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.
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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Prepare the determination and distribution of excess schedule for each of the given situations.
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Advanced Accounting
- BE17.5 (LO 2) Fairbanks Corporation purchased 400 shares of Sherman Inc. common stock for $13,200 (Fairbanks does not have significant influence). During the year, Sherman paid a cash dividend of $3.25 per share. At year-end, Sherman stock was selling for $34.50 per share. Prepare Fairbanks' journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment. (Assume a zero balance in the Fair Value Adjustment account.) BE17.6 (LO 2) Use the information from BE17.5 but assume the stock is nonmarketable. Prepare Fairbanks' journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment, if any.arrow_forwardExercise 4 – 6On January 1, 2020, Blunt Co. purchased 50,000 ordinary shares of Powter Co. at ₱16 per share. The shares are classified as financial asset at fair value through other comprehensive income. Powter declared and paid dividends of ₱4 and ₱5 per share in 2020 and 2021, respectively. At the end of 2020 and 2021, Powter’s shares were trading at ₱17 and ₱14, respectively.1. Determine the dividend income recognized by Blunt on the equity instrument in 2020 and 2021.2. Determine the carrying amount of the equity instrument on Blunt’s statement of financial statement on December 31, 2020 and December 31, 2021.3. Determine the unrealized gain or loss on change in fair value recognized by Blunt in its profit or loss statement for the year ended December 31, 2020 and December 31, 2021.4. Determine the cumulative balance of the unrealized gain or loss recognized in the other comprehensive income of Blunt’s shareholders’ equity on December 31, 2020 and December 31, 2021.arrow_forwardQUESTION 7 At December 31, 2019, Bixby Corporation had 30,000 shares outstanding of $10 par value common stock. The shares were originally issued for $26 per share. On January 1, 2020, Bixby split its common stock 4 for 1 with a corresponding reduction in the stock’s par value. The market price of the stock just before the split was $60 per share. After the split, the balance of the common stock account is: A. $ 900,000 B. $ 780,000 C. $1,800,000 D. $ 300,000arrow_forward
- E 4-4 Equity method The stockholder’s equity accounts of Pop Corporation and Son Corporation at December 31, 2015, were as follows (in thousands): Pop Corporation Son Corporation Capital stock $1,200 $500 Retained earnings 500 100 Total $1,700 $600 On January 1, 2016, Pop Corporation acquired an 80 percent interest in Son Corporation for $580,000. The excess fair value was due to Son’s equipment being undervalued by $50,000 and unrecorded patents. The undervalued equipment had a five-year remaining useful life when Pop acquired its interest. Patents are amortized over 10 years. The income and dividends of Pop and Son are as follows (in thousands): Pop Son 2016 2017 2016 2017 Net income $340 $350 $120 $150 Dividends 240 250 80 90 Required Assume that Pop Corporation uses the equity…arrow_forwardE 4-4 Equity method The stockholder’s equity accounts of Pop Corporation and Son Corporation at December 31, 2015, were as follows (in thousands): Pop Corporation Son Corporation Capital stock $1,200 $500 Retained earnings 500 100 Total $1,700 $600 On January 1, 2016, Pop Corporation acquired an 80 percent interest in Son Corporation for $580,000. The excess fair value was due to Son’s equipment being undervalued by $50,000 and unrecorded patents. The undervalued equipment had a five-year remaining useful life when Pop acquired its interest. Patents are amortized over 10 years. The income and dividends of Pop and Son are as follows (in thousands): Pop Son 2016 2017 2016 2017 Net income $340 $350 $120 $150 Dividends 240 250 80 90 Required Assume that Pop Corporation uses the equity…arrow_forward
- Financial & Managerial AccountingAccountingISBN:9781285866307Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage LearningCorporate Financial AccountingAccountingISBN:9781305653535Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning