Business combination:
Business combination refers to the combining of one or more business organizations in a single entity. The business combination leads to the formation of combined financial statements. After business combination, the entities having separate control merges into one having control over all the assets and liabilities. Mergers and acquisition are types of business combinations.
Consolidated financial statements:
The consolidated financial statements refer to the combined financial statements of the entities which are prepared at the year-end. The consolidated financial statements are prepared when one organization is either acquired by the other entity or two organizations merged to form the new entity. The consolidated financial statements serve the purpose of both the entities about financial information.
Value analysis:
The value analysis in a business combination is an essential part of determining the worth of the acquired entity. The
:
Preparation of the value analysis and the determination and distribution of excess schedule.
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Advanced Accounting
- (TCO A) On January 2, 20X1, Heinreich Co. paid $500,000 for 24% of the voting common stock of Jones Corp. At the time of the investment, Jones had net assets with a book value and fair value of $1,800,000. During 20X1, Jones incurred a net loss of $60,000 and paid dividends of $100,000. Any excess cost over book value is attributable to goodwill with an indefinite life.Required:(1) Prepare a schedule to show the amount of goodwill from Heinrich's investment in Jones.(2) Prepare a schedule to show the balance in Heinreich's investment account at December 31, 20X1.arrow_forwardProblem 3On January 1, 20x9, Maykaya Corporation acquired 80 percent of Galisod Company's common stock for P160,000 cash. The fair value of the non-controlling interest at that date was determined to be P40,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition:At the date of the business combination, the book values of Galisod’s net assets and liabilities approximated fair value except for inventory, which had a fair value of P45,000, and land, which had a fair value of P60,000 (using the full-goodwill approach). 1.What amount of total inventory will be reported in the consolidated balance sheet prepared immediately after the business combination?a. P130,000 b. P135,000c. P90,000d. P45,000 2. What amount of goodwill will be reported in the consolidated balance sheet prepared immediately after the business combination?a. P0b. P40,000c. P20,000d. P15,000 3. What amount of total assets will be reported in the consolidated…arrow_forwardProblem 3On January 1, 20x9, Maykaya Corporation acquired 80 percent of Galisod Company's common stock for P160,000 cash. The fair value of the non-controlling interest at that date was determined to be P40,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition:At the date of the business combination, the book values of Galisod’s net assets and liabilities approximated fair value except for inventory, which had a fair value of P45,000, and land, which had a fair value of P60,000 (using the full-goodwill approach). 1. What amount of total liabilities will be reported in the consolidated balance sheet prepared immediately after the business combination?a. P395,000b. P280,000c. P275,000d. P195,000 2. What amount will be reported as non-controlling interest in the consolidated balance sheet prepared immediately after the business combination?a. P0b. P15,000c. P40,000d. P46,000 3. What amount of consolidated retained earnings…arrow_forward
- 1-Arlington, Inc. purchases all of the common stock of Frisco Company for $450,000 cash. At the acquisition date, Frisco's stockholders' equity consisted of Common Stock, $300,000, and Retained Earnings, $20,000. It was determined that the investee's balance sheet included land undervalued by $30,000 and equipment undervalued by $5,000. Arlington estimates a 10-year life for any goodwill. Required:a. What is the amount of goodwill recorded at date of acquisition?b. What is the balance in goodwill one year after acquisition, if the company is a private company?arrow_forwardQUESTION 17 On January 1, 20X9, Pirate Corporation acquired 80 percent of Sea-Gull Company's common stock for $160,000 cash. The fair value of the noncontrolling interest at that date was determined to be $40,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition: Pirate Corp. Sea-Gull Corp. Cash $ 60,000 $ 20,000 Accounts Receivable 80,000 30,000 Inventory 90,000 40,000 Land 100,000 40,000 Buildings and Equipment 200,000 150,000 Less: Accumulated Depreciation (80,000 ) (50,000 ) Investment in Sea-Gull Corp. 160,000 Total Assets $ 610,000 $ 230,000 Accounts Payable $ 110,000 $ 30,000 Bonds Payable 95,000 40,000 Common Stock 200,000 40,000 Retained Earnings 205,000 120,000 Total Liabilities…arrow_forwardQUESTION 21 On January 1, 20X9, Pirate Corporation acquired 80 percent of Sea-Gull Company's common stock for $160,000 cash. The fair value of the noncontrolling interest at that date was determined to be $40,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition: Pirate Corp. Sea-Gull Corp. Cash $ 60,000 $ 20,000 Accounts Receivable 80,000 30,000 Inventory 90,000 40,000 Land 100,000 40,000 Buildings and Equipment 200,000 150,000 Less: Accumulated Depreciation (80,000 ) (50,000 ) Investment in Sea-Gull Corp. 160,000 Total Assets $ 610,000 $ 230,000 Accounts Payable $ 110,000 $ 30,000 Bonds Payable 95,000 40,000 Common Stock 200,000 40,000 Retained Earnings 205,000 120,000 Total Liabilities…arrow_forward
- QUESTION 19 On January 1, 20X9, Pirate Corporation acquired 80 percent of Sea-Gull Company's common stock for $160,000 cash. The fair value of the noncontrolling interest at that date was determined to be $40,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition: Pirate Corp. Sea-Gull Corp. Cash $ 60,000 $ 20,000 Accounts Receivable 80,000 30,000 Inventory 90,000 40,000 Land 100,000 40,000 Buildings and Equipment 200,000 150,000 Less: Accumulated Depreciation (80,000 ) (50,000 ) Investment in Sea-Gull Corp. 160,000 Total Assets $ 610,000 $ 230,000 Accounts Payable $ 110,000 $ 30,000 Bonds Payable 95,000 40,000 Common Stock 200,000 40,000 Retained Earnings 205,000 120,000 Total Liabilities…arrow_forwardL2-4 Awe Company pays CU500,000,000 for a 30% interest in Groy Company on July 1, 19x2 when the book value of Groy Company's net assets equals fair value. Awe Company amortizes any goodwill from this investment over 20 years. Information related to Groy Company is as follows: 31 Desember 19x1 31 Desember 19x2 Share capital, nominal IDR 1,000 Rp600.000.000 Rp600.000.000 Retained earning 400.000.000 500.000.000 Total Shareholders' Equity 1.000.000.000 1.100.000.000 Net profit earned during the year 19x2 200.000.000 Dividend for the year 19x2 (paid on March 1 of Rp. 50,000,000 and September 1 of Rp. 50,000,000) 100.000.000 Required: calculate Awe Company's revenue from Groy Company for the year 19x2arrow_forwardQUESTION 20 On January 1, 20X9, Pirate Corporation acquired 80 percent of Sea-Gull Company's common stock for $160,000 cash. The fair value of the noncontrolling interest at that date was determined to be $40,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition: Pirate Corp. Sea-Gull Corp. Cash $ 60,000 $ 20,000 Accounts Receivable 80,000 30,000 Inventory 90,000 40,000 Land 100,000 40,000 Buildings and Equipment 200,000 150,000 Less: Accumulated Depreciation (80,000 ) (50,000 ) Investment in Sea-Gull Corp. 160,000 Total Assets $ 610,000 $ 230,000 Accounts Payable $ 110,000 $ 30,000 Bonds Payable 95,000 40,000 Common Stock 200,000 40,000 Retained Earnings 205,000 120,000 Total Liabilities…arrow_forward
- QUESTION 18 On January 1, 20X9, Pirate Corporation acquired 80 percent of Sea-Gull Company's common stock for $160,000 cash. The fair value of the noncontrolling interest at that date was determined to be $40,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition: Pirate Corp. Sea-Gull Corp. Cash $ 60,000 $ 20,000 Accounts Receivable 80,000 30,000 Inventory 90,000 40,000 Land 100,000 40,000 Buildings and Equipment 200,000 150,000 Less: Accumulated Depreciation (80,000 ) (50,000 ) Investment in Sea-Gull Corp. 160,000 Total Assets $ 610,000 $ 230,000 Accounts Payable $ 110,000 $ 30,000 Bonds Payable 95,000 40,000 Common Stock 200,000 40,000 Retained Earnings 205,000 120,000 Total Liabilities…arrow_forwardOn-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_forward5. ABC Company purchased Tara Company for P8, 000,000 cash. Tara Company had total liabilities of P3, 000,000. ABC Company’s assessment of the fair value is obtained when it purchased Tara Company is as follows:Cash 1, 000,000Inventory 500,000In-process research and development 5, 000,000Assembled workforce 1, 200,000What is the goodwill arising from the acquisition?arrow_forward
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning