Fundamentals of Advanced Accounting
6th Edition
ISBN: 9780077862237
Author: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik
Publisher: McGraw-Hill Education
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Question
Chapter 5, Problem 11Q
To determine
Explain the manner in which the business combination accounts for these events.
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A subsidiary sells land to the parent company at a significant gain. The parent holds the land for two years and then sells it to an outside party, also for a gain. How does the business combination account for these events?
When two proprietors decide to combine their businesses, generally accepted accounting principles usually require that noncash assets be taken over at their
a.book value as of the date of formation.
b.historical cost value as of the date of formation.
c.fair market value as of the date of formation.
d.residual value as of the date of formation.
Indigo Corporation wants to transfer cash of $150,000 or property worth $150,000 to one of its shareholders, Linda, in a redemption transaction that will be treated as a qualifying stock redemption. If Indigo distributes property, the corporation will choose between two assets that are each worth $150,000 and are no longer needed in its business: Property A (basis of $75,000) and Property B (basis of $195,000).
a. Compute Indigo’s recognized gain or loss if it distributes Property A in redemption of Linda’s shares.
b. Compute Indigo’s recognized gain or loss if it distributes Property B in redemption of Linda’s shares.
c. Compute Indigo’s recognized gain or loss if it sells Property B to an unrelated party and then distributes the sale proceeds in redemption of Linda’s shares.
Chapter 5 Solutions
Fundamentals of Advanced Accounting
Ch. 5 - Prob. 1QCh. 5 - Prob. 2QCh. 5 - Prob. 3QCh. 5 - Prob. 4QCh. 5 - James, Inc., sells inventory to Matthews Company,...Ch. 5 - Prob. 6QCh. 5 - Prob. 7QCh. 5 - Prob. 8QCh. 5 - Prob. 9QCh. 5 - Prob. 10Q
Ch. 5 - Prob. 11QCh. 5 - Prob. 12QCh. 5 - Prob. 13QCh. 5 - Prob. 1PCh. 5 - Prob. 2PCh. 5 - Prob. 3PCh. 5 - Prob. 4PCh. 5 - Prob. 5PCh. 5 - Use the same information as in problem (5) except...Ch. 5 - Prob. 7PCh. 5 - Prob. 8PCh. 5 - Prob. 9PCh. 5 - Prob. 10PCh. 5 - What is the total of consolidated cost of goods...Ch. 5 - Prob. 12PCh. 5 - Prob. 13PCh. 5 - Prob. 14PCh. 5 - What is the consolidated total for inventory at...Ch. 5 - Prob. 16PCh. 5 - Prob. 17PCh. 5 - Prob. 18PCh. 5 - Prob. 19PCh. 5 - Prob. 20PCh. 5 - Prob. 21PCh. 5 - Prob. 22PCh. 5 - Prob. 23PCh. 5 - Prob. 24PCh. 5 - Prob. 25PCh. 5 - Prob. 26PCh. 5 - Prob. 27PCh. 5 - Prob. 28PCh. 5 - Prob. 29PCh. 5 - Prob. 30PCh. 5 - Prob. 31PCh. 5 - Prob. 32PCh. 5 - Prob. 33PCh. 5 - Prob. 34PCh. 5 - Prob. 35PCh. 5 - Prob. 36PCh. 5 - Prob. 1DYSCh. 5 - Prob. 2DYS
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- Assuming the existence of two companies, A and B, which of the following is not a business combination? a. Company A acquires all assets and liabilities of Company B. Company B continues as a company, holding shares of Company A. b. Company C is formed to acquire all the assets and liabilities of Company A and Company B. Both Company A and Company B liquidate. c. Company A acquires all assets and liabilities of Company B, and Company B liquidates. d. Company A acquires a group of assets of Company B, the group of assets not constituting a business. Company B continues to operate as a company.arrow_forwardThe following are independent events: a. A partnership is preparing to become a corporation and sell stock to the public. At this time, it decides to switch from accelerated to straight-line depreciation. b. A company has been debiting half its advertising costs to an intangible asset account and amortizing these costs over 3 years. c. A company has been using accelerated depreciation. It now estimates that the pattern of benefits to be received in the future will be equal each period, so it decides to change to the straight-line depreciation method. d. A company has been using straight-line depreciation for its property, plant, and equipment. It is now buying a new type of machine and elects to use accelerated depreciation on the new machine. e. A company switches from capitalizing certain expenditures to expensing them due to the issuance of an Accounting Standards Update that makes capitalization of these expenditures no longer generally accepted. Required: Identify the correct accounting treatment for the changes (if any) related to the preceding events.arrow_forwardAssuming the existence of two companies, A and B, which of the following is not a business combination? Company C is formed to acquire all the assets and liabilities of Company A and Company B. Both Company A and Company B liquidate. Company A acquires all assets and liabilities of Company B, and Company B liquidates. Company A acquires all assets and liabilities of Company B. Company B continues as a company, holding shares of Company A. Company A acquires a group of assets of Company B, the group of assets not constituting a business. Company B continues to operate as a company.arrow_forward
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