ADVANCED FINANCIAL ACCOUNTING IA
12th Edition
ISBN: 9781260545081
Author: Christensen
Publisher: MCG
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Question
Chapter 4, Problem 4.2C
To determine
Introduction: The acquisition differential is arises when the one company acquires a part of the net assets of other company.
To define: The difficulties while treating the differential when the offer is accepted.
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Glass Company is thinking about acquiring Plastic Company. Glass Company is considering two methods of accomplishing control and is wondering how the accounting treatment will differ under each method. Glass Company has estimated that the fair values of Plastic’s net assets are equal to their book values, except for the equipment, which is understated by $20,000.The following balance sheets have been prepared on the date of acquisition:Assets Glass PlasticCash . . . . . . . . . . . . . . . . . . . . . . . . . . . $540,000 $ 20,000Accounts receivable . . . . . . . . . . . . . . . 50,000 70,000Inventory . . . . . . . . . . . . . . . . . . . . . . . . 50,000 100,000Property, plant, and equipment (net) . . . 230,000 270,000Total assets. . . . . . . . . . . . . . . . . . . . . $870,000…
Business Combination Versus Asset Acquisition
As part of a project, Webflow Inc. acquires these assets from Digital Sea Company (in millions):
Fair Value
$4
Cash
Trading debt investments
Equipment
in process R&D
6
240
60
The in-process R&D has no alternative future use. Webflow pays $335 million in cash for the acquired assets, and also pays $5 million in cash for legal and advisory costs
Note: Provide all answers in millions and round answers to the nearest whole number. For example. 16.355.000 would be 16.
a Prepare the journal entry to record the acquisition if it qualifies as a business combination.
Debit
Credit
Cash
to record the business combination
0
0
0
0
0
D
O
0
10
0
0
0
340
it is an ecat acnuutine Ama the cash and die
thindacate
ABC Company purchased an asset which has the following information:
1. List price of $60000
2. Sales tax of $ 3000
3. Freight charges of $1500
4. Installation charges of $5000
5. Advertising charges of $10000
6. Interest charges of $2000 Requirement:
required:
A. Which of the above payments must be included in the totala acquisitioncost.
B. Calculate the total acquisition cost of the asset.
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Expert Answer
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Step 1
The cost of the asset includes all those cost which makes the asset relevant for it's intended use. These expenditure include the non refundable taxes, import duties, freight charges and installation
The cost of the asset excludes those expenditures for promotional activities, administrative and other overhead expenditures, expenditure on captive consumption, expenditure incurred for opening and inaugurating new facilities.
In this case advertising expenditure is excluded and Interest depends on the various factors…
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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