Consolidation on date of acquisition - Equity method with noncontrolling interest and AAP Assume that a parent company acquires an 80% interest in its subsidiary for a purchase price of $620,800. The excess of the total fair value of the controlling and noncontrolling interests over the book value of the subsidiary's Stockholders Equity is assigned to a building (in PPE, net) that the parent believes is worth $50,000 more than its book value, an: unrecorded Patent that the parent valued at $100,000, and Goodwill of $150,000, 80% of which is allocated to the parent. Th parent and the subsidiary report the balance sheets on the acquisition date in b. below: a. Prepare the consolidation entries on the acquisition date. Consolidation Worksheet Debit Description [E] Common stock APIC Retained earnings Equity investment Noncontrolling interest [A] PPE, net Patent Goodwill Equity investment Noncontrolling interest 47,600 59,500 368,900 0 - 0 50,000 100,000 0 0 0 Credit 0 0 a 0 0 0 0 0 0 0 0

Consolidation on date of acquisition - Equity method with noncontrolling interest and AAP Assume that a parent company acquires an 80% interest in its subsidiary for a purchase price of $620,800. The excess of the total fair value of the controlling and noncontrolling interests over the book value of the subsidiary's Stockholders Equity is assigned to a building (in PPE, net) that the parent believes is worth $50,000 more than its book value, an: unrecorded Patent that the parent valued at $100,000, and Goodwill of $150,000, 80% of which is allocated to the parent. Th parent and the subsidiary report the balance sheets on the acquisition date in b. below: a. Prepare the consolidation entries on the acquisition date. Consolidation Worksheet Debit Description [E] Common stock APIC Retained earnings Equity investment Noncontrolling interest [A] PPE, net Patent Goodwill Equity investment Noncontrolling interest 47,600 59,500 368,900 0 - 0 50,000 100,000 0 0 0 Credit 0 0 a 0 0 0 0 0 0 0 0

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: A parent company owns 80% of the issued capital of its subsidiary. On consolidation, a sale of…

A: Lets understand the basics. When there is transaction between the parent entity and subsidiary…

Q: Assume on July 1, 2022, a parent company paid $1,656,000 to purchase an 80% interest in a…

A: The Goodwill is the amount of purchase consideration paid in excess of fair value of net…

Q: Which item is eliminated when preparing a consolidation worksheet? a. Equipment acquisitions Macca…

A: Eliminating intercompany transactions and balances ensures that the consolidated financial…

Q: Assume a parent company acquired 80% of the outstanding voting common stock of a subsidiary on…

A: Consolidation in accounting refers to the process of combining the financial statements of a parent…

Q: The amount of goodwill (gain from a bargain purchase) resulting from the business combination is 2.…

A: Step 1: Calculation of Identifiable Net Assets of Subsidiary Company Particulars Amount Amount…

Q: Assigning bargain purchase gain (i.e., "negative goodwill") to controlling and noncontrolling…

A: Goodwill is the amount of purchase consideration which is paid in excess of fair value of net…

Q: Measurement of Goodwill A parent has purchased a 100% interest in a subsidiary for $30,000. On the…

Q: 56. Consolidation subsequent to date of acquisition—Equity method with noncontrolling interest, AAP,…

A: Part 2: Explanation:Step 1: Calculation of GoodwillOn January 1, 2016, the parent company acquired…

Q: goodwill or (gain on acquisition) arising on consolidation ace price?

A: Fair value of assets = P1,280,000 Less: Fair value of Liabilities = P716,000 Identifiable net…

Q: Assigning bargain purchase gain (i.e., "negative goodwill") to controlling and noncontrolling…

A: The Goodwill is the amount of purchase consideration which is paid in excess of fair value of net…

Q: psons aujo be a pas de send us aedade

A: #Note It has been assumed that only requirement A is required to answer. The Additional paid in…

Q: am. 102.

