ADVANCED FINANCIAL ACCOUNTING IA
12th Edition
ISBN: 9781260545081
Author: Christensen
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 4, Problem 4.10.5E
To determine
Introduction: Consolidation is the merger or acquisition of small companies into a single large one. In financial accounting, consolidation means an aggregation of financial statements of a group company/different entities and reported at a group level.
To choose: Select the best option
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Peer Company acquired
of the common stock of
Sight Company on January 1, year one, for
On that date, Sight had the following trial balance:
account
debit
Additional paid in capital
Building (12-year life)
Common stock
Current assets
Equipment (6-yr life)
Land
Liabilities (due in 4 years)
Retained earnings 1/year 1
Totals
$250,000
170,000
160,000
110,000
$690,000
During year one, Sight reported net income of
During year two, Sight reported net income of
During year one, Sight paid dividends of
During year two, Sight paid dividends of
Building
Equipment
credit
$100,000
170,000
300,000
120,000
$690,000
On January 1, year one, fair values of some Sight's accounts were:
Land
$122,000
$274,000
$196,000
There was no impairment of any goodwill arising from the acquisition.
Peer uses the equity method for this investment.
Part A. Use the data for the Peer Company acquisition of the Sight
Company to prepare the consolidation journal entries (such as entry S, A,....)
for December 31 of year one.…
Review of pre-consolidation equity method (controlling investment in affiliate, fair value differs from book value)
Assume an investee has the following financial statement information for the three years ending December 31, 2019:
(At December 31)
2019
2018
2017
Current assets
$285,000
$277,500
$207,000
Tangible fixed assets
662,500
575,000
563,000
Intangible assets
40,000
45,000
50,000
Total assets
$987,500
$897,500
$820,000
Current liabilities
$120,000
$110,000
$100,000
Noncurrent liabilities
266,250
242,500
220,000
Common stock
100,000
100,000
100,000
Additional paid-in capital
100,000
100,000
100,000
Retained earnings
400,000
345,000
300,000
Stockholders' equity
600,000
545,000
500,000
Total liabilities and equity
$986,250
$897,500
$820,000
(For the years ended December 31)
2019
2018
2017
Revenues
$970,000
$920,000
$850,000
Expenses
875,000
840,000
775,000
Net income
$95,000
$80,000
$75,000
Dividends
$40,000
$35,000
$25,000…
1. what is the basis for consolidation?2. is goodwill being remeasured to fair value at each reporting period? if false, what is the correct answer?3.a. Before consolidation, entity A's retained is how much? 3.b.he consolidated earning is how much?this is the scenario for #3a and b:entity A acquired 90% interest in ENtity B on January 1, 20x1 when entity B's net assets had a fair value of 100. On December 31, 20x2, Entity B's net assets increased to 200 after adjustments for acquisition date fair values, net of depreciation.
Chapter 4 Solutions
ADVANCED FINANCIAL ACCOUNTING IA
Ch. 4 - When is the carrying value of the investment...Ch. 4 - What is a differential? How is a differential...Ch. 4 - Prob. 4.3QCh. 4 - Prob. 4.4QCh. 4 - Prob. 4.5QCh. 4 - Prob. 4.6QCh. 4 - Prob. 4.7QCh. 4 - Prob. 4.8QCh. 4 - Prob. 4.9QCh. 4 - Prob. 4.10Q
Ch. 4 - Prob. 4.11QCh. 4 - What determines whether the balance assigned to...Ch. 4 - What does the termpushdown accountingmean?Ch. 4 - Under what conditions is push-down accounting...Ch. 4 - Prob. 4.15QCh. 4 - Prob. 4.2CCh. 4 - Prob. 4.3CCh. 4 - Prob. 4.4CCh. 4 - Prob. 4.1ECh. 4 - Prob. 4.2ECh. 4 - Prob. 4.3ECh. 4 - Prob. 4.4ECh. 4 - Prob. 4.5ECh. 4 - Prob. 4.6ECh. 4 - Prob. 4.7ECh. 4 - Prob. 4.8ECh. 4 - Prob. 4.9ECh. 4 - Prob. 4.10.1ECh. 4 - Prob. 4.10.2ECh. 4 - Prob. 4.10.3ECh. 4 - Prob. 4.10.4ECh. 4 - Prob. 4.10.5ECh. 4 - Prob. 4.11.1ECh. 4 - Prob. 4.11.2ECh. 4 - Prob. 4.11.3ECh. 4 - Prob. 4.11.4ECh. 4 - Prob. 4.12ECh. 4 - Prob. 4.13ECh. 4 - Prob. 4.14ECh. 4 - Prob. 4.15ECh. 4 - Prob. 4.16ECh. 4 - Prob. 4.17ECh. 4 - Prob. 4.18.1ECh. 4 - Prob. 4.18.2ECh. 4 - Prob. 4.18.3ECh. 4 - Prob. 4.18.4ECh. 4 - Prob. 4.18.5ECh. 4 - Prob. 4.18.6ECh. 4 - Prob. 4.19ECh. 4 - Prob. 4.20ECh. 4 - Prob. 4.21ECh. 4 - Prob. 4.22ECh. 4 - Prob. 4.23ECh. 4 - Prob. 4.24AECh. 4 - Prob. 4.25PCh. 4 - Prob. 4.26PCh. 4 - Prob. 4.27PCh. 4 - Consolidated Balance Sheet Powder Company spent...Ch. 4 - Prob. 4.29PCh. 4 - Prob. 4.30PCh. 4 - Prob. 4.31PCh. 4 - Prob. 4.32PCh. 4 - Prob. 4.33PCh. 4 - Prob. 4.34PCh. 4 - Prob. 4.35PCh. 4 - Prob. 4.36PCh. 4 - Prob. 4.37AP
