ADVANCED FINANCIAL ACCOUNTING IA
12th Edition
ISBN: 9781260545081
Author: Christensen
Publisher: MCG
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Chapter 4, Problem 4.27P
To determine
Introduction: A consolidated worksheet is used to prepare the consolidated financial statements of the parent company and its subsidiary. It reflects the individual values of the parent and the subsidiary and then one consolidated figure for both the entities.
Consolidation
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13
ABC Corp. acquired all the assets and liabilities of XYZ Corporation by issuing shares of its common stock. On January 1, 2020, partial balance sheet data for the companies prior to the business combination and immediately following the combination is provided.
ABC Corp.
XYZ Corp.
Combination
Cash
65,000
25,000
90,000
Accounts receivable
72,000
20,000
94,000
Inventory
33,000
45,000
88,000
PPE (net)
400,000
150,000
650,000
Goodwill
?
Total Assets
570,000
240,000
?
Accounts payable
50,000
25,000
75,000
Bonds payable
250,000
100,000
350,000
Common stock, P2 par
100,000
25,000
160,000
Share Premium
65,000
20,000
245,000
Retained earnings
105,000
70,000
?
Total Liab and Equity
570,000
240,000
?
What is the fair value of the net assets held by XYZ Corp at the date of combination?
Group of answer choices
115,000
227,000…
Consolidation adjustment necessary when affiliate's debt is acquired from non-affiliate
Assume that a Parent company owns 65 percent of its Subsidiary. The parent company uses the equity method to account for its Equity investment. On January 1, 2015, the Parent
(face) 10 year, 10 percent bonds payable for a $100,000 premium. The bonds pay interest on December 31 of each year. On January 1, 2018,
amortization. In preparing the consolidated financial statements for the year ended December 31, 2019, what consolidating entry adjustment is necessary
the
Subsidiary
$0
+
Please answer all parts of the question.
$2,000,000
use straight-line
company issued to an unaffiliated company
acquired 30 percent of the bonds for $572,000. Both companies
for the beginning-of-year Equity investment balance?
20
ABC Corp. acquired all the assets and liabilities of XYZ Corporation by issuing shares of its common stock. On January 1, 2020, partial balance sheet data for the companies prior to the business combination and immediately following the combination is provided.
ABC Corp.
XYZ Corp.
Combination
Cash
65,000
25,000
90,000
Accounts receivable
72,000
20,000
94,000
Inventory
33,000
45,000
88,000
PPE (net)
400,000
150,000
650,000
Goodwill
?
Total Assets
570,000
240,000
?
Accounts payable
50,000
25,000
75,000
Bonds payable
250,000
100,000
350,000
Common stock, P2 par
100,000
25,000
160,000
Share Premium
65,000
20,000
245,000
Retained earnings
105,000
70,000
?
Total Liab and Equity
570,000
240,000
?
What amount of goodwill be reported by the combined entity immediately following the combination?
