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 8.2E
To determine
Business combination:
A business combination refers tothe combining of one or more business organizations in a single entity. Business combinations lead to the formation of combined financial statements. After business combination, the entities having separate control merge into one having control over all the assets and liabilities. Merging and acquisition are two types of business combinations.
Consolidated financial statements:
Consolidated financial statements refer to the combined financial statements of entities which are prepared at year-end. Prepared when one organization is either acquired by the other entity or two organizations merged to form a new entity, consolidated financial statements serve the purpose of both the entities about financial information.
To prepare: The
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Question 10
On January 2, 2020, Tuao Company purchased 10% of Abulug Company’s outstanding ordinary shares for P20,000,000. Tuao is the largest single shareholder in Abulug and this gives Tuao the power to participate in the financial and operating policy decisions of the Abulug but is not control or joint control over those policies. Abulug reported profit of P10,000,000 and paid dividend of P4,000,000.
What should be the balance in Tuao’s investment in Abulug Company at the end of 2020?
Group of answer choices
P20,600,000
P21,000,000
P20,000,000
P21,400,000
Exercise 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.
Exercise 4 – 7On January 1, 2020, Levesque Co. purchased 500,000 ordinary shares of Rowland Co. at ₱14 per share, representing a 25% ownership in Rowland. This allowed Levesque to exercise significant control over Rowland. Rowland declared and paid dividends of ₱1 and ₱2 in 2020 and 2021, respectively. At the end of 2020 and 2021, Rowland’s shares were trading at ₱15 and ₱17 per share. Rowland’s net income in 2020 and 2021 was ₱2,400,000 and ₱3,200,000, respectively.1. Determine the investment income recognized by Levesque in 2020 and 2021.2. Determine the carrying amount of Levesque’s investment on December 31, 2020, and December 31, 2021.
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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- Question 5 On January 2, 2020, Theodora Company purchased 40,000 shares of Byzantine, Inc. stock at P100 per share. Brokerage fees amounted to P120,000. A P5 dividend per share of Byzantine, Inc. shares had been declared on December 15, 2019, to be paid on March 31, 2020 to shareholders of record on January 31, 2020. The shares are designated as FVTOCI. On December 31, 2020 the investment has a fair value of P4,200,000. How much should be recognized in the 2020 other comprehensive income related to these securities? Group of answer choices P400,000 P200,000 P80,000 P280,000arrow_forwardProblem 4-35 (Algo) (LO 4-2, 4-3, 4-5) Miller Company acquired an 80 percent interest in Taylor Company on January 1, 2019. Miller paid $744,000 in cash to the owners of Taylor to acquire these shares. In addition, the remaining 20 percent of Taylor shares continued to trade at a total value of $186,000 both before and after Miller’s acquisition. On January 1, 2019, Taylor reported a book value of $464,000 (Common Stock = $232,000; Additional Paid-In Capital = $69,600; Retained Earnings = $162,400). Several of Taylor’s buildings that had a remaining life of 20 years were undervalued by a total of $61,900. During the next three years, Taylor reports income and declares dividends as follows: Year Net Income Dividends 2019 $ 54,400 $ 7,800 2020 70,200 11,700 2021 78,000 15,600 Determine the appropriate answers for each of the following questions: What amount of excess depreciation expense should be recognized in the consolidated financial…arrow_forwardE9–6Subsidiary with Preferred Stock Outstanding Playtown Corporation purchased 75 percent of Sandbox Company common stock and 40 percent of its preferred stock on January 1, 20X6, for $270,000 and $80,000, respectively. At the time of purchase, the fair value of Sandbox’s common shares held by the noncontrolling interest was $90,000. Sandbox’s balance sheet contained the following balances:Preferred Stock ($10 par value) $200,000Common Stock ($5 par value) 150,000Retained Earnings 210,000Total Stockholders’ Equity $560,000page 486 For the year ended December 31, 20X6, Sandbox reported net income of $70,000 and paid dividends of $50,000 (which includes the preferred dividend). The preferred stock is cumulative and pays an annual dividend of 8 percent.Required Prepare the journal entries recorded by Playtown for its investments in Sandbox during 20X6.Present the consolidation entries needed to prepare the consolidated financial statements for Playtown Corporation as of…arrow_forward
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