Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
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Chapter 7, Problem 4E
To determine
Business combination:
Business combination refers tothe 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.
Value analysis:
The value analysis in a business combination is an essential part of determining the worth of the acquired entity. The
:
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Duko Corporation is acquiring the net assets, exclusive of cash, of Weber Company as of January 1, 2015, at which time Weber Company’s balance sheet is as follows: (see attachment)Duko Corporation feels that the following fair values should be used for Weber’s book values:Cash (no change) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,000Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000Investment in marketable securities . . . . . . . . . . . . . . . . . . 150,000Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 450,000Buildings (no change) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 450,000Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600,000Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,000Income tax payable (no change). . . . . . . . . . . . . . . . . . . . 190,000Duko will issue 20,000 shares of its common…
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All the issued and outstanding common stock of MOA Company were brought by Aura Company on October 1, 2020 for P700,000. The assets and liabilities of Aura Company were:
Cash
50,000
Accounts receivable (net of P25,000 allowance for bad debts)
250,000
Inventory
150,000
Property & Equipment (net of P100,000, allowance for depreciation)
300,000
Accounts payable
130,000
On October 1, 2020 the fair value of the following assets was as follows:
Accounts receivable (net)
235,000
Inventory
130,000
Property & equipment (net)
400,000
There is an unrecorded warranty liability on prior-product sales estimated P20,000 discounted cash flow based on estimated future cash flows.
The amount of goodwill as a result of the business combination should be:
Group of answer choices
65,000
100,000
35,000
Zero
1. On January 1, 2013, the Sara Company entered into a transaction for acquisition of assets andliabilities of Ana Company. Sara issued P400 in long-term liabilities and 40 shares of common stockhaving a par value of P1 per share but a fair value of P10 per share. Sara paid P20 to lawyers,accountants and brokers for assistance in bringing about this purchase. Another P15 was paid inconnection with stock issuance costs. Prior to these transactions, the balance sheets for the twocompanies were as follows:
Sara AnaCash P180 P 40Accounts receivable 810 180Inventory 1,080 280Land 600 360Buildings (net) 1,260 440Equipment (net) 480 100Accounts Payable ( 450) ( 80)Long-term liabilities (1,290) (400)Common stock, P1 par (330)Common stock, P20 par (240)Additional paid-in capital (1,080) (340)Retained earnings (1,260) (340)In Sara’s appraisal of Ana, three assets were deemed to be undervalued in the books of Ana: Inventoryby P10, Land by P40 and Buildings by P60.2. Compute the amount of…
Chapter 7 Solutions
Advanced Accounting
Ch. 7 - Prob. 1UTICh. 7 - Prob. 2UTICh. 7 - Prob. 3UTICh. 7 - Prob. 4UTICh. 7 - Exercise 1 (LO 1) Purchase of shares directly from...Ch. 7 - Prob. 2ECh. 7 - Prob. 3ECh. 7 - Prob. 4ECh. 7 - Prob. 5ECh. 7 - Prob. 6E
Ch. 7 - Prob. 7.1ECh. 7 - Exercise 7 (LO 4) Equity adjustments with...Ch. 7 - Prob. 8.1ECh. 7 - Prob. 8.2ECh. 7 - Prob. 8.3ECh. 7 - Prob. 7.1.1PCh. 7 - Prob. 7.1.2PCh. 7 - Prob. 7.2.1PCh. 7 - Prob. 7.2.2PCh. 7 - Prob. 7.2.3PCh. 7 - Prob. 7.2.4PCh. 7 - Problem 7-4 (LO 3) Sale of partial, then balance...Ch. 7 - Prob. 7.5PCh. 7 - Prob. 7.7.1PCh. 7 - Prob. 7.8.2PCh. 7 - Prob. 7A.1APCh. 7 - Prob. 7A.2.1APCh. 7 - Prob. 7A.2.2AP
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