900,000 respectively on 1 January 2019. On the same day, there was an intangible asset carried in S at $500,000 but the fair value of it was $700,000. Required: a. Determine the fair value of the consideration transferred on 1 January 2019 in accordance with IFRS 3 Business Combinations. Round to the nearest integer. Prepare the journal entries in P’s books on 1 January 2019.…