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Prepare consolidation worksheet entries for December 31, 2021 -Prepare entry S to eliminate stockholders' equity accounts of subsidiary for 2021. Prepare entry A to recognize allocations attributed to specific accounts at acquisition date for 2021. Prepare entry I to eliminate the income accrual for 2021 less the amortization recorded by the parent using the equity method. Prepare entry D to eliminate intra-entity dividend transfers. Prepare entry E to recognize current year amortization expense.arrow_forwardOn 1 January 2000, K Ltd acquired 60% of the shares in V ltd for $400,000. Consideration took the form of cash $300,000, and shares with a fair value of $200,000 At that date the owner's equity of V ltd comprised Shares capital $300,000 Retained earnings $200,000 $100,000 Revaluation surplus Total $600,000 On 1 January 2000, the fair values of all assets and liabilities of V Ltd were recorded in fair value with the exception of inventory which had a fair value $50,000 greater than book value. The inventory was all sold before 30 June 2000. • Both companies use the periodic method to account for inventory. ● The company income tax rate is 30%. K Ltd has a financial year end of 30 June. ● The fair value of the non-controlling interest is estimated to be $260,000. K Ltd uses the 100% goodwill method to measure NCI.arrow_forwardConsolidated Worksheet Preparation You will be creating and entering formulas to complete four worksheets. The first objective is to demonstrate the effect of different methods of accounting for the investments (equity, initial value, and partial equity) on the parent company’s trial balance and on the consolidated worksheet subsequent to acquisition. The second objective is to show the effect on consolidated balances and key financial ratios of recognizing a goodwill impairment loss. Project Scenario Pecos Company acquired 100 percent of Suaro’s outstanding stock for $1,450,000 cash on January 1, 2017, when Suaro had the following balance sheet:(THIS IS IN THE PICTURE) Following is the consolidated information worksheet. December 31, 2018, trial balances Pecos Suaro revenues $ (1,052,000) $ (427,000) operating expenses $ 821,000 $ 262,000 goodwill impairment loss ? income of Suaro ? net income ? $…arrow_forward
- Questions: a. How much is the Consolidated Net Income? b. Using the same problem, how much is the Goodwill to be presented in the consolidated financial statements at December 31, 2022? c. Using the same problem, how much is the Consolidated Shareholders’ Equity at December 31, 2022? -------arrow_forwardIntra-group transaction Question (worksheet adjustment entries for the following independent transactions) Sydney Ltd owns all of the shares of Mel Ltd. In relation to the following intragroup transactions, all parts of which are independent unless specified, prepare the consolidation worksheet adjusting entries for preparation of the consolidated financial statements as at 30 June 2019. Assume an income tax rate of 30%. (c) During June 2019, MEL Ltd declared a $3000 dividend. The dividend was paid in August 2020.arrow_forwardb. Prepare all consolidation entries needed to prepare consolidated statements for 20X5. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.a. Prepare all journal entries that Pizza recorded during 20×5 related to its investment in Slice. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. View transaction listPizza Corporation acquired 80 percent ownership of Slice Products Company on January 1, 20X1, for $151,000. On that date, the fair value of the noncontrolling interest was $37,750, and Slice reported retained earnings of $46,000 and had $95,000 of common stock outstanding Pizza has used the equity method in accounting for its investment in Slice. Trial balance data for the two companies on December 31, 20X5, are as follows: Item Pizza Corporation Slice Products Company Debit Credit Debit Credit Cash and Receivables $ 86,000 $ 67,000 Inventory 277,000…arrow_forward
