ADVANCED ACCOUNTING CHAPTERS 15-19
12th Edition
ISBN: 9781337046251
Author: FISCHER
Publisher: CENGAGE C
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter 8, Problem 1UTI
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.
:
Impact of the dividend on the equity of the subsidiary and the investment account.
Expert Solution & Answer
Explanation of Solution
| Date | Accounts Title and Explanation | Post Ref. | Debit ($) | Credit ($) |
| 500,000 | ||||
| Common stock | 10,000 | |||
| Paid in capital in excess of par | 490,000 | |||
| (being the stock dividend recorded) |
Table: (1)
The
Want to see more full solutions like this?
Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
Subsidiary Company S had the following stockholders’ equity on December 31, 2017, prior to distributing a 10% stock dividend:
The fair value of the shares distributed is $50 each. What is the effect of this dividend on the subsidiary equity, the investment account, and the December 31, 2017, elimination procedures? Assume the parent uses the simple equity method to account for its investment in the subsidiary.
Subsidiary Company S had the following stockholders’ equity on December 31, 2017, prior to distributing a 10% stock dividend: Common stock ($1 par), 100,000 shares issued and outstanding . . . . . . . Paid-incapitalinexcessofpar .................................. Retainedearnings ............................................ Totalequity ............................................... $ 100,000 1,900,000 2,000,000 $4,000,000 The fair value of the shares distributed is $50 each. What is the effect of this dividend on the subsidiary equity, the investment account, and the December 31, 2017, elimi- nation procedures? Assume the parent uses the simple equity method to account for its investment in the subsidiary.
Pam Company paid $440,000 for an 80 percent interest in Sun Company on July 1, 2016, when Sun had total equity of $220,000. Sun Company reported earnings of $20,000 for 2016 and declared dividends of $32,000 on November 1, 2016.
RequiredGive the entries to record these facts on the books of Pam Company:
Assuming that Pam Company uses the cost method of accounting for its subsidiaries.Assuming that Pam Company uses the equity method of accounting for its subsidiaries. (Any difference between investment cost and book value acquired is to be assigned to equipment and amortized over a 10-year period.)
Chapter 8 Solutions
ADVANCED ACCOUNTING CHAPTERS 15-19
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Galaxy corporation acquired 80% of the outstanding shares of united company on June 1, 2016 for P3,517,500. United Company's stockholder's equity components at the end of this year as follows: Ordinary shares, P100 par, P1,500,000, Share premium P675,000 and Retained earnings P1, 335,000. Noncontrolling interest is measured at fair value and the fair value is P705,000. The Assets of United were fairly valued, except for inventories, which are overstated by P66,000, and equipment, which was understated by P90,000. Remaining useful life of equipment is 4 year. Stockholder's equity of Galaxy on January 1, 2016 is composed of Ordinary shares P4,500,000, Share premium P1,050,000, Retained earnings P3,150,000. Goodwill, if any, should be written down by P85,350 at year-end. Net income for the first year of parent is P450,000 and the net income of subsidiary from the date of acquisition is P255,000. Dividends declared at the end of the year amounted to P100,000 and P80,000. During the year,…arrow_forwardAttached are the consolidated workpaper balances of Bush, Inc., and its subsidiary, Dorr Corporation, as of December 31, 2016 and 2015:Additional information:a. On January 20, 2016, Bush, Inc., issues 10,000 shares of its common stock for land having a fair value of $215,000.b. On February 5, 2016, Bush reissues all of its treasury stock for $44,000.c. OnMay 15, 2016, Bush pays a cash dividend of $58,000 on its common stock.d. On August 8, 2016, equipment is purchased for $127,000.e. On September 30, 2016, equipment is sold for $40,000. The equipment costs $62,000 and has a net book value of $34,000 on the date of the sale.f. On December 15, 2016, Dorr Corporation pays a cash dividend of $50,000 on its common stock.g. Deferred income taxes represent timing differences relating to the use of accelerated depreciation methods for income tax reporting and the straight-line method for financial reporting.h. Net income for 2016 is as follows:Controlling interest in consolidated net income. .…arrow_forwardAccording to the statements, prepare the appropriate journal entries, and calculate the differences Tony Ltd. acquired 30% of the outstanding ordinary shares of Chang Company on January 1, 2018, by paying $900,000 for the 90,000 shares, Chang declared and paid $0.15 per share cash dividends on March 15, June 15, September 15, and December 15, 2018. Chang reported net income of $160,000 for the year. At December 31, 2018, the market price of Chang ordinary shares was $12 per share. Required: 1. Prepare the journal entries for Tony Ltd. for 2018, assuming Tony Ltd. cannot exercise significant influence over Chang, and Tony Ltd. made an irrevocable election to treat the equity investment as fair value through other comprehensive income. 2. Prepare the journal entries for Tony Ltd. for 2018, assuming tony Ltd. can exercise significant influence over Chang. 3. Indicate the statement of financial position and income statement account balances at December 31, 2018, under each method of…arrow_forward
