ADVANCED FINANCIAL ACCOUNTING IA
12th Edition
ISBN: 9781260545081
Author: Christensen
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Question
Chapter 7, Problem 7.12E
To determine
Concept Introduction:
The intercompany transactions occur when the unit of legal entity is having transactions with another unit of the similar entity. This transaction can be divided into two categories such as direct and indirect intercompany transfer. The direct transfer occurs when there is transfer between the different units of the same entity and indirect transfer occurs when the unit of entity acquires debt or assets issued to unrelated entity through another unit of the same entity. This type of transfer will help the entity in improving the flow of finance and asset in efficient manner.
Requirement 1
The consolidated entry to remove the effect of the intercompany sale as of December 31 20X3.
To determine
Concept Introduction:
The intercompany transactions occur when the unit of legal entity is having transactions with another unit of the similar entity. This transaction can be divided into two categories such as direct and indirect intercompany transfer. The direct transfer occurs when there is transfer between the different units of the same entity and indirect transfer occurs when the unit of entity acquires debt or assets issued to unrelated entity through another unit of the same entity. This type of transfer will help the entity in improving the flow of finance and asset in efficient manner.
Requirement 2
The consolidated entry to remove the effect of the intercompany sale as of December 31 20X4.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Preparing the consolidation journal entries for sale of depreciable assets-Equity method
Assume that on January 1, 2011, a wholly owned subsidiary sells to its parent, for a sale price of $132,000, equipment that originally cost $156,000
The subsidiary originally purchased the equipment on January 1, 2007, and depreciated the equipment assuming a 10-year useful life (straight-line
with no salvage value. The parent has adopted the subsidiary's depreciation policy and depreciates the equipment over the remaining useful life of 6
years. The parent uses the full equity method to account for its Equity Investment
a. Compute the annual depreciation expense for the subsidiary (pre-intercompany sale) and the parent (poss-intercompany sale)
Annual depreciation expense-subsidiary $156,000
Annual depreciation expense-parent $ 122,000x
b. Compute the pre-consolidation Gain on Sale recognized by the subsidiary during 2011.
$ 62,400 x
c. Prepare the required consolidation journal entry in 2011…
Preparing the consolidation entries for sale of depreciable assets-Equity method
Assume that on January 1, 2016, a parent sells to its wholly owned subsidiary, for a sale price of $243,000, equipment that originally cost $276,000.
The parent originally purchased the equipment on January 1, 2012, and depreciated the equipment assuming a 10-year useful life (straight-line with
no salvage value). The subsidiary has adopted the parent's depreciation policy and depreciates the equipment over the remaining useful life of 6
years. The parent uses the equity method to account for its Equity Investment.
a. Compute the annual pre-consolidation depreciation expense for the subsidiary (postintercompany sale) and the parent (pre-intercompany sale).
Subsidiary-depreciation $ 40,500
Parent-depreciations 27,600
b. Compute the pre-consolidation Gain on Sale recognized by the parent during 2016.
$ 77,400
c. Prepare the required consolidation entry in 2016 (assume a full year of depreciation)
Debit…
Business Combination Versus Asset Acquisition
Haley Corporation pays $3,900,000 in cash to acquire assets from Jaxon Inc., as follows:
Fair Value
$1,800,000
1,260,000
540,000
Machinery and equipment
Developed technology (limited-life)
Customer lists (limited-life)
In addition, Haley pays $100,000 in cash for legal and advisory costs connected with the acquisition.
Required
Note: Enter all zeros with your numerical answers, do not abbreviate your answers in thousands or in
millions.
a. Prepare the journal entry to record the acquisition, assuming it qualifies as a business combination.
Debit
Credit
To record the business combination
+
+
+
+
+
+
+
+
+
+
To record the asset acquisition
b. Prepare the journal entry to record the acquisition, assuming it is an asset acquisition.
