Answered: 1. At the date of an acquisition which…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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1. At the date of an acquisition which resulted to either goodwill or gain on bargain purchase, the acquisition method: A. Consolidates the subsidiary's assets and liabilities at book value. B. Consolidates the subisdiary's assets at fair value and libailities at book value. C. Consolidates the subsidiary's assets at book value and liabilities at fair value. D. Consolidates the subsidiary's assets and liabilities at fair value. 2. The consideration transferred in a business combination will most likely include which of the following? A. The transaction price in an arrangement that is primarily for the benefit of the acquirer or the combined entity. B. A contingent liability with an acquisition-date fair value but imposes an improbable outflow that the acquirer assumes in a business combination. C. The "off-market" value of a reacquired right. D. The acquisition-date fair value of a contingent consideration that is dependent upon the occurrence of a possible, but not probable, future event. 3. It is that portion of profit or loss and net assets of a subsidiary attributable to equity interests that are net assets of a subsidiary attributable to equity interests that are not owned directly by the parent. A. Controlling Interest B. Non-controlling Interest C. Subsidiary Interest D. Residual Interest 4. Exclusive Company owns a 100% interest in Inclusive Corporation. On January 4, 2022, Exclusive sold Inclusive a fixed asset that Inclusive will use over a 5- year period. The asset was sold at a P30,000 profit. In the consolidated statements, this profit will: A. Not be recorded B. Be recognized over 5 years. C. Be recognized when the asset is resold to outsider at the end of its period use. D. Be recognized in the year of sale. 5. On January 1, 20x1, Day Co. acquired 75% interest in Night Co. for P216,000. On this date, the carrying amount of Night's net identifiable assets was P192,000, equal to fair value. Non- The financial statements of the entities on December 31, 20x1 show the following information: controlling interest was measured at a fair value of P72,000. The financial statements of the entities on December 31, 20x1 show the following information: Day Co. ASSETS Investment in subsidiary (at cost) ₱216,000 Equipment, net 480,000 Other assets 240,000 TOTAL ASSETS ₱936,000 Night Co. Equipment, net₱228,000 Other assets 54,000 Total assets ₱282,000 Day, Co. LIABILITIES & EQUITY Liabilities ₱84,000 Share capital 720,000 Retained earnings 132,000 Total equity 852,000 TOTAL LIABILITIES and Equity ₱936,000 Night, Co. LIABILITIES & EQUITY Liabilities ₱30,000 Share capital 120,000 Retained earnings 132,000 Total equity 252,000 TOTAL LIABILITIES & EQUITY ₱282,000 Day, Co. Revenues ₱360,000 Depreciation Expense (48,000) Other expenses (38,400) Gain on sale of Equipment 14,400 Profit for the year 288,000 Night, Co Revenues ₱96,000 Depreciation Expense (14,400) Other expenses (21,600) Profit for the year 60,000 Additional Information: - No dividends were declared by either entity during 20x1. There is also no impairment of giodwill. However, on January 1, 20x1, right after the business combination, Day, Co. Sold equipment with historical cost of 14,400 and accumulated depreciation of 86,400 for Night, Co. and 72,000 for Day, Co. has been depreciating this equipment over a useful life of 10 years using straight line method. Night, co decided to this accounting policy over its remaining useful life of 4 years. Required: 1. What is the carrying amount of the equipment sold by Day Co. to Night Co. in the consolidated financial statements? 2. How much is the Consolidated Equipment-Net? 3. How much is the consolidated Depreciation Expense?

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