Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 5, Problem 5.2.2C
To determine
Introduction: Consolidation is a process in which financial statements of subsidiary is merged with financial statements of the parent. In this process, effect of intercompany transactions are eliminated.
To construct: The balance sheet and income statement in case, parent company purchases bonds of subsidiary from market.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
nkt.2
The Parent company issued $500,000 face value 5% 15-year bonds to an unaffiliated party for $515,000 on January 1st 2016. December 31, 2018 the Subsidiary company paid $485,000 to purchase all of the outstanding parent company’s bonds from 3rd parties. • Prepare the entries for the parent and the sub related to the bond transactions (to record the initial issuance, annual interest and the effective retirement)
Problem 4-35 (Algo) (LO 4-2, 4-3, 4-5)
Miller Company acquired an 80 percent interest in Taylor Company on January 1, 2019. Miller paid $744,000 in cash to the owners of Taylor to acquire these shares. In addition, the remaining 20 percent of Taylor shares continued to trade at a total value of $186,000 both before and after Miller’s acquisition.
On January 1, 2019, Taylor reported a book value of $464,000 (Common Stock = $232,000; Additional Paid-In Capital = $69,600; Retained Earnings = $162,400). Several of Taylor’s buildings that had a remaining life of 20 years were undervalued by a total of $61,900.
During the next three years, Taylor reports income and declares dividends as follows:
Year
Net Income
Dividends
2019
$
54,400
$
7,800
2020
70,200
11,700
2021
78,000
15,600
Determine the appropriate answers for each of the following questions:
What amount of excess depreciation expense should be recognized in the consolidated financial…
E 4-3 General problems
1. Pam Corporation owns a 70 percent interest in Sun Corporation, acquired several years ago at book value. On December 31, 2016, Sun mailed a check for $80,000 to Pam in part payment of an $160,000 account with Pam. Pam had not received the check when the books were closed on December 31. Pam had accounts receivable of $1,200,000 (including the $160,000 from Sun), and Sun had accounts receivable of $1,760,000 at year-end. In the consolidated balance sheet of Pam Corporation and Subsidiary at December 31, 2016, accounts receivable will be shown at what amount?
Use the following information in answering questions 2 and 3.
Pam Corporation purchased a 70 percent interest in Sun Corporation on January 1, 2016, for $112,000, when Sun’s stockholders’ equity consisted of $24,000 common stock, $80,000 additional paid-in capital, and $16,000 retained earnings. Income and dividend information for Sun is as follows:
2016
2017
2018
Net income (or…
Chapter 5 Solutions
Advanced Accounting
Ch. 5 - Prob. 1UTICh. 5 - Subsidiary Company S has $1000,000 of bonds...Ch. 5 - Plessor Industries acquired 80% of the outstanding...Ch. 5 - Company P purchased $100,000 of subsidiary Company...Ch. 5 - Prob. 5UTICh. 5 - Prob. 6UTICh. 5 - Prob. 7UTICh. 5 - Prob. 1ECh. 5 - Prob. 2ECh. 5 - Prob. 3.1E
Ch. 5 - Prob. 3.2ECh. 5 - Prob. 4ECh. 5 - Carlton Company is an 80%- owned subsidiary of...Ch. 5 - Carlton Company is an 80%- owned subsidiary of...Ch. 5 - Prob. 6.1ECh. 5 - Prob. 6.2ECh. 5 - Prob. 7.1ECh. 5 - Prob. 7.2ECh. 5 - Prob. 7.3ECh. 5 - Prob. 8.1ECh. 5 - Prob. 8.3ECh. 5 - Prob. 9ECh. 5 - Prob. 5.1.1PCh. 5 - Prob. 5.1.2PCh. 5 - Prob. 5.2PCh. 5 - Prob. 5.3PCh. 5 - Prob. 5.4PCh. 5 - Prob. 5.5PCh. 5 - Prob. 5.6PCh. 5 - Prob. 5.7PCh. 5 - Prob. 5.8.1PCh. 5 - Prob. 5.8.2PCh. 5 - Prob. 5.9PCh. 5 - Prob. 5.10PCh. 5 - Prob. 5.14PCh. 5 - Prob. 5.2.1CCh. 5 - Prob. 5.2.2CCh. 5 - Prob. 5.3.1CCh. 5 - Prob. 5.3.2CCh. 5 - Prob. 5.3.3CCh. 5 - Prob. 5.3.4C
Knowledge Booster
Learn more about
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
- Problem 3-25 (Algo) (LO 3-1, 3-3a, 3-4) Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2020, in exchange for $6,121,000 in cash. Allison intends to maintain Mathias as a wholly owned subsidiary. Both companies have December 31 fiscal year-ends. At the acquisition date, Mathias’s stockholders’ equity was $2,060,000 including retained earnings of $1,560,000. At the acquisition date, Allison prepared the following fair-value allocation schedule for its newly acquired subsidiary: Consideration transferred $ 6,121,000 Mathias stockholders' equity 2,060,000 Excess fair over book value $ 4,061,000 to unpatented technology (8-year remaining life) $ 896,000 to patents (10-year remaining life) 2,620,000 to increase long-term debt (undervalued, 5-year remaining life) (160,000 ) 3,356,000 Goodwill $ 705,000 Postacquisition, Allison…arrow_forwardQuestion 5 Tinto Ltd obtained control of Suda ltd by acquiring 80% of the issued share capital of Suda ltd at 1 January 2015. The consideration is to be settled as follows: · A cash payment of R1 000 000 · The fair value of machine is R500 000 is recorded in Tinto ltd · Tinto ltd will issue new shares to the seller, to the value of R600 000 Journalize the above transaction in the books of Tinto ltd.arrow_forwardP 4-2 Workpapers and financial statements in year of acquisition Pop Corporation acquired 70 percent of the outstanding voting stock of Son Corporation for $182,000 cash on January 1, 2016, when Son’s stockholders’ equity was $260,000. All the assets and liabilities of Son were stated at fair values (equal to book values) when Pop acquired its 70 percent interest. Financial statements of the two corporations at and for the year ended December 31, 2016, are summarized as follows (in thousands): Pop Son Combined Income and Retained Earnings Statements for the Year Ended December 31 Sales $1,240 $400 Income from Son 42 — Cost of goods sold (800) (260) Operating expenses (308) (80) Net income 174 60 Add: Retained earnings January 1 260 44 Deduct: Dividends (120) (40) Retained earnings December 31 $ 314 $ 64 Balance Sheet at December 31 Cash $ 182 $ 60 Receivables—net…arrow_forward
- P 4-1 Calculations five years after acquisition Pam Corporation purchased 75 percent of the outstanding voting stock of Sun Corporation for $4,800,000 on January 1, 2016. Sun’s stockholders’ equity on this date consisted of the following (in thousands): Capital stock, $10 par $2,000 Additional paid-in capital 1,200 Retained earnings December 31, 2015 1,600 Total stockholders’ equity $4,800 The excess fair value of the net assets acquired was assigned 10 percent to undervalued inventory (sold in 2016), 40 percent to undervalued plant assets with a remaining useful life of eight years, and 50 percent to goodwill. Comparative trial balances of Pam Corporation and Sun at December 31, 2020, are as follows (in thousands): Pam Sun Other assets—net $7,530 $5,200 Investment in Sun—75% 4,680 — Expenses (including cost of sales) 6,370 1,200 Dividends 1,000 400…arrow_forwardP 4-1 Calculations five years after acquisition Pam Corporation purchased 75 percent of the outstanding voting stock of Sun Corporation for $4,800,000 on January 1, 2016. Sun’s stockholders’ equity on this date consisted of the following (in thousands): Capital stock, $10 par $2,000 Additional paid-in capital 1,200 Retained earnings December 31, 2015 1,600 Total stockholders’ equity $4,800 The excess fair value of the net assets acquired was assigned 10 percent to undervalued inventory (sold in 2016), 40 percent to undervalued plant assets with a remaining useful life of eight years, and 50 percent to goodwill. Comparative trial balances of Pam Corporation and Sun at December 31, 2020, are as follows (in thousands): Pam Sun Other assets—net $7,530 $5,200 Investment in Sun—75% 4,680 — Expenses (including cost of sales) 6,370 1,200 Dividends 1,000 400…arrow_forwardMeasurement – IFRS 9 Financial InstrumentsStartUp Ltd. acquires corporate bonds in the amount of five million Euro on the capital market and intends to holds the financial instruments for five years until the liquidity is needed to invest in its infrastructure.Assume the financial instruments bear the character of debt instruments categorized in a • mixed business model• at fair value through other comprehensive incomePlease explain, how StartUp Ltd. needs to measure the financial instruments initially and in subsequent periodsarrow_forward