Credit
Debit
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Chapter 7 Solutions
ADVANCED FINANCIAL ACCOUNTING IA
Ch. 7 - Prob. 7.1QCh. 7 - Prob. 7.2QCh. 7 - Prob. 7.3QCh. 7 - Prob. 7.4QCh. 7 - Prob. 7.5QCh. 7 - Prob. 7.6QCh. 7 - Prob. 7.7QCh. 7 - Prob. 7.8QCh. 7 - Prob. 7.9QCh. 7 - Prob. 7.10Q
Ch. 7 - Prob. 7.11QCh. 7 - Prob. 7.12QCh. 7 - Prob. 7.13QCh. 7 - Prob. 7.14QCh. 7 - Prob. 7.15QCh. 7 - Prob. 7.16QCh. 7 - Prob. 7.17QCh. 7 - Prob. 7.18AQCh. 7 - Prob. 7.1CCh. 7 - Prob. 7.2CCh. 7 - Prob. 7.3CCh. 7 - Prob. 7.4CCh. 7 - Prob. 7.5CCh. 7 - Prob. 7.1.1ECh. 7 - Prob. 7.1.2ECh. 7 - Prob. 7.1.3ECh. 7 - Prob. 7.1.4ECh. 7 - Prob. 7.1.5ECh. 7 - Prob. 7.2.1ECh. 7 - Prob. 7.2.2ECh. 7 - Prob. 7.2.3ECh. 7 - Prob. 7.2.4ECh. 7 - Prob. 7.2.5ECh. 7 - Prob. 7.2.6ECh. 7 - Prob. 7.3ECh. 7 - Prob. 7.4ECh. 7 - Prob. 7.5ECh. 7 - Prob. 7.6ECh. 7 - Prob. 7.7ECh. 7 - Transfer of Depreciable Asset at Year-End Pitcher...Ch. 7 - Prob. 7.9ECh. 7 - Sale of Equipment to Subsidiary in Current Period...Ch. 7 - Prob. 7.11ECh. 7 - Prob. 7.12ECh. 7 - Prob. 7.13ECh. 7 - Prob. 7.14ECh. 7 - Prob. 7.15ECh. 7 - Prob. 7.16ECh. 7 - Prob. 7.17ECh. 7 - Prob. 7.18ECh. 7 - Prob. 7.19ECh. 7 - Prob. 7.20ECh. 7 - Prob. 7.21ECh. 7 - Prob. 7.22ECh. 7 - Prob. 7.23AECh. 7 - Prob. 7.24PCh. 7 - Prob. 7.25PCh. 7 - Prob. 7.26PCh. 7 - Prob. 7.27PCh. 7 - Prob. 7.28.1PCh. 7 - Prob. 7.28.2PCh. 7 - Prob. 7.28.3PCh. 7 - Prob. 7.28.4PCh. 7 - Prob. 7.29PCh. 7 - Prob. 7.30PCh. 7 - Prob. 7.31PCh. 7 - Prob. 7.32PCh. 7 - Prob. 7.33PCh. 7 - Prob. 7.34PCh. 7 - Prob. 7.35PCh. 7 - Prob. 7.37PCh. 7 - Prob. 7.38PCh. 7 - Prob. 7.41AP
Knowledge Booster
Similar questions
- XXX Ltd acquires 100% interest in YYY Ltd. On 1 July 2022 XXX Ltd sells an item of plant to YYY Ltd for $145 000 when its carrying value in XXX Ltd’s accounts was $101 250 (cost $168 750, accumulated depreciation $67 500). This plant is assessed as having a remaining useful life of 6 years and the tax rate is 30%. Required: Provide consolidation journal entries for 30 June 2023 to adjust for the above sale.arrow_forwardXXX Ltd acquires 100% interest in YYY Ltd. On 1 July 2022 XXX Ltd sells an item of plant to YYY Ltd for $145 000 when its carrying value in XXX Ltd's accounts was $101 250 (cost $168 750, accumulated depreciation $67 500). This plant is assessed as having a remaining useful life of 6 years and the tax rate is 30%. Required: Provide consolidation journal entries for 30 June 2023 to adjust for the above sale. Please answer asaparrow_forwardOn January 1, 2020, Parent Corporation purchased equipment from its 70% owned subsidiary for $360,000. The total useful life of the equipment was 15 years when Sub originally purchased it on January 1, 2015 for $450,000. Both Parent and Sub use straight- line depreciation. Required: a. Prepare the December 31, 2020 consolidation entry in general journal format. 5. Prepare the December 31, 2023 consolidation entry in general journal format. c. Repeat requirement (b), assuming instead that this had been a downstream sale.arrow_forward
- Preparing the [I] consolidation journal entries for sale of depreciable assets - Equity methodAssume that on January 1, 2011, a wholly owned subsidiary sells to its parent, for a sale price of $126,000, equipment that originally cost $148,000. The subsidiary originally purchased the equipment on January 1, 2007, and depreciated the equipment assuming a 10-year useful life (straight-line with no salvage value). The parent has adopted the subsidiary's depreciation policy and depreciates the equipment over the remaining useful life of 6 years. The parent uses the full equity method to account for its Equity Investment. a. Compute the annual depreciation expense for the subsidiary (pre-intercompany sale) and the parent (post-intercompany sale). Annual depreciation expense-subsidiary Answer Annual depreciation expense-parent Answer b. Compute the pre-consolidation Gain on Sale recognized by the subsidiary during 2011. $Answer c. Prepare the required [I] consolidation journal…arrow_forwardaaa Ltd acquires 100% interest in YYY Ltd. On 1 July 2022 aax Ltd sells an item of plant to YYY Ltd for $145 000 when its carrying value in aaax Ltd's accounts was $101 250 (cost $168 750, accumulated depreciation $67 500). This plant is assessed as having a remaining useful life of 6 years and the tax rate is 