Concept explainers
Business combination:
Business combination refers tothe combining of one or more business organizations in a single entity. The business combination leads to the formation of combined financial statements. After business combination, the entities having separate control merges into one having control over all the assets and liabilities. Merging and acquisition are types of business combinations.
Consolidated financial statements:
The consolidated financial statements refer to the combined financial statements of the entities which are prepared at the year-end. The consolidated financial statements are prepared when one organization is either acquired by the other entity or two organizations merged to form the new entity.The consolidated financial statements serve the purpose of both the entities about financial information.
Value analysis:
The value analysis in a business combination is an essential part of determining the worth of the acquired entity. The
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To prepare: Consolidated worksheet for Company A and Company Tfor the year ended December 31, 2016 along with the determination and distribution of excess schedule.
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Advanced Accounting
- OBrien Industries Inc. is a book publisher. The comparative unclassified balance sheets for December 31, 2017 and 2016 follow. Selected missing balances are shown by letters. Note 1. Investments are classified as available for sale. The investments at cost and fair value on December 31, 2016, are as follows: Note 2. The investment in Jolly Roger Co. stock is an equity method investment representing 30% of the outstanding shares of Jolly Roger Co. The following selected investment transactions occurred during 2017: May 5. Purchased 3,080 shares of Gozar Inc. at 30 per share including brokerage commission. Gozar Inc. is classified as an available-for-sale security. Oct. 1. Purchased 40,000 of Nightline Co. 6%, 10-year bonds at 100. The bonds are classified as available for sale. The bonds pay interest on October 1 and April 1. 9. Dividends of 12,500 are received on the Jolly Roger Co. investment. Dec. 31. Jolly Roger Co. reported a total net income of 112,000 for 2017. OBrien Industries Inc. recorded equity earnings for its share of Jolly Roger Co. net income. 31. Accrued three months of interest on the Nightline bonds. 31. Adjusted the available-for-sale investment portfolio to fair value, using the following fair value per-share amounts: 31. Closed the OBrien Industries Inc. net income of 146,230. OBrien Industries Inc. paid no dividends during the year. Instructions Determine the missing letters in the unclassified balance sheet. Provide appropriate supporting calculations.arrow_forwardOn January 1, 2015, Peanut Company acquired 80% of the common stock of Salt Company for $200,000. On this date, Salt had total owners’ equity of $200,000, which included retained earnings of $100,000. During 2015 and 2016, Peanut accounted for its investment in Salt using the simple equity method. Any excess of cost over book value is attributable to inventory (worth $12,500 more than cost), to equipment (worth $25,000 more than book value), and to goodwill. FIFO is used for inventories. The equipment has a remaining life of four years, and straight-line depreciation is used. Any remaining excess is attributed to goodwill. On January 1, 2016, Peanut held merchandise acquired from Salt for $20,000. During 2016, Salt sold merchandise to Peanut for $40,000, $10,000 of which was still held by Peanut on December 31, 2016. Salt’s usual gross profit is 50%. On January 1, 2015, Peanut sold equipment to Salt at a gain of $15,000. Depreciation is being computed using the straight-line method, a…arrow_forwardOn January 1, 2015, Fisher Corporation paid $2,290,000 for 35 percent of the outstanding voting stock of Steel, Inc., and appropriately applies the equity method for its investment.Any excess of cost over Steel’s book value was attributed to goodwill. During 2015, Steel reports $720,000 in net income and a $100,000 other comprehensive income loss. Steel also declares and pays $20,000 in dividends. What amount should Fisher report as its Investment in Steel on its December 31, 2015, balance sheet? What amount should Fisher report as Equity in Earnings of Steel on its 2015 income statement?arrow_forward
- On July 1, 2014, Issue Company purchased 80% of the outstanding shares of Intrigue Company at a cost of $160,000. On that date, Intrigue had $100,000 of capital stock and $140,000 of retained earnings. For 2014, Issue had income of $56,000 from its separate operations and paid dividends of $30,000. For 2014, Intrigue reported income of $13,000 and paid dividends of $6,000. All the assets and liabilities of Intrigue have book values equal to their respective fair market values. Assume income was earned evenly throughout the year except for the intercompany transaction on October 1. On October 1, Issue purchased an equipment from Intrigue for $20,000. The book value of the equipment on that date was $24,000. The loss of $4,000 is reflected in the income of Intrigue indicated above. The equipment is expected to have a useful life of 5 years from the date of sale. In the December 31, 2014 consolidated statement of financial position, how much is the consolidated net income attributable…arrow_forwardPorter Corporation purchased 80% of the common stock of Salem Company for $850,000 on January 1, 2013. During the next three years, Salem had the following income and Dividends paid: Year Income Dividends 2013 $100,000 $25,000 2014 $110,000 $35,000 2015 $170,000 $60,000 Prepare the journal entries made under both methods and then compute the ending balance in the "investment" account under both methods.arrow_forwardOn July 1, 2015, Cleopatra Corporation acquired 25% of the shares of Marcus, Inc. for P1,000,000. At that date, the equity of Marcus was P4,000,000, with all the identifiable assets and liabilities being measured at amounts equal to fair value. The table below shows the profits and losses made by Marcus during 2015 to 2019: Year Profit (Loss) 2015 200,000 2016 2,000,000 2017 2,500,000 2018 160,000 2019 300,000 How much will the Investment in Associate account be debited/credited in 2018? Group of answer choices P1,060,000 Cr. P1,035,000 Cr. No entry P40,000 Dr.arrow_forward
- On July 1, 2015, Cleopatra Corporation acquired 25% of the shares of Marcus, Inc. for P1,000,000. At that date, the equity of Marcus was P4,000,000, with all the identifiable assets and liabilities being measured at amounts equal to fair value. The table below shows the profits and losses made by Marcus during 2015 to 2019: Year Profit (Loss) 2015 200,000 2016 2,000,000 2017 2,500,000 2018 160,000 2019 300,000 How much will the Investment in Associate account be debited/credited in 2018? a. P1,035,000 Cr. b. No entry c. P40,000 Dr. d. P1,060,000 Cr.arrow_forwardOn July 1, 2015, Issue Company purchased 80% of the outstanding shares of Intrigue Company at a cost of ₱1,600,000. On that date, Intrigue had ₱1,000,000 of share capital and ₱1,400,000 of retained earnings. For 2015, Issue had income of ₱560,000 from its separate operations and paid dividends of ₱300,000. For 2015, Intrigue reported income of ₱130,000 and paid dividends of ₱60,000. All the assets and liabilities of Intrigue have book values equal to their respective fair market values. Assume income was earned evenly throughout the year except for the intercompany transaction on October 1. On October 1, 2015, Issue purchased an equipment from Intrigue for ₱200,000. The book value of the equipment on that date was ₱240,000. The loss of ₱40,000 is reflected in the income of Intrigue indicated above. The equipment is expected to have a useful life of 5 years from the date of sale. In the December 31, 2015 consolidated statement of financial position, how much is the consolidated net…arrow_forwardAt the beginning of 2016, Pioneer Products’ ownership interest in the common stock of LLB Co. increased to the point that it became appropriate to begin using the equity method of accounting for the investment. The balance in the investment account was $44 million at the time of the change but would have been $56 million if Pioneer had used the equity method and the account had been adjusted for investee net income and dividends. How should Pioneer report the change? Would your answer be the same if Pioneer is changing from the equity method rather than to the equity method?arrow_forward
- On January 1, 2015, P Corporation purchased 80% of S Company’s outstanding shares for ₱620,000. At that date, all of S Company’s assets and liabilities had market values approximately equal to their book values and no goodwill was included in the purchase price. The following information was available for 2015: Income from own operations of P Corporation, ₱150,000; Operating loss of S Company, ₱20,000. Dividends paid in 2015 by P Corporation, ₱75,000; by S Company to P Corporation, ₱12,000. On July 1, 2015, there was a downstream sale of equipment at a gain of ₱25,000. The equipment is expected to have a remaining useful life of 10 years from the date of sale. Also, on January 1, 2015, there was an upstream sale of furniture at a loss of ₱7,500. The furniture is expected to have a useful life of five years from the date of sale. Non-controlling interest is measured at fair market value. How much is the consolidated net income attributable to parent shareholders’ equity? A. ₱97,250B.…arrow_forwardOn January 1, 2015, Paro Company purchases 80% of the common stock of Solar Company for $320,000. Solar has common stock, other paid-in capital in excess of par, and retained earnings of $50,000, $100,000, and $150,000, respectively. Net income and dividends for two years for Solar are as follows: 2015 2016Net income . . . . . . . . . . . . . . . . . . . . . . $60,000 $90,000Dividends. . . . . . . . . . . . . . . . . . . . . . . . 20,000 30,000On January 1, 2015, the only undervalued tangible assets of Solar are inventory and the building. Inventory, for which FIFO is used, is worth $10,000 more than cost. The inventory is sold in 2015. The building, which is worth $30,000 more than book value, has a remaining life of 10 years, and straight-line depreciation is used. The remaining excess of cost over book value is attributed to goodwill.1. Using this information and the information in the following…arrow_forwardOn January 1, 2015, Peanut Company acquired 80% of the common stock of Salt Company for $200,000. On this date, Salt had total owners’ equity of $200,000 (including retained earnings of $100,000). During 2015 and 2016, Peanut accounted for its investment in Salt using the cost method.Any excess of cost over book value is attributable to inventory (worth $12,500 more than cost), to equipment (worth $25,000 more than book value), and to goodwill. FIFO is used for inventories.The equipment has a remaining life of four years, and straight-line depreciation is used. On January 1, 2016, Peanut held merchandise acquired from Salt for $20,000. During 2016, Salt sold merchandise to Peanut for $40,000, $10,000 of which was still held by Peanut on December 31, 2016. Salt’s usual gross profit is 50%.On January 1, 2015, Peanut sold equipment to Salt at a gain of $15,000. Depreciation is being computed using the straight-line method, a 5-year life, and no salvage value. The following trial balances…arrow_forward
- Financial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage LearningEBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT