he equipment has a remaining useful life as of 4 years from January 1, 2021. ABC Co. elects to measure non- hterest as its proportionate share in XYZ's net identifiable assets. Compute for the consolidated asset.
he equipment has a remaining useful life as of 4 years from January 1, 2021. ABC Co. elects to measure non- hterest as its proportionate share in XYZ's net identifiable assets. Compute for the consolidated asset.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Question
![On January 1, 2021, ABC Co. acquired 80% interest in XYZ, Inc. by issuing 5,000 shares with fair value of P30 per share
and par value of P20 per share. The financial statements of ABC Co. and XYZ, Inc. immediately after the acquisition are
shown below:
Jan. 1, 2021
XYZ, Inc.
10,000
АВССо.
Cash
20,000
Accounts receivable
60,000
24,000
80,000
150,000
46,000
Inventory
Investment in subsidiary
Equipment
Accumulated depreciation
Total assets
400,000
100,000
(40,000)
670,000
(20,000)
160,000
Accounts payable
Bonds payable
Share capital
40,000
12,000
60,000
340,000
100,000
Share premium
130,000
Retained earnings
Total liabilities and equity
100,000
48,000
670,000
160,000
On January 1, 2021, the fair value of the assets and liabilities of XYZ, Inc. were determined by appraisal, as follows:
Carrying
Fair
Fair value
XYZ, Inc.
amounts
values
increment
Cash
10,000
10,000
Accounts receivable
24,000
24,000
Inventory
46,000
62,000
16,000
Equipment
Accumulated depreciation
Accounts payable
Net assets
100,000
(20,000) (24,000)
120,000
20,000
(4,000)
(12,000)
148,000
(12,000)
180,000
32,000
The equipment has a remaining useful life as of 4 years from January 1, 2021. ABC Co. elects to measure non-controlling
interest as its proportionate share in XYZ's net identifiable assets. Compute for the consolidated asset.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa454e56f-e022-45fa-a910-d0ab12ea4bb8%2F817a65eb-669e-47bd-a29f-2b2bbb5d2d91%2Fpzztghrr_processed.png&w=3840&q=75)
Transcribed Image Text:On January 1, 2021, ABC Co. acquired 80% interest in XYZ, Inc. by issuing 5,000 shares with fair value of P30 per share
and par value of P20 per share. The financial statements of ABC Co. and XYZ, Inc. immediately after the acquisition are
shown below:
Jan. 1, 2021
XYZ, Inc.
10,000
АВССо.
Cash
20,000
Accounts receivable
60,000
24,000
80,000
150,000
46,000
Inventory
Investment in subsidiary
Equipment
Accumulated depreciation
Total assets
400,000
100,000
(40,000)
670,000
(20,000)
160,000
Accounts payable
Bonds payable
Share capital
40,000
12,000
60,000
340,000
100,000
Share premium
130,000
Retained earnings
Total liabilities and equity
100,000
48,000
670,000
160,000
On January 1, 2021, the fair value of the assets and liabilities of XYZ, Inc. were determined by appraisal, as follows:
Carrying
Fair
Fair value
XYZ, Inc.
amounts
values
increment
Cash
10,000
10,000
Accounts receivable
24,000
24,000
Inventory
46,000
62,000
16,000
Equipment
Accumulated depreciation
Accounts payable
Net assets
100,000
(20,000) (24,000)
120,000
20,000
(4,000)
(12,000)
148,000
(12,000)
180,000
32,000
The equipment has a remaining useful life as of 4 years from January 1, 2021. ABC Co. elects to measure non-controlling
interest as its proportionate share in XYZ's net identifiable assets. Compute for the consolidated asset.
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