- On 1/1/2017, Cali Co. acquired all of Malibu's outstanding common stock by issuing 20,000 shares of its own $1 Par Common Stock. On the acquisition date Cali Co.'s stock actively traded at $23.50 per share. On the acquisition date, Malibu reported retained earnings of $230,000 and a total book value of $360,000. What would be the consolidated entry S and C for 12/31/17?arrow_forwardAt December 31, 2016, White Corporation, reported as current assets the following equity securities classified as at Fair Value through Profit or Loss: Red Corporation 1,000 shares, P200 par convertible 10% preference share 450,000 Blue Inc., 6,000 ordinary share 650,000 Yellow Company 2,000 ordinary shares 550,000 Trading securities, at fair value 1,650,000 On January 2, 2017, White purchased 100,000 of P100 par ordinary shares of Green Corporation for P16,000,000 representing 25% of Green’s outstanding ordinary shares and an underlying equity of P15,000,000 in Green’s net assets at January 2. White had no other financial transactions with Green during 2017. As a result of White’s 25% ownership of Green, White has the ability to exercise significant influence over Green’s financial and operating policies. White had no intention of disposing of the Green Corporation ordinary shares within a period of 12 months. During 2017, white disposed of the…arrow_forwardAt December 31, 2016, White Corporation, reported as current assets the following equity securities classified as at Fair Value through Profit or Loss: Red Corporation 1,000 shares, P200 par convertible 10% preference share 450,000 Blue Inc., 6,000 ordinary share 650,000 Yellow Company 2,000 ordinary shares 550,000 Trading securities, at fair value 1,650,000 On January 2, 2017, White purchased 100,000 of P100 par ordinary shares of Green Corporation for P16,000,000 representing 25% of Green’s outstanding ordinary shares and an underlying equity of P15,000,000 in Green’s net assets at January 2. White had no other financial transactions with Green during 2017. As a result of White’s 25% ownership of Green, White has the ability to exercise significant influence over Green’s financial and operating policies. White had no intention of disposing of the Green Corporation ordinary shares within a period of 12 months. During 2017, white disposed of the…arrow_forward
- At December 31, 2016, White Corporation, reported as current assets the following equity securities classified as at Fair Value through Profit or Loss: Red Corporation 1,000 shares, P200 par convertible 10% preference share 450,000 Blue Inc., 6,000 ordinary share 650,000 Yellow Company 2,000 ordinary shares 550,000 Trading securities, at fair value 1,650,000 On January 2, 2017, White purchased 100,000 of P100 par ordinary shares of Green Corporation for P16,000,000 representing 25% of Green’s outstanding ordinary shares and an underlying equity of P15,000,000 in Green’s net assets at January 2. White had no other financial transactions with Green during 2017. As a result of White’s 25% ownership of Green, White has the ability to exercise significant influence over Green’s financial and operating policies. White had no intention of disposing of the Green Corporation ordinary shares within a period of 12 months. During 2017, white disposed of the…arrow_forwardOn June 1, 2016, Pat Corporation declared a bonus issue entitling its shareholders to one additional share for each share held. At the time the dividend was declared, the fair value was P10 per share and the par value was P5 per share. On this date, Pat had 600,000 of ordinary shares outstanding. What entry should Pat make to record this transaction? A. Retained Earnings 6,000,000 Share Dividends Distributable 3,000,000 Share Premium 3,000,000B. Share Dividends Payable 6,000,000 Share Dividends Distributable 3,000,000 Share Premium 3,000,000C. Retained Earnings 3,000,000 Share Dividends Distributable 3,000,000D. No entryarrow_forwardOn 1 October 2018, KING acquired 30,000 of VAM's 100,000 shares in exchange for 75,000 of its own shares. The market value of KING's shares at the date of this share exchange was $3.20 per share. VAM's net profit for the financial year ended 31 March 2019 was $200,000. $40,000 of this profit was made by VAM from 1 April 2018 to 30 September 2018. VAM is the only associate of KING. What amount will be shown as 'investment in associate' in the consolidated statement of financial position of KING as at 31 March 2019? Please provide explaination. A) $288,000 B) $300,000 C) $156,000 D) $252,000 E) None of the abovearrow_forward
- Haynes, Inc., obtained 100 percent of Turner Company’s common stock on January 1, 2017, by issuing 11,200 shares of $10 par value common stock. Haynes’s shares had a $15 per share fair value. On that date, Turner reported a net book value of $120,200. However, its equipment (with a five-year remaining life) was undervalued by $8,700 in the company’s accounting records. Also, Turner had developed a customer list with an assessed value of $39,100, although no value had been recorded on Turner’s books. The customer list had an estimated remaining useful life of 10 years. The following balances come from the individual accounting records of these two companies as of December 31, 2017: Haynes Turner Revenues $ (638,000 ) $ (351,000 ) Expenses 465,000 191,000 Investment income Not given 0 Dividends declared 90,000 80,000 The following balances come from the individual accounting records of these two companies as of December 31, 2018: Haynes…arrow_forwardPop corporation paid $686,000 for a 30 percent interest in son corporation's outstanding voting stock on april 1, 2016. at december 31, 2015, son had net assets of $2,000,000 and only common stock outstanding. during 2016, son declared and paid dividends of $40,000 each quarter on march 15, june 15, september 15, and december 15 ($160,000 in total). at april 1, 2016, the book value of assets and liabilities equals the fair value. son's 2016 income was reported as follows:arrow_forwardMoosa LLC is a company with a December 31 year end . On January 1, 2014, the company acquires 1000 shares of Mubarak LLC at a cost of OMR 10 per share. Transaction costs total OMR 100. The investment does not give Moosa LLC influence over , or control of Mubarak LLC . Moosa LLC classifies these shares as held for trading . On December 31, 2014, the fair value of the Mubarak LLC shares has increased to OMR 15 per share. The Mubarak LLC shares did not declare or pay any dividends during 2014 On March 1, 2015 , Moosa LLC sells all of the Mubarak LLC shares for OMR 18 per share. Transaction costs the disposal are OMR 150.Prepare Journal Entries in the books of Ismail LLCarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Financial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage Learning
Financial Accounting
Accounting
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Cengage Learning
Financial instruments products; Author: fi-compass;https://www.youtube.com/watch?v=gvxozM3TUIg;License: Standard Youtube License