Advanced Accounting
7th Edition
ISBN: 9781119373209
Author: JETER, Paul K. Chaney
Publisher: WILEY
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Question
Chapter 7, Problem 5E
To determine
Prepare
- A. P Company purchased the land from S Company.
- B. S Company purchased the land from P Company.
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P Company owns 80% of the outstanding common stock of S Company. On January 1. 2018, S Company sold land to P Company for OMR 500,000. S Company originally purchased the land for OMR 300,000.
On January 1, 2019, P Company Sold the land purchased from S Company to a company outside the affiliated group for OMR 600,000.
Prepare the journal entry of intercompany sales.
Prepare in general journal form the workpaper entries necessary because of the inter company sale of land in the consolidated financial statements workpaper for the year ended December 31, 2019.
Difference between Internal reconstruction and External reconstruction (Merger and acquisition)?
P Company owns 90% of the outstanding common stock of S Company. On January 1, 2020, S Company sold land to P Company for $600,000. S Company originally purchased the land for $400,000. On January 1, 2021, P Company sold the land purchased from S Company to a company outside the affiliated group for $700,000.
Required: Prepare in general journal form the workpaper entries necessary because of the intercompany sale of land in the consolidated financial statements workpaper for the year ended December 31, 2021.
On January 1, 2021, Casey Corporation exchanged $3,300,000 cash for 100 percent of the outstanding voting stock of Kennedy Corporation. Casey plans to maintain Kennedy as a wholly owned subsidiary with separate legal status and accounting information systems.
At the acquisition date, Casey prepared the following fair-value allocation schedule:
Fair value of Kennedy (consideration transferred)
$
3,300,000
Carrying amount acquired
2,600,000
Excess fair value
$
700,000
to buildings (undervalued)
$
382,000
to licensing agreements (overvalued)
(108,000
)
274,000
to goodwill (indefinite life)
$
426,000
Immediately after closing the transaction, Casey and Kennedy prepared the following postacquisition balance sheets from their separate financial records (credit balances in parentheses).
Accounts
Casey
Kennedy
Cash
$
457,000
$
172,500
Accounts receivable
1,655,000…
Chapter 7 Solutions
Advanced Accounting
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Similar questions
- Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2020, in exchange for $6,162,000 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 $2,070,000 including retained earnings of $1,570,000. At the acquisition date, Allison prepared the following fair-value allocation schedule for its newly acquired subsidiary: Consideration transferred $ 6,162,000 Mathias stockholders' equity 2,070,000 Excess fair over book value $ 4,092,000 to unpatented technology (8-year remaining life) $ 912,000 to patents (10-year remaining life) 2,640,000 to increase long-term debt (undervalued, 5-year remaining life) (170,000 ) 3,382,000 Goodwill $ 710,000 Postacquisition, Allison employs the equity method to account for its investment in…arrow_forwardOn January 1, 2021, Casey Corporation exchanged $3,210,000 cash for 100 percent of the outstanding voting stock of Kennedy Corporation. Casey plans to maintain Kennedy as a wholly owned subsidiary with separate legal status and accounting information systems. At the acquisition date, Casey prepared the following fair-value allocation schedule: Fair value of Kennedy (consideration transferred) $ 3,210,000 Carrying amount acquired 2,600,000 Excess fair value $ 610,000 to buildings (undervalued) $ 393,000 to licensing agreements (overvalued) (193,000 ) 200,000 to goodwill (indefinite life) $ 410,000 Immediately after closing the transaction, Casey and Kennedy prepared the following postacquisition balance sheets from their separate financial records (credit balances in parentheses). Accounts Casey Kennedy Cash $ 480,000 $ 166,500 Accounts receivable 1,420,000 295,000 Inventory…arrow_forwardOn Jan 1, 2019, Rudd Company acquired 100% of the common stock of Wilton Company. At that time, Rudd held land with a book value of $100,000 and a fair value of $260,000; Wilton held land with a book value of $50,000 and fair value of $600,000. at what amount would land be reported in Rudd Company balance sheet prepared immediately after the merger ? Select one: a. 860,000 b. 550,000 c. 700,000 d. 590,000arrow_forward
