Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
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Question
Chapter 6, Problem 4E
To determine
Business combination:
Business combination refers to the combining of one or more business organizations in a single entity. The business combination leads to the formation of combined financial statements. After business combination, the entities having separate control merges into one having control over all the assets and liabilities. Merging and acquisition are types of business combinations.
Consolidated financial statements:
The consolidated financial statements refer to the combined financial statements of the entities which are prepared at the year-end. The consolidated financial statements are prepared when one organization is either acquired by the other entity or two organizations merged to form the new entity. The consolidated financial statements serve the purpose of both the entities about financial information.
:
Prepare the entry to record income tax payable on each company’s books.
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(7) H Co acquires S Co for $1,040,000 when the balances of share capital and retained profits of S Co amount to respectively $450,000 and $360,000. S Co holds two properties which are depreciated over 10 years for both tax and accounting purposes, and will be recovered through use. The tax rate is 20%. The carrying amounts, fair values and tax bases of the net
assets of S Co, and resulting temporary differences are shown below:
All the timing differences are temporary differences. All the temporary differences are timing differences.
If the differences between the carrying amount of an asset or liability and its tax base
2
Carrying Amount $
Fair Value $
Tax base $
Property 1 Property 2 Other net assets Total
320,000 390,000 400,000 420,000 90,000 90,000 810,000 900,000
300,000 450,000 90,000 840,000
According to the tax rules, the tax bases of the net assets of S Co are not changed when the net assets are acquired by H Co. What’s the amount of the goodwill?
A.…
N1.
Account
5. PURSUANT TO A COMPLETE LIQUIDATION IN THE CURRENT YEAR Z CORPORATION
DISTRIBUTES TO MOE LAND (FMV $390,000, BASIS OF $425,000) THAT WAS PURCHASED SEVEN YEARS AGO AND HELD FOR INVESTMENT. THAT LAND IS SUBJECT TO A MORTGAGE OF $250,000. MOE OWNS 35% OF Z COPORATION AND HAS A BASIS OF $60,000 IN THOSE SHARES. WHAT ARE THE TAX CONSEQUENCES OF THE LIQUIDATING DISTRIBUTION TO Z CORPORATION AND TO MOE?
Please help me solve questions 1 2 & 3. Thank you!
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 Lake
Scenic
Inventory
$
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…
Chapter 6 Solutions
Advanced Accounting
Ch. 6 - Prob. 1UTICh. 6 - Prob. 2UTICh. 6 - Prob. 3UTICh. 6 - Prob. 4UTICh. 6 - Prob. 5UTICh. 6 - Prob. 6UTICh. 6 - Prob. 7UTICh. 6 - Prob. 1ECh. 6 - Prob. 2ECh. 6 - Prob. 3E
Ch. 6 - Prob. 4ECh. 6 - Problem 6-1 (LO 1) Cash flow, year subsequent to...Ch. 6 - Problem 6-4 (L02) Consolidated EPS. On January 1,...Ch. 6 - Prob. 6.8.1PCh. 6 - Prob. 6.8.2PCh. 6 - Problem 6-9 (LO 3) Worksheet, consolidated...Ch. 6 - Problem 6-9 (LO 3) Worksheet, consolidated...Ch. 6 - Prob. 6.11.1PCh. 6 - Prob. 6.11.2PCh. 6 - Problem 6-12 (LO 4) Worksheet, separate tax,...Ch. 6 - Prob. 6.12.2P
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