- P 4-5 Workpapers in year of acquisition (excess recorded for inventory, building, equipment, trademarks, and goodwill) Pam Corporation acquired a 70 percent interest in Sun Corporation’s outstanding voting common stock on January 1, 2016, for $980,000 cash. The stockholders’ equity (book value) of Sun on this date consisted of $1,000,000 capital stock and $200,000 retained earnings. The differences between the fair value of Sun and the book value of Sun were assigned $10,000 to Sun’s undervalued inventory, $28,000 to undervalued buildings, $42,000 to undervalued equipment, and $80,000 to previously unrecorded trademarks. Any remaining excess is goodwill. The undervalued inventory items were sold during 2016, and the undervalued buildings and equipment had remaining useful lives of seven years and three years, respectively. The trademarks have a 40-year life. Depreciation is straight line. At December 31, 2016, Sun’s accounts payable include $20,000 owed to Pam. This $20,000 account…arrow_forwardSUB is an 80% owned subsidiary of PAR. SUB issued $100,000 of 8%, 10-year bonds for $95,000 on 1/1/2011. Annual interest is paid on 12/31/. PAR purchased the bonds on 1/1/2017, for $102,000. Both companies use the straight-line method to amortize the premium/discount on the bonds. 1) How much gain or loss on retirement should be reported in 2017 consolidated statements? Select one: a. 2,000 loss b. 0 c. 4,000 loss d. 2,000 gain 2) The elimination and adjustment process for 2017 consolidated statements include: Select one: a. Credit Investment in Subsidiary Bond 102,000 b. Credit Interest Expense 8,000 c. Debit Interest Revenue 7,500 d. Credit Discount 500 Clear my choicearrow_forwardIntermediate accounting 1, Investments 4. On January 1, 20x1, ABC purchased bonds with face amount of P5,000,000. The entity paid P4,700,000 plus transaction cost of P42,130 for the bond investment. The business model of the entity in managing the financial asset is to collect contractual cash flows that are solely payment of principal and interest and also to sell the bonds the open market. The bonds mature on December 31, 20x3 and pays 6% interest annually on December 31 each year with 8% effective interest rate (after incorporating the transaction cost on initial recognition). The bonds are quoted at 106 and 108 on December 31, 20x1 and December 31, 20x2. The bonds are sold at 103 on July 1, 20x3, excluding accrued interest. Use 4-decimal present value factor. The initial amount of the investment in bonds is (sample answer: 2,350,450)arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
- Financial & Managerial AccountingAccountingISBN:9781285866307Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage LearningAccounting (Text Only)AccountingISBN:9781285743615Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage LearningFinancial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage Learning
Financial & Managerial Accounting
Accounting
ISBN:9781285866307
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Accounting (Text Only)
Accounting
ISBN:9781285743615
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Financial Accounting
Accounting
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Cengage Learning
Financial instruments products; Author: fi-compass;https://www.youtube.com/watch?v=gvxozM3TUIg;License: Standard Youtube License