- Boulder, Inc., obtained 90 percent of Rock Corporation on January 1, 2019. Annual amortization of $25,000 is applicable on the allocations of Rock's acquisition-date business fair value. On January 1, 2020, Rock acquired 75 percent of Stone Company's voting stock. Excess business fair-value amortization on this second acquisition amounted to $11,800 per year. For 2021, each of the three companies reported the following information accumulated by its separate accounting system. Separate operating income figures do not include any investment or dividend income. Separate Operating Income Dividends Declared Boulder $360,900 $120,000 Rock 124,900 21,000 Stone 188,000 41,000 Required: What is consolidated net income for 2021? How is 2021 consolidated net income distributed to the controlling and noncontrolling interests? Amount a. Consolidated net income for 2021 b. Controlling interest in consolidated net income…arrow_forwardAllison Corporation acquired all of the outstanding voting stock of Mathias, Incorporated, on January 1, 2023, in exchange for $6,059,500 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 $2,045,000 including retained earnings of $1,545,000. At the acquisition date, Allison prepared the following fair-value allocation schedule for its newly acquired subsidiary: Consideration transferred $ 6,059,500 Mathias stockholders' equity 2,045,000 Excess fair over book value $ 4,014,500 to unpatented technology (8-year remaining life) $ 872,000 to patents (10-year remaining life) 2,590,000 to increase long-term debt (undervalued, 5-year remaining life) (145,000) 3,317,000 Goodwill $ 697,500 Postacquisition, Allison employs the equity method to account for its investment in Mathias. During the two years following the business…arrow_forwardAngela Corporation (a private company) acquired all of the outstanding voting stock of Eddy Tech, Inc., on January 1, 2018, in exchange for $9,000,000 in cash. At the acquisition date, Eddy Tech’s stockholders’ equity was $7,200,000 including retained earnings of $3,000,000. At the acquisition date, Angela prepared the following fair value allocation schedule for its newly acquired subsidiary: At the end of 2018, Angela and Eddy Tech report the following amounts from their individually maintained account balances, before consideration of their parent-subsidiary relationship. Parentheses indicate a credit balance. Required: Prepare a 2018 consolidated income statement for Angela and its subsidiary Eddy Tech. Assume that Angela, as a private company, elects to amortize goodwill over a 10-year period.arrow_forward
- On January 1, 2018 Casey Corporation exchanged $3,300,000 cash for 100 percent of the outstanding voting stock of Kennedy Corporation. Casey plans to maintain Kennedy as a wholly owned subsidiary with separate legal status and accounting information systems.At the acquisition date, Casey prepared the following fair-value allocation schedule:Immediately after closing the transaction, Casey and Kennedy prepared the following postacquisition balance sheets from their separate financial records.Prepare an acquisition-date consolidated balance sheet for Casey Corporation and its subsidiary Kennedy Corporation.arrow_forwardAlpha, Inc. owns 80 percent of outstanding stock of Tulip Corporation. Intra-entity sales of $320,000 occurred during 2020 and again in 2021. This merchandise cost $240,000 each year. Of the total transfers, $70,000 was still held on December 31, 2020, with $50,000 unsold on December 31, 2021. The sales is from Alpha to Tulip. In preparing for year 2021 consolidation entries, to account for intra-entity gross profit deferred from year 2020, it should enter consolidation entry *G by: a. Debit Investment in Tulip at $17,500 b. Debit Retained Earnings at $17,500 c. Debit Inventory at $17,500. d. Credit Inventory at $12,500.arrow_forward4-On January 2, 2019, Moonshine, Inc. acquired Cambridge as a wholly-owned subsidiary, paying an excess of $400,000 over the book value of Hudson's net assets. One-half of the excess was attributable to equipment with a 4-year life, leaving the remainder as goodwill. The parent uses the equity method of pre-consolidation Equity investment bookkeeping. The 2020 financial statements for the two companies are presented below. Moonshine, Inc. Cambridge Sales $2,500,000 $600,000 Cost of goods sold -1,800,000 -350,000 Gross profit 700,000 250,000 Operating expenses -386,000 -82,000 Equity income 118,000 0 Net Income $432,000 $168,000 Retained Earnings, 1/1/20 $2,400,000 $160,000 Net income 432,000 168,000 Dividends -103,000 -19,500 Retained Earnings, 12/31/20 $2,729,000 $308,500 Cash and receivables $1,250,000 $47,500 Inventory 1,540,000 98,000 Equity…arrow_forward
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