Effects of qualifying as a business on asset acquisitions Assume that on January 1, 2019 an investor company paid $2,250 to an investee company in exchange for the following assets and liabilities transferred from the investee company: Asset (Liability) Production equipment Factory Land Patents Investee's Estimated Fair Value Description Production equipment Factory Land Patents Book Value $300 1,500 100 Cash In addition, the investor provided to the seller contingent consideration with a fair value of $200 and the investor paid an additional $50 of transaction costs to an unaffiliated third party. The contingent consideration has a potential settlement value of $450 in two years, and is not a derivative financial instrument. The book values are from the investee's financial records immediately before the exchange. The fair values are measured in accordance with FASB ASC 820: Fair Value Measurement. Parts a. and b. are independent of each other. If no additional debit or credit entries are required, select "No entry" as the answer. a. Provide the journal entry recorded by the investor company assuming that the net assets transferred from the investee do not qualify as a "business," as that ter defined in FASB ASC Master Glossary. General Journal - + + + $240 1,200 600 360 Debit Credit
Effects of qualifying as a business on asset acquisitions Assume that on January 1, 2019 an investor company paid $2,250 to an investee company in exchange for the following assets and liabilities transferred from the investee company: Asset (Liability) Production equipment Factory Land Patents Investee's Estimated Fair Value Description Production equipment Factory Land Patents Book Value $300 1,500 100 Cash In addition, the investor provided to the seller contingent consideration with a fair value of $200 and the investor paid an additional $50 of transaction costs to an unaffiliated third party. The contingent consideration has a potential settlement value of $450 in two years, and is not a derivative financial instrument. The book values are from the investee's financial records immediately before the exchange. The fair values are measured in accordance with FASB ASC 820: Fair Value Measurement. Parts a. and b. are independent of each other. If no additional debit or credit entries are required, select "No entry" as the answer. a. Provide the journal entry recorded by the investor company assuming that the net assets transferred from the investee do not qualify as a "business," as that ter defined in FASB ASC Master Glossary. General Journal - + + + $240 1,200 600 360 Debit Credit
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Effects of qualifying as a business on asset acquisitions
Assume that on January 1, 2019 an investor company paid $2,250 to an investee company in exchange for the following assets and liabilities transferred from the
investee company:
Asset (Liability)
Production equipment
Factory
Land
Patents
Investee's Estimated Fair
Value
Description
Production equipment
Factory
Land
Patents
Book Value
$300
1,500
100
In addition, the investor provided to the seller contingent consideration with a fair value of $200 and the investor paid an additional $50 of transaction costs to an
unaffiliated third party. The contingent consideration has a potential settlement value of $450 in two years, and is not a derivative financial instrument. The book
values are from the investee's financial records immediately before the exchange. The fair values are measured in accordance with FASB ASC 820: Fair Value
Measurement.
Cash
Parts a. and b. are independent of each other.
If no additional debit or credit entries are required, select "No entry" as the answer.
a. Provide the journal entry recorded by the investor company assuming that the net assets transferred from the investee do not qualify as a "business," as that term is
defined in FASB ASC Master Glossary.
General Journal
$240
1,200
600
360
+
Debit
Credit
Transcribed Image Text:b. Provide the journal entry recorded by the investor company assuming that the net assets transferred from the investee qualify as a "business,” as that term is
defined in FASB ASC Master Glossary.
General Journal
Description
Production equipment
Factory
Land
Patents
Cash
♦
(▶
♦
Debit
Credit
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