19, X acquired share ownership of 2 entities, namely Y and Z with the following information: • X acquired 30% of shares in Y, of which X previously owned 40% of Y's shares. Based on the analysis conducted by X, the additional 30% ownership of the shares resulted in X having control over Y. • X acquired 20% of Z's shares, of which X previously owned 60% of Z's shares. Based on the analysis carried out by X, X has control over Z. retains control over Z. Towards the end of 2020, X sold part of its ownership in both companies, with the following information: • X sells 15% of its ownership in Y shares. Based on the analysis conducted by X, the sale does not cause X to lose control over Y. • X sells 40% of its ownership in Z shares. Based on the analysis conducted by X, the sale causes X to lose control over Z.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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In early 2019, X acquired share ownership of 2 entities, namely Y and Z with the following information: 

• X acquired 30% of shares in Y, of which X previously owned 40% of Y's shares. Based on the analysis conducted by X, the additional 30% ownership of the shares resulted in X having control over Y. 

• X acquired 20% of Z's shares, of which X previously owned 60% of Z's shares. Based on the analysis carried out by X, X has control over Z. retains control over Z. 

 

Towards the end of 2020, X sold part of its ownership in both companies, with the following information: 

• X sells 15% of its ownership in Y shares. Based on the analysis conducted by X, the sale does not cause X to lose control over Y.

 • X sells 40% of its ownership in Z shares. Based on the analysis conducted by X, the sale causes X to lose control over Z. 

 

Explain how the accounting treatment for X for ownership of Y and Z when:

1. Acquisition of additional shares in early 2019.

2. Sale of partial ownership towards the end of 2020.

Expert Solution
Step 1

Acquisition of business:

The acquisition of a business can be defined as a business strategy used for the expansion of the business. Under the scheme of acquisition, a business unit acquires control over another business unit to expand its size and scale of operation.

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