a
Consolidation income tax issues: The legal structure of an acquisition can result in taxable or non-taxable transactions. In taxable transaction, the assets acquired and liabilities assumed will have tax basis equal to the fair market values because the subsidiary is required to recognize all inherent gains and losses for tax purposes. In order to avoid this, many acquisitions are structured to avoid classification as taxable transaction.
Any difference arising out of fair market value and tax basis should be recorded as
When companies in the consolidated group files separate tax returns, intercompany income accruals and dividend transfers must be considered in computing income tax expense for the period. When an investor and investee files separate tax returns, the investor is taxed on the dividends received from the investee rather than on the amount of investment income reported.
the
b
Consolidation income tax issues: The legal structure of an acquisition can result in taxable or non-taxable transactions. In taxable transaction, the assets acquired and liabilities assumed will have tax basis equal to the fair market values because the subsidiary is required to recognize all inherent gains and losses for tax purposes. In order to avoid this, many acquisitions are structured to avoid classification as taxable transaction.
Any difference arising out of fair market value and tax basis should be recorded as
When companies in the consolidated group files separate tax returns, intercompany income accruals and dividend transfers must be considered in computing income tax expense for the period. When an investor and investee files separate tax returns, the investor is taxed on the dividends received from the investee rather than on the amount of investment income reported.
the computation of income assigned to non-controlling interest for the year 20X5.
c
Consolidation income tax issues: The legal structure of an acquisition can result in taxable or non-taxable transactions. In taxable transaction, the assets acquired and liabilities assumed will have tax basis equal to the fair market values because the subsidiary is required to recognize all inherent gains and losses for tax purposes. In order to avoid this, many acquisitions are structured to avoid classification as taxable transaction.
Any difference arising out of fair market value and tax basis should be recorded as
When companies in the consolidated group files separate tax returns, intercompany income accruals and dividend transfers must be considered in computing income tax expense for the period. When an investor and investee files separate tax returns, the investor is taxed on the dividends received from the investee rather than on the amount of investment income reported.
the computation of income to controlling interest for 20X5.
d
Consolidation income tax issues: The legal structure of an acquisition can result in taxable or non-taxable transactions. In taxable transaction, the assets acquired and liabilities assumed will have tax basis equal to the fair market values because the subsidiary is required to recognize all inherent gains and losses for tax purposes. In order to avoid this, many acquisitions are structured to avoid classification as taxable transaction.
Any difference arising out of fair market value and tax basis should be recorded as deferred tax asset or liability.
When companies in the consolidated group files separate tax returns, intercompany income accruals and dividend transfers must be considered in computing income tax expense for the period. When an investor and investee files separate tax returns, the investor is taxed on the dividends received from the investee rather than on the amount of investment income reported.
Requirement 4
the computation of amount assigned to non-controlling interest in consolidated balance sheet.
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Chapter 10 Solutions
ADVANCED FINANCIAL ACCOUNTING IA
- On-Ju Company acquired 90% interest in Southwest Company on December 31, 20x4 for P320,000. During 20x5 Southwest had a net income of P22,000 and paid a cash dividend of P7,000. Applying the cost method would give a debit balance in the Investment in Southwest Company account at the end of 20x5 of: P335,000 P333,500 P313,700 P320,000arrow_forwardHELP MEarrow_forward2.Wye acquired 100% of the equity share capital of Derwent on 1 July 20X4. For the year ended 30 June 20X5, the cost of sales of Wye was $250,000 and the cost of sales of Derwent was $130,000. During the year ended 30 June 20X5, Wye sold goods costing $25,000 to Derwent for $35,000. At the year-end, half these goods were still in inventory. What is the consolidated cost of sales for the year ended 30 June 20X5? a. $340,000 b. $350,000 c. $345,000 d. $360,000arrow_forward
- Cake Company acquired the following plant assets during the current year.· Equipment - Acquired at an invoice price of P600,000, subject to a 5% cash discount which was not taken.· Land - Acquired by issuing 10,000 shares of P50 par value when the market price of the share was P120. The shares issued are treasury shares which had been acquired at a cost of P90 per share. The fair value of the land is P1,100,000.· Machinery - Acquired at a cost of P275,000. Installation cost was P7,000, trial run and other testing cost P18,000, and construction of base, P10,000.What is the total increase in property, plant and equipment as a result of plant asset acquisitions? P1,770,000 P1,970,000 P1,980,000 P2,080,000arrow_forwardJameson Company acquired 90% interest in Southwest Company on December 31, 20x4 for P320,000. During 20x5 Southwest had a net income of P22,000 and paid a cash dividend of P7,000. the cost method is applied that means it would give a debit balance in the Investment in Southwest Company account at the end of 20x5 of:arrow_forwardQuestions Assuming CONVEX Ltd acquire 75% of CONCAVE Ltd, How will you treat the followings? (a)Within the year, CONVEX Ltd. sold pharmaceutical products worth $8 million to CONCAVE Ltd. CONVEX Ltd. made a margin of 20% on these sales. CONCAVE Ltd. has sold 60% of these products to external parties by the end of the year. (b) Within the year, CONCAVE Ltd. acquired land for $50,000 and sold it to CONVEX Ltd. for $55,000. CONVEX Ltd. is in possession of the land as at the end of the year. (c) CONVEX Ltd. is planning to sell 30% of their shares to another company who wants to support local production of the vaccine. How will this transaction affects the preparation of CONVEX Ltd. financial statements for the next accounting period? (d) Assuming you have done the financial ratio analysis and you have realized that profitability is looking good but liquidity is not impressive and needs urgent attention. What do you think could be the problem with CONCAVE Ltd. that your company needs to help…arrow_forward
- ATRIG Corporation sold some of its capital assets and derived gain or loss as follows: Item Holding Period Gain/Loss Truck 1 3 years (P350,000) Truck 2 9 months (90,000) Shares sold directly to buyer 5 years 400,000 Land located in Cebu 10 years 1,200,000 Equipment 4 years 120,000 How much shall be reported as net capital gain or loss subject to rules on regular income tax? P1,280,000 O (P320,000) O (P145,000) zeroarrow_forwardP Co acquired 60% of the equity of S Co on 1 April 20X5. The statements of profit or loss of the two companies for the year ended 31 December 20X5 are set out below. P Co $ S Co Revenue Cost of sales Gross profit Administrative expenses Profit before tax Income taxes Profit for the year Note. 170,000 65,000 105,000 43,000 62,000 23,000 39,000 80,000 36,000 44,000 12,000 32,000 8,000 24,000 Retained earnings brought forward 81,000 40,000 Retained earnings carried forward 108,000 58,000 Required Prepare the consolidated statement of profit or loss and movements on retained earningsarrow_forwardRichard Company purchased 20% of Cliff Company for P3,000,000 during the current year. This investment did not give Richard Company the ability to exercise significant influence over Cliff Company. During the year, Cliff Company reported net income of P3,500,000 and paid cash dividends of P4,000,000. What is the carrying amount of the investment in Cliff Company ot the end of the current year? o a.2.200,000 O b.2,900,000 O .3,000,000 o d. 3,700,000arrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
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