A: We can explain further as follows;Key Concepts1. Equity Method: The equity method is used by a…

Q: What amount of revenues will be reported in the consolidated financial statements for the year ended…

A: Total Sales Recognized = Total Sales - Inter firm Sales

Q: Noncontrolling interest and intercompany sale of depreciable assets Assume on January 1, 2018, a…

A: Correct answer will be d. $16200 Because, the unrealised profit will be deducted from the income of…

Q: Consolidation at date of acquisition (purchase price equals book value) A parent company acquires…

A: The acquisition takes place whenever the company buys the shares or take over which is the purchase…

Q: a. Given the following acquisition-date balance sheets of the parent and subsidiary, at what amounts…

A: a). Amounts will be reported on the consolidated balance sheet 1 Accounts Receivable…

Q: ubsidiary company issued $1,000,000 (face) 6 percent, five-year bonds to an unaffiliated company for…

A: Parent company acquires an 80% interest in its Subsidiary on January 1, 2020. On January 1, 2020,…

Q: Consolidation on date of acquisition - Equity method with noncontrolling interest and AAP Assume…

A: IFRS 3 Business Combinations outlines the accounting when an acquirer obtains control of a business…

Q: Assume on January 1, 2018, a parent company acquired a 75% interest in a subsidiary’s voting common…

A: The question is related to Consolidation. The Straight-line Method is calculated with the help of…

Q: 29

A: INTRODUCTION: If one firm acquires the assets and liabilities of another, accounting for…

Question

b. Prepare the consolidation spreadsheet on the acquisition date.
Cash
Accounts receivable
Inventory
Equity investment
Patent
Goodwill
PPE, net
Total Assets
Current liabilities
Long-term liabilities
Common stock
APIC
Noncontrolling interest
Parent Subsidiary
$460,378 $107,576
362,880
165,648
549,990
212,772
620,800
2,645,622
$4,639,670
$407,390
2,000,000
463,523
344,453
Retained earnings
1,424,304
Total Liabilities and Equity $4,639,670
[A]
[A]
393,652 [A]
$879,648
$165,648
238,000
47,600 [E]
59,500 [E]
368,900 [E]
$879,648
Elimination Entries
cr
Dr
100,000
0
50,000
47,600
59,500
368,900
0
0 [E]
O [A]
0 [E]
0 [A]
0
Consolidated
567,954
528,528
762,762
$
$
$
$
0
100,000
0
0
573,038
2,238,000
463,523
344,453
0
1,424,304
0

Consolidation on date of acquisition - Equity method with noncontrolling interest and AAP
Assume that a parent company acquires an 80% interest in its subsidiary for a purchase price of $620,800. The excess of the total fair value of the controlling and noncontrolling interests over the book value of the subsidiary's Stockholders'
Equity is assigned to a building (in PPE, net) that the parent believes is worth $50,000 more than its book value, an: unrecorded Patent that the parent valued at $100,000, and Goodwill of $150,000, 80% of which is allocated to the parent. The
parent and the subsidiary report the balance sheets on the acquisition date in b. below:
a. Prepare the consolidation entries on the acquisition date.
Consolidation Worksheet
Debit
Description
[E] Common stock
APIC
Retained earnings
Equity investment
Noncontrolling interest
[A] PPE, net
Patent
Goodwill
Equity investment
Noncontrolling interest
47,600
59,500
368,900
0
0
50,000
100,000
0
0
0
Credit
0
0
0
0
0
0
0
0
0
0

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: Definition:

VIEW

Step 2: Requirement (a):

VIEW

Step 3: Requirement (b):