Group of answer choices
125,000…
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
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- Consolidation adjustment necessary when affiliate's debt is acquired from non-affiliate Assume that a Parent company owns 65 percent of its Subsidiary. The parent company uses the equity method to account for its Equity investment. On January 1, 2015, the Parent company issued to an unaffiliated company $2,000,000 (face) 10 year, 10 percent bonds payable for a $100,000 premium. The bonds pay interest on December 31 of each year. On January 1, 2018, the Subsidiary acquired 30 percent of the bonds for $572,000. Both companies use straight-line amortization. In preparing the consolidated financial statements for the year ended December 31, 2019, what consolidating entry adjustment is necessary for the beginning-of-year Equity investment balance? $Answer Answer Creditarrow_forwardOn February 1, 20x1, Paco Corp. acquired outstanding ordinary shares of School Inc. for cash. The incomplete working paper elimination entries on that date for the consolidated of statement of financial position of Paco Corp. and School Inc. are shown below: WPEE 1 Shareholders' equity - School Inc. 1,453,500 Investment in School Inc. 1,235,475 Non-controlling interest 218,025 WPEE 2 Inventories 33,150 Equipment 280,500 Goodwill ? Investment in School Inc. 349,775 Non-controlling interest ? Assuming NCI is measured at fair value, the cash consideration includes control premium of P20,000, what is the amount of goodwill?arrow_forwardThe following book and fair values were available for Westmont Company as of March Inventory Land Buildings Customer relationships Accounts payable Common stock Additional paid-in capital Retained earnings, 1/1 Revenues Expenses View transaction list Arturo Company pays $4,000,000 cash and issues 20,000 shares of its $2 par value common stock (fair value of $50 per share) for all of Westmont's common stock in a merger, after which Westmont will cease to exist as a separate entity. Stock issue costs amount to $25,000, and Arturo pays $42,000 for legal fees to complete the transaction. Journal entry worksheet Prepare Arturo's journal entries to record its acquisition of Westmont. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) 2 Book Value Fair Value $630,000 $ 600,000 990,000 2,000,000 800,000 (80,000) 3 Transaction 750,000 1,700,000 Note: Enter debits before credits. 0 (80,000) (2,000,000) (500,000) (360,000) (420,000)…arrow_forward
- On February 1, 20x1, Paco Corp. acquired outstanding ordinary shares of School Inc. for cash. The incomplete working paper elimination entries on that date for the consolidated of statement of financial position of Paco Corp. and School Inc. are shown below: WPEE 1 Shareholders' equity - School Inc. 1,453,500 Investment in School Inc. 1,235,475 Non-controlling interest 218,025 WPEE 2 Inventories 33,150 Equipment 280,500 Goodwill ? Investment in School Inc. 349,775 Non-controlling interest ? Assuming NCI is measured at NCI proportionate share, the cash consideration excludes control premium amounting to P25,000, what is the amount of goodwill?arrow_forwardParent Corporation acquired all the identifiable net assets of Sub Company by issuing ordinary shares on January 2. 2022. Partial balance sheet for the companies prior to the business combination and immediately following the combination is provided: Parent 65,000 Consolidated 60,000 Sub 25,000 20,000 45,000 140,000 10,000 240,000 Cash Accounts receivable 72,000 94,000 Inventory Buildings Goodwill 33,000 400,000 88,000 650,000 Total assets 570,000 75.000 350,000 Accounts payable Bonds payable Common stock, P2 par Share premium Retained earnings Total liabilities and equities 50,000 25,000 100,000 25,000 20,000 70,000 240,000 250,000 100,000 160,000 65,000 105,000 570,000 100,000 The only consideration transferred is the issuance of shares with fair value of P8. Parent also paid business combination expenses, share issue costs are twice the amount of indirect costs. Parent and Sub are SMES.arrow_forwardPower Corporation acquired 70 percent of Silk Corporation’s common stock on December 31, 20x2. Balance sheet datafor the two companies immediately following acquisition follow: 7. What amount of consolidated retained earnings will be reported? A.P 295,000 C. P 232,000B. P 268,000 D. P 205,0008. What amount of stockholders; equity will be reported?A. P 355,000 C. P 419,500B. P 397,000arrow_forward
