![GEN COMBO LOOSELEAF INTERMEDIATE ACCOUNTING; CONNECT ACCESS CARD](https://www.bartleby.com/isbn_cover_images/9781260089042/9781260089042_largeCoverImage.gif)
Concept explainers
1.
Equity investments: The financial instruments which claim ownership in the issuing company and pay a dividend revenue to the investor company, are referred to as equity securities. The investments in equity securities are referred to as equity investments.
Equity method: Equity method is the method used for accounting equity investments which claim a significant influence of above 20% but less than 50% in the outstanding stock of the investee company.
Debit and credit rules:
- Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in
stockholders’ equity accounts. - Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.
To Journalize: The entries related to the investments during 2018.
2. a.
The amounts to be reported by Company C as an investment in Company C’s 2018 balance sheet .
b.
The amounts to be reported by Company C as investment revenue in the income statement.
c.
The amounts to be reported by Company C among investing activities in the statement of cash flows.
![Check Mark](/static/check-mark.png)
Want to see the full answer?
Check out a sample textbook solution![Blurred answer](/static/blurred-answer.jpg)
Chapter 12 Solutions
GEN COMBO LOOSELEAF INTERMEDIATE ACCOUNTING; CONNECT ACCESS CARD
- Question 1 On January 2020, RITZ Ltd acquired 80% of the ordinary shares of AUGE Ltd. The group accountant has calculated that the goodwill arising on acquisition was GH₵8,000,000. However, the financial controller has uncovered a number of errors and requires advice about how to resolve them. No entries have been posted in respect of contingent cash consideration that work be paid in 2025 if AUGE meets targets. The contingent consideration had a fair value of GH₵800,000 at acquisition and was calculated using a discount rate of 10% No fair value adjustment has been recorded in respect of AUGE’s non-depreciable land. This land had a carry amount of GH400,000 at acquisition and a fair value of GH₵600,000. AUGE’s brand is internally generated and has not been recognized in the consolidated financial statement. At acquisition it had a fair value of GH₵1,000,000 and a remaining estimated useful life of 5 years. Acquisition cost of GH₵100,000 incurred towards the acquisition process has…arrow_forwardQuestion 5 On May 31, 2023, Rooney Company paid $2,100,000 to purchase Frances Corporation, which became a division of Rooney. Frances reported the following balance sheet at the time of the acquisition: Current assets Noncurrent assets $ 500,000 1.800.000 Current liabilities Long-term liabilities Stockholders' equity Total liabilities and $ 400,000 300,000 1,600,000 Total assets $2.300.000 $2,300,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Frances was $1,800,000. At December 31, 2023, Frances reports the following balance sheet information: stockholders' equity $ 400,000 1,600,000 Current assets Noncurrent assets (including goodwill recognized in purchase) Current liabilities (500,000) (300,000) Long-term liabilities Net assets $1.200.000 It is determined that the fair market value of the Frances division is $1,250,000 at this time. Instructions a. Compute the amount of goodwill recognized, if any, on May 31, 2023. b.…arrow_forwardPROBLEM 35At the beginning of 2018, Esterlina Corporation purchased 40% of the ordinary shares outstanding of Mary Grace Incorporated for P15,000,000 when the net assets of Mary Grace Incorporated amounted to P30,000,000. At the acquisition date, the carrying amounts of the identifiable assets and liabilities of Mary Grace Incorporated were equal to their fair value, except for the following: a. Equipment whose fair value was P7,000,000 greater than its carrying amount.b. Inventory whose fair value was P2,500,000 greater than its carrying amount. The equipment has a remaining life of 4 years, and the inventory was all sold during 2013. Mary Grace Incorporated has two classes of shares: Ordinary shares (par value, P100), 300,000 shares outstanding, 15% cumulative preference shares (par value, P50), 100,000 shares outstanding. The investee reported the following net income (inclusive of enter-company transactions) and payment of cash dividend: 2018…arrow_forward
- 工 %24 Paar Corporation bought 100 percent of Kimmel, Inc., on January 1, 2018. On that date, Paar's equipment (10-year remaining life) has a book value of $440,000 but a fair value of $566,000. Kimmel has equipment (10-year remaining life) with a book value of $261,000 but a fair value of $387,000. Paar uses the equity method to record its investment in Kimmel. On December 31, 2020, Paar has equipment with a book value of $308,000 but a fair value of $457,500. Kimmel has equipment with a book value of $182,700 but a fair value of $343,700. What is the consolidated balance for the Equipment account as of December 31, 2020? Multiple Cholce $801,200. $490,700. $578,900. $616,700. Graw < Prev 9 of 15 Next Type here to search *D中 dy 112 OL prt sc delete home 米 s num backspace lock #3 6. 8. enter pause alt ctrl altarrow_forwardQ.1 On January 1, 2019, Rami Corporation purchased 25% of the outstanding common stock of Sawsan Corporation for $100,000 cash. Book value and fair value of Sawsan's assets and liabilities at the time of acquisition are shown below. Assets Book Fair Values Values Cash $40,000 $40,000 Accounts receivable 100,000 90,000 Inventories 40,000 180,000 $360.000 50,000 210,000 Equipment $390,000 Liabilities & Equities Accounts payable Note payable Capital stock Retained earnings $110,000 $110,000 50,000 40,000 100,000 100,000 $360.000 $150.000 Required: Prepare an allocation schedule for Rami's investment in Sawsan.arrow_forwardPROBLEM III. On January 1, 2020, P Corporation purchase 80% of S Company's ordinary share for P810,000. P37,500 of the excess is attributable to goodwill and the balance to depreciable asset with economic life of ten years. NCI is measured at fair value on the date of acquisition. On this date, shareholders' equity of the two companies were as follows: P Corporation S Company Ordinary share P1,312,500 P300,000 Retained earnings 1,950,000 525,000 On December 31, 2020, S Company reported net income of P131,250 and paid dividends of P45,000 to Party. Party reported earnings from its own operations of 356,250 and paid dividends of P172,500. Goodwill has been impaired and should be reported at P7,500 on December 31, 2020. 1. Net income attributable to parent 2. NCINISarrow_forward
- 16 Winner Company acquired 80% interest from Victory Company on January 1, 2021, when the stockholders' equity of Victory consisted of (see image below). Winner paid P1,500,000 for the interest acquired plus P100,000 for costs directly attributable to the acquisition and P20,000 for indirect costs. The amount paid by Winner included a control premium of P50,000. Victory's carrying value of net assets is equal to their fair market values except of the Inventory which was undervalued by 100,000 and Equipment which was underdepreciated by P75,000. How much is the goodwill/gain on bargain purchase? Ordinary shares, P100 par Paid in capital in excess of par Retained earnings 500,000 300,000 500,000arrow_forwardQuestion 2 On January 1, 2020, Party Corporation acquired 70 percent of Selfie Company's common stock for $84,000 cash. The fair value of the noncontrolling interest at that date was determined to be $36,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition: Party Co. $26,000 30,000 32,000 63,000 175,000 40,000 84,000 $450,000 Selfie Co. $15,000 22,500 Cash Accounts Receivable Inventory 18,000 44,500 Land Buildings and Equipment Less: Accumulated Depreciation Investment in Selfie Corp. 85,000 -30,000 Total Assets $155,000 Accounts Payable $90,000 120,000 150,000 $35,000 25,000 40,000 55,000 $155,000 Bonds Payable Common Stock Retained Earnings Total Liabilities and Equity 90,000 $450,000 At the date of the business combination, the book values of Selfie's net assets and liabilities approximated fair value except for inventory, which had a fair value of $21,500, and building and equipment, which had a fair value of $55,000.…arrow_forwardQuestion 11 1) Listen On June 30, 2018, Parent Company sold some land to its subsidiary for $240,000. The land had cost Parent Company $120,000 when it was acquired three years previously. On June 30, 2020, the subsidiary sold the land to an outside party for $275,000. Parent Company owns 75% of the outstanding shares of its subsidiary and accounts for its investment using the cost method. What effect will the adjustment for the realization of the intercompany gain (in the preparation of the consolidated income statement) have on the non-controlling interest in income for 2020? It will decrease the non-controlling interest in income by $8,750. It will have no effect on the non-controlling interest in income. It will increase the non-controlling interest in income by $38,750. It will increase the non-controlling interest in income by $35,000arrow_forward
- PROBLEM III. On January 1, 2020, P Corporation purchase 80% of S Company's ordinary share for P810,000. P37,500 of the excess is attributable to goodwill and the balance to depreciable asset with economic life of ten years. NCI is measured at fair value on the date of acquisition. On this date, shareholders' equity of the two companies were as follows: P Corporation S Company Ordinary share P1,312,500 P300,000 Retained earnings 1,950,000 525,000 On December 31, 2020, S Company reported net income of P131,250 and paid dividends of P45,000 to Party. Party reported earnings from its own operations of 356,250 and paid dividends of P172,500. Goodwill has been impaired and should be reported at P7,500 on December 31, 2020. latlecomeoltolbutable-te-perent. NCINIS 3. NCINAS 4. Consolidated retained earnings 5. Consolidated Shareholders' Equityarrow_forwardPROBLEM VIII On July 1, 2018, Good Cop Company acquired 100% of Bad Cop Company for a consideration transferred of P80 million and pays P500,000 business combination expenses. 2/5 is attributable to share issue costs, 2/5 direct costs and 1/5 for indirect costs. At the acquisition date, the carrying amount of Bad Company's net assets was P50 million with provisional fair value of P60 million. An additional valuation received on May 1, 2019 increased this provisional valuation to P65 million, and on July 30, 2019 this fair value was finalized at P70 million. 1. What amount should Good Cop Company present for goodwill in its statement of financial position on December 31, 2019?arrow_forward*** D only**** On January 1, 2016, Aspen Company acquired 80 percent of Birch Company's voting stock for $428,000. Birch reported a $445,000 book value and the fair value of the noncontrolling interest was $107,000 on that date. Then, on January 1, 2017, Birch acquired 80 percent of Cedar Company for $176,000 when Cedar had a $193,000 book value and the 20 percent noncontrolling interest was valued at $44,000. In each acquisition, the subsidiary's excess acquisition-date fair over book value was assigned to a trade name with a 30-year remaining life. These companies report the following financial information. Investment income figures are not included. 2016 2017 2018 Sales: Aspen Company $ 572,500 $ 625,000 $ 767,500 Birch Company 255,750 363,250 582,600 Cedar Company Not available 231,900 267,000 Expenses: Aspen Company $ 390,000 $ 607,500 $ 722,500 Birch Company 193,000 289,000 517,500 Cedar Company Not available…arrow_forward
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningIntermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
- Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337690881/9781337690881_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337788281/9781337788281_smallCoverImage.jpg)
![Text book image](https://www.bartleby.com/isbn_cover_images/9780357109731/9780357109731_smallCoverImage.gif)