ADVANCED FINANCIAL ACCOUNTING IA
12th Edition
ISBN: 9781260545081
Author: Christensen
Publisher: MCG
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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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As a long-term investment, Fair Company purchased 20% of Midlin Company's 160,000 shares for $192,000 at the
beginning of the reporting year of both companies. During the year, Midlin earned net income of $121,000 and distributed
cash dividends of $0.20 per share. At year-end, the fair value of the shares is $200,000.
2. Assume significant influence was acquired. How will the investment in Midlin Company be reflected in the balance sheet and
income statement of Fair Company at year-end?
Balance Sheet
(Partial)
Income Statement
(Partial)
47.ABC Corp acquired 30,000 shares of XYZ Co. The shares were actively traded in the three markets. The following data were made available: PSE Nikkei NYSEMarket Price 100 105 102Transaction Cost 4 10 5Transport costs 5 10 20ABC Corp normally buys and sells XYZ's shares in PSE and designate them as investment held for FVOCI. The entry to record the acquisition would include:
Dr. Investment in equity securities- FVOCI, P2,850,000
Dr Investment in debt equity - FVOCI P2,850,000
Dr Investment in equity security - FVOCI P2,970,000
Dr. Investment in debt equity- FVOCI P3,120,000
3. What is the carrying amount of the investment in
of the outstanding ordinary shares of Free Company for
P5,000,000 cash. Cyber Company accounts for this investment
At the date of acquisition, Free Company's net assets had a
excess of carrying amount. The land was sold during the
Free Company owned land with a fair value of P1,000,000 in
At the beginning of current year, Cyber Company bought 30%
Problem 17-16 (IAA)
by the equity method.
carrying amount of P12,000,000.
a
current year.
The remaining difference between the purchase price and
ihe carrying amount of the underlying equity cannot be
attributed to any identifiable tangible or intangible asset.
Accordingly, the remaining difference is allocated to
goodwill.
Free Company reported net income of P6,000,000 and paid
cash dividend of P1,500,000 during the current year.
1. What is the implied goodwill from the acquisition?
a. 1,400,000
b. 1,000,000
с. 1,100,000
d.
2. What amount should be reported as investment income
for the…
Chapter 5 Solutions
ADVANCED FINANCIAL ACCOUNTING IA
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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- Required information Skip to question [The following information applies to the questions displayed below.] As a long-term investment, Painters' Equipment Company purchased 20% of AMC Supplies Incorporated's 400,000 shares for $480,000 at the beginning of the fiscal year of both companies. On the purchase date, the fair value and book value of AMC’s net assets were equal. During the year, AMC earned net income of $250,000 and distributed cash dividends of 25 cents per share. At year-end, the fair value of the shares is $505,000. 2. Assume significant influence was acquired. Prepare the appropriate journal entries from the purchase through the end of the year. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.arrow_forwardCn you help me to solve this question please? Placid Lake Corporation acquired 70 percent of the outstanding voting stock of Scenic, Inc., on January 1, 2017, when Scenic had a net book value of $440,000. Any excess fair value was assigned to intangible assets and amortized at a rate of $7,000 per year. Placid Lake's 2018 net income before consideration of its relationship with Scenic (and before adjustments for intra-entity sales) was $340,000. Scenic reported net income of $150,000. Placid Lake declared $140,000 in dividends during this period; Scenic paid $44,000. At the end of 2018, selected figures from the two companies' balance sheets were as follows: Placid LakeScenicInventory$180,000 $94,000 Land 640,000 240,000 Equipment (net) 440,000 340,000 During 2017, intra-entity sales of $95,000 (original cost of $50,000) were made. Only 10 percent of this inventory was still held within the consolidated entity at the end of 2017. In 2018, $130,000 in intra-entity sales were made…arrow_forwardRequired information Skip to question [The following information applies to the questions displayed below.] As a long-term investment, Painters' Equipment Company purchased 20% of AMC Supplies Incorporated's 400,000 shares for $480,000 at the beginning of the fiscal year of both companies. On the purchase date, the fair value and book value of AMC’s net assets were equal. During the year, AMC earned net income of $250,000 and distributed cash dividends of 25 cents per share. At year-end, the fair value of the shares is $505,000. Required: 1. Assume no significant influence was acquired. Prepare the appropriate journal entries from the purchase through the end of the year. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.arrow_forward
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