- Consolidation at the end of the first year subsequent to date of acquisition-Equity method (purchase price equals book value) Assume that a parent company acquires its subsidiary on January 1, 2016, by exchanging 40,000 shares of its $1 par value Common Stock, with a market value on the acquisition date of $30 per share, for all of the outstanding voting shares of the acquiree. You have been charged with preparing the consolidation of these two companies at the end of the first year. On the acquisition date, all of the subsidiary's assets and liabilities had fair values equaling their book values. The parent uses the equity method of pre-consolidation Equity investment bookkeeping. Following are financial statements of the parent and its subsidiary for the year ended December 31, 2016. Income statement Sales Cost of goods sold Gross profit Equity income Operating expenses Net income Statement of retained earnings BOY retained earnings Net income Dividends Ending retained earnings…arrow_forwardAlmond acquires 80% of the share capital of Cashew on 1 August 20X6 and is preparing its group financial statements for the year ended 31 December 20X6. How will Cashew's results be included in the consolidated statement of financial position at 31 December 20X6? a. 80% of Cashew's assets and liabilities, time apportioned for the 4 months from 1 August 20X6 to 31 December 20X6 b. 80% of Cashew's assets and liabilities at 31 December 20X6 C. 100% of Cashew's assets and liabilities at 31 December 20X6 С. d. 100% of Cashew's assets and liabilities, time apportioned for the 4 months from 1 August 20X6 to 31 December 20X6arrow_forwardCONSOLIDATION FOR SMES (excluding Intercompany Sales) PROBLEM I. P Corporation, an SME, paid P3,000,000 for a 90% interest in S Company on January 1, 2019. The stockholders of S Company included share capital of P2,000,000 and retained earnings of P1,000,000. Of the excess of total consideration (purchase price plus NCI) over book value, P200,000 is attributable to undervalued inventories and the remainder to goodwill. All inventories are sold in 2019. S's net income for the year is P522,500 and P's net income is P1,500,000 including dividends received from S in the amount of P90,000. 1. How much is the NCI at the end of 2019? 2. Net Income Attributable to Parent.arrow_forward
- ABC Corp. acquired all the assets and liabilities of XYZ Corporation by issuing shares of its common stock. On January 1, 2020, partial balance sheet data for the companies prior to the business combination and immediately following the combination is provided. ABC Corp. XYZ Corp. Combination Cash 65,000 25,000 90,000 Accounts receivable 72,000 20,000 94,000 Inventory 33,000 45,000 88,000 PPE (net) 400,000 150,000 650,000 Goodwill ? Total Assets 570,000 240,000 ? Accounts payable 50,000 25,000 75,000 Bonds payable 250,000 100,000 350,000 Common stock, P2 par 100,000 25,000 160,000 Share Premium 65,000 20,000 245,000 Retained earnings 105,000 70,000 ? Total Liab and Equity 570,000 240,000 ? What is the fair value of the net assets held by XYZ Corp at the date of combination? Group of answer choices 115,000 270,000 497,000…arrow_forwardABC Corp. acquired all the assets and liabilities of XYZ Corporation by issuing shares of its common stock. On January 1, 2020, partial balance sheet data for the companies prior to the business combination and immediately following the combination is provided. ABC Corp. XYZ Corp. Combination Cash 65,000 25,000 90,000 Accounts receivable 72,000 20,000 94,000 Inventory 33,000 45,000 88,000 PPE (net) 400,000 150,000 650,000 Goodwill ? Total Assets 570,000 240,000 ? Accounts payable 50,000 25,000 75,000 Bonds payable 250,000 100,000 350,000 Common stock, P2 par 100,000 25,000 160,000 Share Premium 65,000 20,000 245,000 Retained earnings 105,000 70,000 ? Total Liab and Equity 570,000 240,000 ? What amount of goodwill be reported by the combined entity immediately following the combination? Group of answer choices a. 13,000 b.…arrow_forwardABC Corp. acquired all the assets and liabilities of XYZ Corporation by issuing shares of its common stock. On January 1, 2020, partial balance sheet data for the companies prior to the business combination and immediately following the combination is provided. ABC Corp. XYZ Corp. Combination Cash 65,000 25,000 90,000 Accounts receivable 72,000 20,000 94,000 Inventory 33,000 45,000 88,000 PPE (net) 400,000 150,000 650,000 Goodwill ? Total Assets 570,000 240,000 ? Accounts payable 50,000 25,000 75,000 Bonds payable 250,000 100,000 350,000 Common stock, P2 par 100,000 25,000 160,000 Share Premium 65,000 20,000 245,000 Retained earnings 105,000 70,000 ? Total Liab and Equity 570,000 240,000 ? What is the fair value of the net assets held by XYZ Corp at the date of combination? a. 270,000 b. 227,000 c. 497,000 d. 115,000arrow_forward
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