Book value: Book value of the asset is found out after deducting accumulated depreciation from the recorded value of the asset. Recorded value is the value at asset enters the books of account of the organization. The fair value of the asset: The fair value of the asset is the amount at which two parties may enter into an agreement with open hand. To Identify: Whether there is excess of cost over book value and provide the accounting treatment.

Question

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Answer 1

Question

Chapter 7, Problem 1UTI

To determine

Book value:

Book value of the asset is found out after deducting accumulated depreciation from the recorded value of the asset. Recorded value is the value at asset enters the books of account of the organization.

The fair value of the asset:

The fair value of the asset is the amount at which two parties may enter into an agreement with open hand.

To Identify:

Whether there is excess of cost over book value and provide the accounting treatment.

Expert Solution & Answer

Explanation of Solution

Compute excess of cost over book value:

Excess of cost over book value = Purchase consideration − Share of parent= $650,000− $510,000 (1)= $140,000

Thus, the excess of the cost price over book value will be debited to goodwill.

Working note 1:

Compute the share of parent in total equity:

Share of parent company = Total equity × Percentage of Ownership= ($650,000 + $200,000) × ( Shares of parent company Total shares issued × 100)= $850,000 × ( 6,000 10,000 × 100)= $510,000

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Answer 2

Question

Chapter 7, Problem 1UTI

To determine

Book value:

Book value of the asset is found out after deducting accumulated depreciation from the recorded value of the asset. Recorded value is the value at asset enters the books of account of the organization.

The fair value of the asset:

The fair value of the asset is the amount at which two parties may enter into an agreement with open hand.

To Identify:

Whether there is excess of cost over book value and provide the accounting treatment.

Expert Solution & Answer

Explanation of Solution

Compute excess of cost over book value:

Excess of cost over book value = Purchase consideration − Share of parent= $650,000− $510,000 (1)= $140,000

Thus, the excess of the cost price over book value will be debited to goodwill.

Working note 1:

Compute the share of parent in total equity:

Share of parent company = Total equity × Percentage of Ownership= ($650,000 + $200,000) × ( Shares of parent company Total shares issued × 100)= $850,000 × ( 6,000 10,000 × 100)= $510,000

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Answer 3

Question

Chapter 7, Problem 1UTI

To determine

Book value:

Book value of the asset is found out after deducting accumulated depreciation from the recorded value of the asset. Recorded value is the value at asset enters the books of account of the organization.

The fair value of the asset:

The fair value of the asset is the amount at which two parties may enter into an agreement with open hand.

To Identify:

Whether there is excess of cost over book value and provide the accounting treatment.

Expert Solution & Answer

Explanation of Solution

Compute excess of cost over book value:

Excess of cost over book value = Purchase consideration − Share of parent= $650,000− $510,000 (1)= $140,000

Thus, the excess of the cost price over book value will be debited to goodwill.

Working note 1:

Compute the share of parent in total equity:

Share of parent company = Total equity × Percentage of Ownership= ($650,000 + $200,000) × ( Shares of parent company Total shares issued × 100)= $850,000 × ( 6,000 10,000 × 100)= $510,000

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Answer 4

Question

Chapter 7, Problem 1UTI

To determine

Book value:

Book value of the asset is found out after deducting accumulated depreciation from the recorded value of the asset. Recorded value is the value at asset enters the books of account of the organization.

The fair value of the asset:

The fair value of the asset is the amount at which two parties may enter into an agreement with open hand.

To Identify:

Whether there is excess of cost over book value and provide the accounting treatment.

Expert Solution & Answer

Explanation of Solution

Compute excess of cost over book value:

Excess of cost over book value = Purchase consideration − Share of parent= $650,000− $510,000 (1)= $140,000

Thus, the excess of the cost price over book value will be debited to goodwill.

Working note 1:

Compute the share of parent in total equity:

Share of parent company = Total equity × Percentage of Ownership= ($650,000 + $200,000) × ( Shares of parent company Total shares issued × 100)= $850,000 × ( 6,000 10,000 × 100)= $510,000

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Answer 5

Chapter 7, Problem 1UTI

To determine

Book value:

Book value of the asset is found out after deducting accumulated depreciation from the recorded value of the asset. Recorded value is the value at asset enters the books of account of the organization.

The fair value of the asset:

The fair value of the asset is the amount at which two parties may enter into an agreement with open hand.

To Identify:

Whether there is excess of cost over book value and provide the accounting treatment.

Expert Solution & Answer

Explanation of Solution

Compute excess of cost over book value:

Excess of cost over book value = Purchase consideration − Share of parent= $650,000− $510,000 (1)= $140,000

Thus, the excess of the cost price over book value will be debited to goodwill.

Working note 1:

Compute the share of parent in total equity:

Share of parent company = Total equity × Percentage of Ownership= ($650,000 + $200,000) × ( Shares of parent company Total shares issued × 100)= $850,000 × ( 6,000 10,000 × 100)= $510,000

Answer 6

Chapter 7, Problem 1UTI

To determine

Book value:

Book value of the asset is found out after deducting accumulated depreciation from the recorded value of the asset. Recorded value is the value at asset enters the books of account of the organization.

The fair value of the asset:

The fair value of the asset is the amount at which two parties may enter into an agreement with open hand.

To Identify:

Whether there is excess of cost over book value and provide the accounting treatment.

Expert Solution & Answer

Explanation of Solution

Compute excess of cost over book value:

Excess of cost over book value = Purchase consideration − Share of parent= $650,000− $510,000 (1)= $140,000

Thus, the excess of the cost price over book value will be debited to goodwill.

Working note 1:

Compute the share of parent in total equity:

Share of parent company = Total equity × Percentage of Ownership= ($650,000 + $200,000) × ( Shares of parent company Total shares issued × 100)= $850,000 × ( 6,000 10,000 × 100)= $510,000

Answer 7

Chapter 7, Problem 1UTI

To determine

Book value:

Book value of the asset is found out after deducting accumulated depreciation from the recorded value of the asset. Recorded value is the value at asset enters the books of account of the organization.

The fair value of the asset:

The fair value of the asset is the amount at which two parties may enter into an agreement with open hand.

To Identify:

Whether there is excess of cost over book value and provide the accounting treatment.

Answer 8

Expert Solution & Answer

Explanation of Solution

Compute excess of cost over book value:

Excess of cost over book value = Purchase consideration − Share of parent= $650,000− $510,000 (1)= $140,000

Thus, the excess of the cost price over book value will be debited to goodwill.

Working note 1:

Compute the share of parent in total equity:

Share of parent company = Total equity × Percentage of Ownership= ($650,000 + $200,000) × ( Shares of parent company Total shares issued × 100)= $850,000 × ( 6,000 10,000 × 100)= $510,000

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Ch. 7 - Prob. 1UTI Ch. 7 - Prob. 2UTI Ch. 7 - Prob. 3UTI Ch. 7 - Prob. 4UTI Ch. 7 - Exercise 1 (LO 1) Purchase of shares directly from...Ch. 7 - Prob. 2E Ch. 7 - Prob. 3E Ch. 7 - Prob. 4E Ch. 7 - Prob. 5E Ch. 7 - Prob. 6E

Explanation of Solution

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Chapter 7 Solutions