- In Bell Group's consolidation worksheet, the opening balance of retained earnings under 'group' column shows a balance of 70000. If there is a debit entry of 16000 in the NCI column, the opening balance of retained earnings under 'parent' column could be: A. 86000 B. 54000 C. 70000 D. 16000 Please show entries or details to explain.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: REQUIREMENTS:A. GoodwillB. Consolidated Total Assets at the date of acquisitionC. Consolidated Total Liabilities at the date of acquisitionD. Consolidated Equity at the date of acquisitionarrow_forwardIntra-group transaction Question (worksheet adjustment entries for the following independent transactions) Sydney Ltd owns all of the shares of Mel Ltd. In relation to the following intragroup transactions, all parts of which are independent unless specified, prepare the consolidation worksheet adjusting entries for preparation of the consolidated financial statements as at 30 June 2019. Assume an income tax rate of 30%. (b) SYD Ltd manufactures certain items which it then markets through MEL Ltd. During the current period, SYD Ltd sold items for $20 000 to MEL Ltd at cost plus 20%. MEL Ltd has sold 75% of these transferred items at 30 June 2019.arrow_forward
- Assume that Company A acquires 70 per cent of Company B for a cash price of $14 million when the share capital and reserves of Company B are: Share capital $8 million Retained earnings $2 million $10 million What amount of goodwill will be shown in the consolidated statement of financial position pursuant to AASB 3 assuming that any non-controlling interest in the acquirer is measured at fair value? Pass the necessary consolidation journal entries and the journal entries to record the non-controlling interest if the non-controlling interest in the acquirer is measured at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets.arrow_forwardIntra-group transaction Question (worksheet adjustment entries for the following independent transactions) Sydney Ltd owns all of the shares of Mel Ltd. In relation to the following intragroup transactions, all parts of which are independent unless specified, prepare the consolidation worksheet adjusting entries for preparation of the consolidated financial statements as at 30 June 2019. Assume an income tax rate of 30%. (d) In January 2019, MEL Ltd paid a $5 000 interim dividend.arrow_forwardQuestion 6: Intra-group transaction Question (worksheet adjustment entries for the following independent transactions) Sydney Ltd owns all of the shares of Mel Ltd. In relation to the following intragroup transactions, all parts of which are independent unless specified, prepare the consolidation worksheet adjusting entries for preparation of the consolidated financial statements as at 30 June 2019. Assume an income tax rate of 30%. (a) SYD Ltd sold inventory to MEL Ltd on 1 September 2018 for $30 000. This inventory had cost SYD Ltd $18 000. One-third of the inventory was sold by Mel Ltd to QLD Ltd for $14 000 and one-third to ADL Ltd for $14 200. (b) SYD Ltd manufactures certain items which it then markets through MEL Ltd. During the current period, SYD Ltd sold items for $20 000 to MEL Ltd at cost plus 20%. MEL Ltd has sold 75% of these transferred items at 30 June 2019. (c) During June 2019, MEL Ltd declared a $3000 dividend. The dividend was paid in August 2020. (d)…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning