Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
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Chapter 2, Problem 2.1.1P
To determine
Introduction: Acquisition is a corporate term used to represent purchase of another company and gaining the ownership of the company.
To record: Acquisition or the investment entry with all other necessary entries in the books of acquiring company.
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Problems 7 and 8 relate to the following:
On January 1, 2016, Pride Corporation purchased 90 percent of the outstanding voting shares of Star, Inc., for $540,000 cash. The acquisition-date fair value of the noncontrolling interest was $60,000. At January 1, 2016, Star’s net assets had a total carrying amount of $420,000. Equipment (eight-year remaining life) was undervalued on Star’s financial records by $80,000. Any remaining excess fair value over book value was attributed to a customer list developed by Star (four-year remaining life), but not recorded on its books. Star recorded net income of $70,000 in 2016 and $80,000 in 2017. Each year since the acquisition, Star has declared a $20,000 dividend. At January 1, 2018, Pride’s retained earnings show a $250,000 balance.
Selected account balances for the two companies from their separate operations were as follows
Assuming that Pride, in its internal records, accounts for its investment in Star using the equity method, what amount of…
Problems 7 and 8 relate to the following:
On January 1, 2016, Pride Corporation purchased 90 percent of the outstanding voting shares of Star, Inc., for $540,000 cash. The acquisition-date fair value of the noncontrolling interest was $60,000. At January 1, 2016, Star’s net assets had a total carrying amount of $420,000. Equipment (eight-year remaining life) was undervalued on Star’s financial records by $80,000. Any remaining excess fair value over book value was attributed to a customer list developed by Star (four-year remaining life), but not recorded on its books. Star recorded net income of $70,000 in 2016 and $80,000 in 2017. Each year since the acquisition, Star has declared a $20,000 dividend. At January 1, 2018, Pride’s retained earnings show a $250,000 balance.
Selected account balances for the two companies from their separate operations were as follows
What is consolidated net income for 2018?
a. $194,000
b. $197,500
c. $203,000
d. $238,000
Q) On 1 January 2017, P Ltd paid £540,000 to acquire 55% of the ordinary share capital of S Ltd. The equity of S Ltd on that date consisted of ordinary share capital of £300,000 and retained earnings of £250,000. Goodwill arising on consolidation has suffered an impairment loss of 30% between 1 January2017 and 31 December 2020. The goodwill figure which should be shown inthe consolidated statement of financial position at 31 December 2020 is:
a) £71,250b) £166,250c) £100,000d) £550,000
Chapter 2 Solutions
Advanced Accounting
Ch. 2 - Prob. 1UTICh. 2 - Prob. 2UTICh. 2 - Prob. 3UTICh. 2 - Prob. 4UTICh. 2 - Prob. 5UTICh. 2 - Prob. 6UTICh. 2 - Santos Corporation is considering investing in...Ch. 2 - Prob. 2.1ECh. 2 - Prob. 2.2ECh. 2 - Prob. 3.1E
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