30%. Required: Provide consolidation journal entries for 30 June 2023 to adjust for the above sale. Please answer asaparrow_forwardPitcher Corporation purchased 60 percent of Softball Corporation's voting common stock on January 1, 20X1. On January 1, 20X5. Pitcher received $240,000 from Softball for a truck Pitcher had purchased on January 1, 20x2, for $300,000. The truck is expected to have a 10-year useful life and no salvage value. Both companies depreciate trucks on a straight-line basis Required: a. Prepare the worksheet consolidation entry or entries needed at December 31, 20X5, to remove the effects of the intercompany sale Note: If no entry is required for a transaction/event, select "No journal entry required in the first account field. view transaction list Consolidation Worksheet Entries < A Record the entry to eliminate the gain on the truck and to correct the asset's basis. B Note: Enter debits before credits Event 1 Record entry Accounts Clear entry Debit Credit view consolidation entriesarrow_forward
- Northern Company acquired Southern Company. The purchase price included all Southern's assets and liabilities and was in the amount of $673,750. Below is information related to the two companies: Northern $1,052,000 Fair value of assets Fair value of liabilities Reported assets Reported liabilities Net income for the year How much goodwill will Northern record in its acquisition of Southern? 585,000 806,000 488,000 41,000 Southern $784,000 302,000 649,000 264,000 65,000arrow_forwardPadre Ltd. holds 90 percent of the outstanding shares of Sonora Ltd. On January 1, 2019, Padre Ltd. transferred equipment to Sonora for $95,000. The equipment had cost $130,000 originally but had a $50,000 carrying value and five-year remaining life at the date of transfer. Depreciation expense is computed according to the straight-line method with no residual value. Required: What would be the consolidation worksheet entries in relation to this asset when preparing the consolidated financial statements for the following accounting periods ending at (Ignore the tax effect): 31 December 2019 31 December 2020 31 December 2021arrow_forwardDLW Corporation acquired and placed in service the following assets during the year: Date Cost Asset Acquired Basis Computer equipment 3/14 S 16,500 Furniture 2/15 S 18,500 Commercial building 12/16 S 339,000 Assuming DLW does not elect §179 expensing and elects not to use bonus depreciation, answer the following questions: What is DLW's year 3 cost recovery for each asset if DLW sells all of these assets on 5/21 of year 3? computer equipment: furniture: commercial building: Total:arrow_forward
- On December 31, Year 4, Prone Inc. sold a piece of equipment to its 90 percent owned subsidiary, Supine Co. Details are as follows: Original purchase date January 1, Year 1 Original cost to Prone $65,000 Original estimate of salvage value $10,000 Original estimate of economic life 5 years $60,000 Intercompany selling price Both companies use straight-line depreciation. Both companies think that, as of the end of Year 4, the equipment's remaining useful life will be four years and the salvage value will become zero. In preparing its Year 5 consolidated financial statements, consolidated depreciation expense will be reduced by: $8,775 $7,800 O $7,020 O $9,750arrow_forward1-During 2020, Subsidiary sells land to Parent for $126,000. The land had a book value of $104,000. The land is then sold to a third party for $176,000 in 2024. Parent uses the equity method for the 100% investment. Required:a. Prepare the consolidation entry related to the land sale for 2020.b. Prepare the consolidation entry related to the land sale for 2021.c. Prepare the consolidation entry related to the land for 2024.d. What will be the gain on sale on the 2024 consolidated income statement?arrow_forwardAssume El Dorado Inc. buys a competitor’s assets for $900,000. Of the $900,000 acquisition price, $600,000 is allocated to Section 197 Intangible Assets as follows: Customer Lists $60,000 Trade Name $90,000 Non-Compete Covenant 80,000 Patent $120,000 Goodwill $250,000 What is El Dorado’s accumulated amortization and remaining basis in each of its Section 197 Intangibles after 3 years? Use a table to present your answer.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education