Chapter 2, Problem 38APA

On January 1, Year 4, Pane Corp. exchanged 150,000 shares of its $20 par value common stock for all of Sky Corp.s common stock. At that date, the fair value of Panes common stock issued was equal to the fair value of the identifiable assets acquired and liabilities assumed. Both corporations continued to operate as separate businesses, maintaining accounting records with years ending December 31. In its separate statements, Pane accounts for the investment using the equity method. Information from separate company operations follows:PaneSkyRetained earnings -- 12/31/Yr 3$3, 200, 000$925,000 Dividends paid -- 3/25/Yr 4750, 000200, 000lf consolidated net income was $800,000, what amount of retained earnings should Pane report in its December 31, Year 4, consolidated balance sheet? A. $3,250,000B. $3,050,000C. $4, 125, 000D. $4, 925,000

The following book and fair values were available for NorthStar Company as of March 1. BluePrint Company pays $4,200,000 cash for all of NorthStar’s common stock in a merger, after which NorthStar will cease to exist as a separate entity. BluePrint pays $70,000 for legal fees to complete the transaction.   Required:   Pass the necessary journal entries in the books of BluePrint for its acquisition of NorthStar’s common stocks.

Problems 12 and 13 relate to the following:On May 1, Donovan Company reported the following account balances:On May 1, Beasley paid $400,000 in stock (fair value) for all of the assets and liabilities of Donovan, which will cease to exist as a separate entity. In connection with the merger, Beasley incurred $15,000 in accounts payable for legal and accounting fees.Beasley also agreed to pay $75,000 to the former owners of Donovan contingent on meeting certain revenue goals during the following year. Beasley estimated the present value of its probability adjusted expected payment for the contingency at $20,000. In determining its offer, Beasley noted the following:• Donovan holds a building with a fair value $30,000 more than its book value.• Donovan has developed unpatented technology appraised at $25,000, although is it not recorded in its financial records.• Donovan has a research and development activity in process with an appraised fair value of $45,000. The project has not yet…

The Wexler Company is looking for a shop in Cincinnati. A certificate of incorporation was obtained in Ohio for the establishment of a company called Major Sales Company, and authorization was received for the issuance of 10,000 shares of Major Sales Company with no par value. On April 1, 1989, Wexler Company acquired all of Major Sales Company stock for $250,000; set value @$10 per share set at this issue. The balance sheet for Wexler Company prior to the establishment of the Major Sales Company reads as follows: Assets:Cash                                                               $420,000Other Assets                                                   $780,000Total Assets                                                    $1,200,000 Liability                                                             $250,000Shareholders' Capital:Authorized capital              $500,000Additional paid-in capital   $150,000Retained profit                   $300,000             $950,000Total…

On January 3, 2019, Persoff Corporation acquired all of the outstanding voting stock of Sea Cliff, Inc., in exchange for $6,815,000 in cash. Persoff elected to exercise control over Sea Cliff as a wholly owned subsidiary with an independent accounting system. Both companies have December 31 fiscal year-ends. At the acquisition date, Sea Cliff’s stockholders’ equity was $2,527,500 including retained earnings of $1,727,500.   Persoff pursued the acquisition, in part, to utilize Sea Cliff’s technology and computer software. These items had fair values that differed from their values on Sea Cliff’s books as follows:   Asset Book Value Fair Value RemainingUseful Life Patented technology $ 152,500 $ 2,427,500 7 years Computer software $ 67,500 $ 1,867,500 12 years   Sea Cliff’s remaining identifiable assets and liabilities had acquisition-date book values that closely approximated fair values. Since acquisition, no assets have been impaired. During the next three years, Sea Cliff…

1. On January 2, 2022, Bread Corporation issued 100,000 new shares of its $5 par value common stock valued at $19 a share for all of Dilan Corporation's outstanding common shares. Bread paid $15,000 to register and issue shares. Bread also paid $10,000 for the direct combination costs of the accountants. The fair value and book value of Dilan's identifiable assets and liabilities were the same. Summarized balance sheet information for both companies just before the acquisition on January 2, 2022, is as follows: Cash Inventories Other current assets Land Plant assets-net Total Assets Accounts payable Bread Dilan $ 150,000 320,000 $ 120,000 400,000 500,000 500,000 350,000 250,000 4,000,000 1,500,000 $5,320,000 $2,770,000 $1,000,000 $ 300,000 Notes payable 1,300,000 660,000 Capital stock, $5 par 2,000,000 500,000 Paid-in capital 1,000,000 100,000 Retained Earnings 20,000 1,210,000 Total Liabilities & Equities $5,320,000 $2,770,000 Required: 1. Prepare Bread's general journal entry for the…

Arther Corporation acquired all of the outstanding $10 par voting common stock of Trent Inc., on January 1, 2016, in exchange for 50,000 shares of its $10 par voting common stock. On December 31, 2015, the common stock of Arther had a closing market price of $15 per share on a national stock exchange. The retained earnings balance of Trent Inc., was $156,000 on the date of the acquisition. Both companies continued to operate as separate business entities maintaining separate accounting records with years ending December 31.On December 31, 2018, after year-end adjustments but before the nominal accounts were closed, the companies had the following condensed statements: (see attachment)Additional information is as follows: a. There have been no changes in the common stock and additional paid-in capital in excess of par accounts since the one necessitated in 2016 by Arther’s acquisition of Trent, Inc. b. At the acquisition date, the market value of Trent’s machinery exceeded book value by…

On January 1, 20x4, the Alpha Company entered into a transaction for acquisition of assets and liabilities of Beta Company. Alpha issued P400 in long-term liabilities and 40 shares of ordinary shares having a par value of P1 per share but a fair value of P10 per share. Alpha paid P20 to lawyers, accountants and brokers for assistance in bringing about this purchase. Another P15 was paid in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows: Item.. ..Alpha .Beta Cash.. P 180 ..P 40 Accounts Receivable...... 810..180 Inventory... 1,080.. 280 Land. . 600.. 360 Buildings (net).. .1,260.. 440 Equipment (net).. 480... 100 .....- Accounts Payable........( 450)..( 80) Long-term liabilities......(1,290)..( 400) Ordinary Shares, P1 par....( 330) Ordinary Shares, P20 par .( 240) Share Premium.. ( 1,080)..( 340) Retained Earnings.......(1,260).. ( 340) Note: Parentheses indicate a credit balance.

Fast Ltd. is a public company that prepares its consolidated financial statements in accordance with IFRS. Its net income in Year 2 was $200,000, and shareholders' equity at December 31, Year 2, was $1,800,000. Mr. Lombardi, the major shareholder, has made an offer to buy out the other shareholders, delist the company, and take it private. Thereafter, the company will report under ASPE. You have identified the following two areas in which Fast's accounting principles differ between IFRS and ASPE. 1. Fast incurred research and development costs of $500,000 in Year 1. Thirty percent of these costs were related to development activities that met the criteria for capitalization as an intangible asset. The newly developed product was brought to market in January, Year 2 and is expected to generate sales revenue for 10 years. 2. Fast acquired equipment at the beginning of Year 1 at a cost of $100,000. The equipment has a five-year life with no expected residual value and is depreciated on a…