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 4 steps with 5 images

SEE SOLUTION Check out a sample Q&A here

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

Consolidated net income and net income attributable to the noncontrolling interest Assume that on January 1, 2021, a parent company acquired an 85% interest in a subsidiary's voting common stock. On the date of acquisition, the fair-value of the subsidiary's net assets equaled their reported book values except for machinery and equipment, which had a fair value of $720,000 and a reported book value of $300,000. the machinery and equipment had a 5-year remaining useful life and no salvage value. The following are the highly summarized pre-consolidation income statements of the parent and subsidiary for the year ended December 31, 2022: Income Statement Parent Subsidiary Revenues $2,592,000 $345,600 75,480 (1,728,000) (172,800) $939,480 $172,800 Equity income Expenses Net income For the year ended December 31, 2022, what amounts will be reported for (1) consolidated net income and (2) net income attributable to the noncontrolling interest, respectively, in the parent's consolidated…
46. Consolidation at the end of the first year subsequent to date of acquisition-Equity method (purchase price equals book value) Assume a parent company acquires its subsidiary on January 1, 2022, by exchanging 30,000 shares of its $1 par value Common Stock, with a market value on the acquisition date of $17 per share, for all of the outstanding voting shares of the acquiree. You have been charged with preparing the consolidation of these two companies at the end of the first year. On the acquisition date, all of the subsidiary's assets and liabilities had fair values equaling their book values. The parent uses the equity method of pre-consolidation Equity investment bookkeeping. Following are financial statements of the parent and its subsidiary for the year ended December 31, 2022. LO2 X
Equity method and consolidations Assume that a parent company acquired 80% of the outstanding voting common stock of a subsidiary on January 1, 2018. On the acquisition date, the identifiable net assets of the subsidiary had fair values that approximated their recorded book values except for a patent, which had a fair value of $200,000 and no recorded book value. On the date of acquisition, the patent had five years of remaining useful life and the parent company amortizes its intangible assets using straight line amortization. During the year ended December 31, 2019, the subsidiary recorded sales to the parent in the amount of $240,000. On these sales, the subsidiary recorded pre-consolidation gross profits equal to 25%. Approximately 30% of this merchandise remains in the parent’s inventory at December 31, 2019. The following summarized pre-consolidation financial statements are for the parent and the subsidiary for the year ended December 31, 2019: Investor Investee Income…
Assume a parent company acquired 80% of the outstanding voting common stock of a subsidiary on January 1, 2018. On the acquisition date, the identifiable net assets of the subsidiary had fair values that approximated their recorded book values except for a patent, which had a fair value of $200,000 and no recorded book value. On the date of acquisition, the patent had five years of remaining useful life and the parent company amortizes its intangible assets using straight line amortization. During the year ended December 31, 2019, the subsidiary recorded sales to the parent in the amount of $240,000. On these sales, the subsidiary recorded pre-consolidation gross profits equal to 25%. Approximately 30% of this merchandise remains in the parent’s inventory at December 31, 2019. The following summarized pre-consolidation financial statements are for the parent and the subsidiary for the year ended December 31, 2019: Investor Investee Income statement: Revenues $4,800,000…
Noncontrolling interest and intercompany sale of depreciable assets Assume on January 1, 2018, a parent company acquired a 75% interest in a subsidiary’s voting common stock. On the date of acquisition, the fair value of the subsidiary’s net assets equaled their reported book values. On January 1, 2020, the subsidiary purchased a building for $777,600 The building has a useful life of 8 years and is depreciated on a straight-line basis with no salvage value. On January 1, 2022, the subsidiary sold the building to the parent for $648,000 The parent estimated that the building had a six-year remaining useful life and no salvage value. The parent also uses the straight-line method of amortization. For the year ending December 31, 2022, the parent’s “stand-alone” income (i.e., net income before recording any adjustments related to preconsolidation investment accounting) is $810,000 . The subsidiary’s recorded net income is $162,000. Based on this information, determine the balance for…
Pushdown Accounting Assume a parent company acquires its subsidiary by paying $1,700,000 for all of the outstanding voting shares of the investee. On the acquisition date, subsidiary's assets and liabilities have individual fair values that equal their book values, except for property equipment with a fair value greater than book value by $150,000 and license with a fair value greater than book value by $250,000. The parent and subsidiary have the following balance sheets immediately after the acquisition, but before any pushdown adjustments by the subsidiary: Parent Parent Subsidiary Assets: Cash & receivables $ 800,000 $ 350,000 Inventory 600,000 200,000 Property & equipment, net 2,300,000 1,025,000 Equity investment 1,700,000 Licenses - 275,000 $ 5,400,000 $ 1,850,000 Liabilities and stockholders' equity: Current liabilities $ 400,000 $ 400,000 Other liabilities 300,000 - Note payable - 600,000 Common stock 1,670,000…
Assume a parent company owns a 100% controlling interest in its long-held subsidiary. The following excerpts are from the parent’s and subsidiary’s pre-consolidation income statements for the year ending December 31, 2019: Parent Subsidiary Revenues $3,000,000 $2,000,000 Cost of goods sold (2,250,000) (1,300,000) Gross profit $750,000 $700,000 On January 1, 2019, the subsidiary held no inventories purchased from the parent. During the year ending December 31, 2019, the parent company sold $400,000 of inventory to its subsidiary. All of the parent’s sales to affiliates and non-affiliates have the same gross margin. At December 31, 2019, the subsidiary still held in its inventory $120,000 of merchandise purchased from the parent. The remaining inventory was sold to unaffiliated third-party customers during the year ended December 31, 2020. Intercompany sales, profits in ending inventoryWhat amount of gross profit will be reported in the consolidated…