ADVANCED ACCOUNTING
ADVANCED ACCOUNTING
14th Edition
ISBN: 9781307664089
Author: Hoyle
Publisher: MCG/CREATE
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Chapter 5, Problem 2Q
To determine

Find the amount of these sales which would be eliminated in consolidated financial statements.

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In a split - off transaction, if the subsidiary's book value is $150 million, and the parent company decides to distribute 80% of the subsidiary's book value to the shareholders of the new entity, how much will a shareholder holding 100 shares in the new entity receive in cash? Assume that the company has 1.25 million shares outstanding.
The owners of Rainier Company are planning to sell the business to new interests. The cumulative net earnings for the past five years amounted to P16,500,000 including expropriation loss of P1,500,000. Goodwill is measured by capitalizing excess earnings at 25% with normal earnings at 20%. The fair value of the net assets of the entity at current year-end was P10,000,000. What is the acquisition cost of the entity? A. 16,400,000 B. 14,000,000 C. 14,400,000 D. 15,200,000
Paloma, Inc., owns 90 percent of Blanca Corporation. Both companies have been profitable for many years. During the current year, the parent sold merchandise to the subsidiary at a transfer price of $194,000. In recording the transfer, the parent recognized cost of goods sold of $139,000. At the end of the year, the subsidiary still held 40 percent of this merchandise in its inventory. Assume that the tax rate is 21 percent. What deferred income tax asset amount is created if a consolidated tax return were filed?
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