Advanced Financial Accounting
12th Edition
ISBN: 9781259916977
Author: Christensen, Theodore E., COTTRELL, David M., Budd, Cassy
Publisher: Mcgraw-hill Education,
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Chapter 5, Problem 5.21.4P
To determine
Introduction: Immediately after business combination, the parent company records income and dividends from subsidiary using equity method, in addition parent must also write off portion of differential of excess acquisition price. Further all the intercompany transactions must be eliminated before preparation of consolidated financial statements.
To choose: The correct answer.
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48.On January 1, 2020, XYZ, Inc. acquired for $ 1,000,000 100% of the voting shares of ABC, Inc. As of December 31, 2020, the market value of the shares was $ 1,450,000. XYZ bought this investment with the objective of retaining it for an indefinite time. Which of the following statements is true regarding XYZ's investment and financial statements?
Select one:
a. This investment requires the XYZ and ABC financial statements to be consolidated and the investment account does not appear in the Statement of Financial Position.
b. In XYZ's unconsolidated books, the investment is reported at amortized cost.
c. This investment requires the financial statements of ABC and XYZ to be consolidated, and the investment account is reported as a long-term asset in the Consolidated Statement of Position.
d. In XYZ's unconsolidated books, the investment is classified as Available for sale.
Webster Corporation acquired 25% of the outstanding common stock of Digest Inc. on January 1, 2022. The purchase price was $2,300,000 for 60,000 shares. Digest declared and paid a $1.10 per share cash dividend on June 30, 2022. The fair market value of the Digest stock at the end of 2022 is $42 per share. Webster can not exert significant influence over Digest and accounts for the investment as an equity investment. This is Webster's only equity investment.
At December 31, 2022 the investment asset will be reported on Webster's balance sheet at what amount?
$2,300,000
$2,484,000
$2,520,000
$2,434,000
For which of the corporate distributions listed below may loss be recognized?
Question options:
A dividend of property with a basis of $500,000 and a value of $450,000
Securities with a value of $500,000 and a basis of $550,000 distributed to its shareholders pro-rata as part of a complete liquidation; the securities were bought by the corporation three years ago with internal funds.
Land with a value of $400,000 and a basis of $470,000 distributed to a 70% shareholder pursuant to a complete liquidation; the land was contributed by the same shareholder 20 months before the liquidation
Chapter 5 Solutions
Advanced Financial Accounting
Ch. 5 - Where is the balance assigned to the...Ch. 5 - Why must a noncontrolling interest be reported in...Ch. 5 - Prob. 5.3QCh. 5 - Prob. 5.4QCh. 5 - Prob. 5.5QCh. 5 - Prob. 5.6QCh. 5 - Prob. 5.7QCh. 5 - Prob. 5.8QCh. 5 - Prob. 5.9QCh. 5 - Prob. 5.10Q
Ch. 5 - Under what Circumstances would a parent company...Ch. 5 - Prob. 5.12QCh. 5 - Prob. 5.13QCh. 5 - Prob. 5.14AQCh. 5 - Prob. 5.15AQCh. 5 - Consolidation Worksheet Preparation The newest...Ch. 5 - Prob. 5.2CCh. 5 - Prob. 5.3CCh. 5 - Prob. 5.4CCh. 5 - Prob. 5.5CCh. 5 - Prob. 5.1.1ECh. 5 - Prob. 5.1.2ECh. 5 - Prob. 5.1.3ECh. 5 - Prob. 5.1.4ECh. 5 - Prob. 5.2.1ECh. 5 - Prob. 5.2.2ECh. 5 - Prob. 5.2.3ECh. 5 - Prob. 5.2.4ECh. 5 - Prob. 5.2.5ECh. 5 - Prob. 5.3ECh. 5 - Prob. 5.4ECh. 5 - Balance Sheet Worksheet Problem Company owns 90...Ch. 5 - Prob. 5.6ECh. 5 - Prob. 5.7ECh. 5 - Prob. 5.8.1ECh. 5 - Prob. 5.8.2ECh. 5 - Prob. 5.8.3ECh. 5 - Prob. 5.8.4ECh. 5 - Prob. 5.8.5ECh. 5 - Prob. 5.8.6ECh. 5 - Prob. 5.8.7ECh. 5 - Prob. 5.9ECh. 5 - Prob. 5.10ECh. 5 - Prob. 5.11ECh. 5 - Prob. 5.12ECh. 5 - Prob. 5.13ECh. 5 - Prob. 5.14ECh. 5 - Prob. 5.15ECh. 5 - Prob. 5.16ECh. 5 - Prob. 5.17AECh. 5 - Prob. 5.18AECh. 5 - Prob. 5.19PCh. 5 - Prob. 5.20PCh. 5 - Prob. 5.21.1PCh. 5 - Multiple-Choice Questions on Applying the Equity...Ch. 5 - Prob. 5.21.3PCh. 5 - Prob. 5.21.4PCh. 5 - Prob. 5.22PCh. 5 - Computation of Account Balances Pencil Company...Ch. 5 - Prob. 5.24PCh. 5 - Equity Entries with Differential On January 1,...Ch. 5 - Equity Entries with Differential Plug Corporation...Ch. 5 - Prob. 5.27PCh. 5 - Prob. 5.28PCh. 5 - Prob. 5.29P
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Choose the correct. McKinley, Inc., owns 100 percent of Jackson Company’s 45,000 voting shares. On June 30, McKinley’s internal accounting records show a $192,000 equity method adjusted balance for its investment in Jackson. McKinley sells 15,000 of its Jackson shares on the open market for $80,000 on June 30. How should McKinley record the excess of the sale proceeds over its carrying amount for the shares?a. Reduce goodwill by $64,000.b. Recognize a gain on sale for $16,000.c. Increase its additional paid-in capital by $16,000.d. Recognize a revaluation gain on its remaining shares of $48,000.arrow_forwardUse this problem for the next two questions: On January 1, year 1, ABC Corporation purchased 80% of XYZ Corporation's P10 par common stock for P975,000. On this date, the carrying amount of XYZ's net assets was P1,000,000. The fair values of XYZ's identifiable assets and liabilities were the same as their carrying amounts except for plant assets (net) with fair values of P100,000 in excess of their carrying amount. The fair value of the noncontrolling interest in XYZ on January 1, year 1, was P250,000. For the year ended December 31, year 1, XYZ had net income of P190,000 and paid cash dividends totaling P125,000. In the January 1, year 1 consolidated balance sheet, goodwill should be reported at ?arrow_forwardQuestion Description Phelp Corporation acquired 80% of the voting stock of Sam Inc. at an acquisition cost of $450,000 on January 1, 2020. The fair value of the noncontrolling interest was $75,000. Sam’s equity at the date of acquisition was as follows: Common stock $ 15,000 Additional paid-in capital 30,000 Retained earnings 75,000 Total $ 120,000 Sam’s identifiable net assets were reported at values approximating fair value except that its inventories were undervalued by $15,000, its plant assets were overvalued by $37,500, and it had previously unreported identifiable intangible assets valued at $127,500. The entire beginning inventories were sold in 2020. The remaining useful life of plant assets and intangible assets was both five years with no salvage value. Sam used straight line depreciation and amortization. During 2020, Sam had a net income of $54,000 and Other Comprehensive Loss of $10,000. On December 23, 2020, Sam declared and paid $8,000…arrow_forward
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