Concept explainers
a.
Concept Introduction: The value analysis is more of a systematic production review which includes the purchase process and the design of product to make sure the costs are reduced. This can be done using a set of activities including the product designs to make use of parts that have low-tolerance which are affordable, to switch to the components that cost low, including standardization of the parts to ensure the volume discounts are achieved.
To prepare: The valuation analysis schedules to determine what adjustments are to be recorded.
b.
Concept Introduction: The value analysis is more of a systematic production review which includes the purchase process and the design of product to make sure the costs are reduced. This can be done using a set of activities including the product designs to make use of parts that have low-tolerance which are affordable, to switch to the components that cost low, including standardization of the parts to ensure the volume discounts are achieved.
To prepare: The valuation analysis schedules to determine what adjustments are to be recorded.
Want to see the full answer?
Check out a sample textbook solutionChapter 2 Solutions
Advanced Accounting
- Car Inc. wants to purchase the net assets of Paint Inc. for purposes of horizontal consolidation and will pay $750,000 cash for them. The balance sheet for Paint Inc. on the date of purchase is as follows: Assets Liabilities & Owners' Equity Book Value Fair Market Value Book Value Fair Market Value Cash $0 $0 A/P $75,000 $75,000 A/R 60,000 50,000 Notes Payable 25,000 25,000 Inventory 75,000 80,000 Mortgage Payable 50,000 50,000 Net Fixed Assets 150,000 200,000 Total Liabilities: $150,000 Patents 0 25,000 Common Stock 50,000 Retained Earnings 85,000 Total Equity: $135,000 Total Assets: $285,000 Total Liabilities & O.E.: $285,000 A) Prepare the journal entry amounts for this asset acquisition on the books of Car Inc. by entering the proper debit and credit amounts in the gray-shaded cells below. Account Debits Credits A/R Inventory Net…arrow_forwardIf PROMDI Co., a new company would acquire the net assets of CARDO Co and SYANO Co. PROMDI Co will be issuing 30,000 shares to CARDO and 12,000 shares to SYANO. The following is the balance sheet of PROMDI Co, followed by the fair values and additional unpaid costs incurred by PROMDI in the acquisition: Compute for the total liabilities at the date of acquisitionarrow_forwardIf PROMDI Co., a new company would acquire the net assets of CARDO Co and SYANO Co. PROMDI Co will be issuing 30,000 shares to CARDO and 12,000 shares to SYANO. The following is the balance sheet of PROMDI Co, followed by the fair values and additional unpaid costs incurred by PROMDI in the acquisition: Compute for the goodwillarrow_forward
- Northwest Paperboard Company, a paper and allied products manufacturer, was seeking to gain a foothold inCanada. Toward that end, the company bought 40% of the outstanding common shares of Vancouver Timber andMilling, Inc., on January 2, 2018, for $400 million.At the date of purchase, the book value of Vancouver’s net assets was $775 million. The book values and fairvalues for all balance sheet items were the same except for inventory and plant facilities. The fair value exceededbook value by $5 million for the inventory and by $20 million for the plant facilities.The estimated useful life of the plant facilities is 16 years. All inventory acquired was sold during 2018.Vancouver reported net income of $140 million for the year ended December 31, 2018. Vancouver paid acash dividend of $30 million.Required:1. Prepare all appropriate journal entries related to the investment during 2018.2. What amount should Northwest report as its income from its investment in Vancouver for the year…arrow_forwardThe 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.arrow_forwardHonesty Company, an SME, acquired 30% interest of the equity of Integrity Company for P500,000 plus a transaction cost of P10,000 on January 1, 2022. At the end of the year, Integrity reported a profit of P400,000 and declared dividends of P150,000. The dividends were paid on January 15, 2023.Published price quotation does not exist for Integrity. Using appropriate valuation techniques, Honesty determined the fair value of its investment in Integrity at December 31, 2022 as P560,000. Costs to sell are estimated at 3% of the fair value of the investment. Answer the following questions related to this 1 problem: a. Using the Equity Model, how much is Carrying Value of the Investment at December 31, 2022? b. Using the Cost Model, how much is the amount to be reported by Honesty in the profit or loss for 2022? c. Using the Fair Value Model, how much is Carrying Value of the Investment at December 31, 2022? __________________arrow_forward
- Honesty Company, an SME, acquired 30% interest of the equity of Integrity Company for P500,000 plus a transaction cost of P10,000 on January 1, 2022. At the end of the year, Integrity reported a profit of P400,000 and declared dividends of P150,000. The dividends were paid on January 15, 2023.Published price quotation does not exist for Integrity. Using appropriate valuation techniques, Honesty determined the fair value of its investment in Integrity at December 31, 2022 as P560,000. Costs to sell are estimated at 3% of the fair value of the investment. Answer the following subquestion relating to this one problem: a. Using the Cost Model, how much is Carrying Value of the Investment at December 31, 2022? b. Using the Equity Model, how much is the amount to be reported by Honesty in the profit or loss for 2022? _________________&arrow_forwardSenpai Company acquires 15% of Kohai Company’s common stock for P600,000 cash and carries the investment using the cost model. A few months later, Senpai purchases another 60% of Kohai Company’s stock for P2,592,000. At that date, Kohai Company reports identifiable assets with a book value of P4,680,000 and a fair value of P6,120,000, and it has liabilities with a book value and fair value of P2,280,000. The fair value of the 25% non-controlling interest in Kohai Company is P1,080,000. Compute the amount of goodwill, using full-goodwill or fair value basis approach.arrow_forwardSenpai Company acquires 15% of Kohai Company’s common stock for P600,000 cash and carries the investment using the cost model. A few months later, Senpai purchases another 60% of Kohai Company’s stock for P2,592,000. At that date, Kohai Company reports identifiable assets with a book value of P4,680,000 and a fair value of P6,120,000, and it has liabilities with a book value and fair value of P2,280,000. The fair value of the 25% non-controlling interest in Kohai Company is P1,080,000. Compute the amount of goodwill, using full-goodwill or fair value basis approach: a. 480,000 b. 360,000 c. None of the given d. Nonearrow_forward
- Senpai Company acquires 15% of Kohai Company’s common stock for P600,000 cash and carries the investment using the cost model. A few months later, Senpai purchases another 60% of Kohai Company’s stock for P2,592,000. At that date, Kohai Company reports identifiable assets with a book value of P4,680,000 and a fair value of P6,120,000, and it has liabilities with a book value and fair value of P2,280,000. The fair value of the 25% non-controlling interest in Kohai Company is P1,080,000. Compute for the amount of goodwill, using partial goodwill or proportionate basis approach: a. None b. 480,000 c. None of the given d. 360,000arrow_forwardSummer Company holds assets with a fair value of $122,000 and a book value of $81,000 and liabilities with a book value and fair value of $23,000. Required: Compute the following amounts if Parade Corporation acquires 70 percent ownership of Summer: What amount did Parade pay for the shares if no goodwill and no gain on a bargain purchase are reported? What balance will be assigned to the noncontrolling interest in the consolidated balance sheet if Parade pays $86,800 to acquire its ownership and goodwill of $25,000 is reported?arrow_forwardIf PROMDI Co., a new company would acquire the net assets of CARDO Co and SYANO Co. PROMDI Co will be issuing 30,000 shares to CARDO and 12,000 shares to SYANO. The following is the balance sheet of PROMDI Co, followed by the fair values and additional unpaid costs incurred by PROMDI in the acquisition: compute for the consolidated total assets at the date of acquisitionarrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningEBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
- Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning