Subject: acounting Exercise 2B: Stock Purchase of Another CompanyHotSauce Inc. wants to purchase the net assets of AuntyAcid Inc. for purposes of horizontal consolidation andwill pay $850,000 cash for them. The balance sheet for AuntyAcid Inc. on the date of purchase is as follows:CashA/RInventoryNet Fixed AssetsPatentsTotal Assets:AssetsBook Value$0100,000250,000250,0000AuntyAcid Inc.Balance Sheet as of 3/31/20X1$600,000AccountInvestment in AuntyAcid Inc.CashTotalFair MarketValue$0 A/P95,000275,000350,000100,000Liabilities & Owners' EquityBook Value$75,000125,000Notes PayableMortgage PayableTotal Liabilities:Common StockRetained EarningsTotal Equity:Total Liabilities & O.E.:A) Prepare the journal entry amounts for this stock purchase on the books of HotSauce Inc. byentering the proper debit and credit amounts in the gray-shaded cells below.DebitsFair MarketValue$75,000125,000150,000 120,000$350,000$0200,00050,000$250,000$600,000Credits$0B) Note: There is NO journal entry made on the part of the acquired company as stock is purchasedfrom the shareholders, and NOT the acquired company!

For the purpose of maintaining track of commercial transactions, the business entities record them…

HotSauce Inc. wants to purchase the net assets of AuntyAcid Inc. for purposes of horizontal consolidation and will pay $850,000 cash for them. The balance sheet for AuntyAcid Inc. on the date of purchase is as follows: Cash A/R Inventory Net Fixed Assets Patents Total Assets: Assets Book Value $0 100,000 250,000 250,000 AuntyAcid Inc. Balance Sheet as of 3/31/20X1 $600,000 Account Investment in AuntyAcid Inc. Cash 0 Total Fair Market Value $0 95,000 275,000 350,000 100,000 Liabilities & Owners' Equity A/P Notes Payable Mortgage Payable Total Liabilities: Common Stock Retained Earnings Total Equity: Total Liabilities & O.E.: Debits Book Value $0 $75,000 125,000 150,000 $350,000 A) Prepare the journal entry amounts for this stock purchase on the books of HotSauce Inc. by entering the proper debit and credit amounts in the gray-shaded cells below. 200,000 50,000 $250,000 $600,000 Fair Market Value $75,000 125,000 120,000 Credits $0 B) Note: There is NO journal entry made on the part of the acquired company as stock is purchased from the shareholders, and NOT the acquired company!

HotSauce Inc. wants to purchase the net assets of AuntyAcid Inc. for purposes of horizontal consolidation and will pay $850,000 cash for them. The balance sheet for AuntyAcid Inc. on the date of purchase is as follows: Cash A/R Inventory Net Fixed Assets Patents Total Assets: Assets Book Value $0 100,000 250,000 250,000 AuntyAcid Inc. Balance Sheet as of 3/31/20X1 $600,000 Account Investment in AuntyAcid Inc. Cash 0 Total Fair Market Value $0 95,000 275,000 350,000 100,000 Liabilities & Owners' Equity A/P Notes Payable Mortgage Payable Total Liabilities: Common Stock Retained Earnings Total Equity: Total Liabilities & O.E.: Debits Book Value $0 $75,000 125,000 150,000 $350,000 A) Prepare the journal entry amounts for this stock purchase on the books of HotSauce Inc. by entering the proper debit and credit amounts in the gray-shaded cells below. 200,000 50,000 $250,000 $600,000 Fair Market Value $75,000 125,000 120,000 Credits $0 B) Note: There is NO journal entry made on the part of the acquired company as stock is purchased from the shareholders, and NOT the acquired company!

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

You're given the following details of an acquisition of Target Co. by Acquirer Ltd.. What is the transaction value for this acquisition of Target Co.? Acquisition of Target Co. by Acquirer Ltd. Target Share Price ($/sh.) $85.40 Acquisition Premium 15% Diluted Shares Outstanding (MM) 670 Target Total Debt $3,562 Target Cash and Cash Equivalents $5,147 % Debt Financing 40% % Equity Financing 60% Equity Financing Fees 4.0% Debt Financing Fees 1.5% Other Transaction Costs $800
Question 3: Prepare acquisition analysis and Consolidation worksheet entries Syd Ltd acquired all the issued shares (Cum-div.) of Mel Ltd on 1 July 2020. At this date the financial position of Matt Ltd was as follows: Carrying Amount Fair ValuePlant $300 000 270 000Accumulated Depreciation (60 000) Account Receivables 25 200 25 200Cash 15 000 15 000Inventories 15 600 19 600295 800 Share Capital 220 000 General Reserve 23 400 Retained Earnings 24 200 Provisions of Employee benefits 19 200 19 200Dividend Payable 9 000 9 000295 800 Additional information: The assets of Mel Ltd did not include a patent that was valued by Syd Ltd at $12 000. Its useful life was considered to be 6 years, with benefits being received equally over that period. The plant was considered to have a further 10-year life and is depreciated on a straight-line basis. All the pre-acquisition inventories were not sold by 30 June 2021. An interim dividend of $10,000 paid by Mel Ltd in September 2020. Syd Ltd declared a…
Question 3: Prepare acquisition analysis and Consolidation worksheet entries Syd Ltd acquired all the issued shares (Cum-div.) of Mel Ltd on 1 July 2020. At this date the financial position of Matt Ltd was as follows: Carrying Amount Fair Value Plant $300 000 270 000 Accumulated Depreciation (60 000) Account Receivables 35 200 35 200 Cash 15 000 15 000 Inventories 15 600 19 600 305 800 Share Capital 230 000 General Reserve 23 400 Retained Earnings 24 200 Provisions of Employee benefits 19 200 19 200 Dividend Payable 9 000 9 000 305 800 Additional information: The assets of Mel Ltd did not include a patent that was valued by Syd Ltd at $12 000. Its useful life was considered to be 6 years, with benefits being received equally over that period. The plant was considered to have a further 10-year life and is depreciated on…
Assume that Company A acquires 70 per cent of Company B for a cash price of $14 million when the share capital and reserves of Company B are: Share capital$8 millionRetained earnings$2 million $10 millionPass the necessary consolidation journal entries and the journal entries to record the non-controlling interest if the non-controlling interest in the acquirer is measured at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets
Problem 3) On January 1, 20X7, Falcon acquired the net assets of Intra for $3,400,000 with the issue of shares. The statement of financial position for Intra at the date of acquisition is shown below, together with estimates of the fair values of Intra's recorded assets and liabilities. Intra Corp Statement of Financial Position as at December 31, 20X6 Assets Cash Accounts receivable Inventories Property, plant, and equipment Development projects Other investments Total assets Liabilities Accounts payable and accrued liabilities Long-term debt Common shares Retained earnings Total liabilities and shareholders' equity Book value $ 000's 350 180 330 3,465 150 20 4,495 180 680 1,525 2,110 4,495 Fair value $ 000's 350 170 310 3,155 565 45 180 660 Required: a) What is the amount of goodwill to be recorded for this business combination? b) Prepare the journal entry that Falcon will use to record the business combination. Prepare the statement of financial position for Intra on January 1,…
2. Parent Company buys Sub Company. Sub Company has the following book market values for their accounts as of the purchase. Balance Sheet of Sub Company Book Values Fair Values Assets Current assets $150 $150 Property, plant, and equipment (net) Copyright (net) Sales contracts 200 300 50 600 350 Total Assets $400 $1,400 Liabilities Accounts payable $100 $100 Stockholders' Equity Common stock-$5 par value 50 Additional paid-in capital 50 Retained earnings 200 Total Liabilities and Stockholders' Equity $400 (1) Parent Company pays $400 cash and 50 shares of $10 par common stock $20 per share as of the business combination. Prepares a journal entry for takeover for Parent Company. Sub Company dissolves after this event. (5
Here are the pre-acquisition balance sheets of POP Company and Sicle Company onDecember 31, 20x5:Pop Co. Sicle Co.Book Value Book Value Market ValuesCurrent assets P 5,000,000 P 2,000,000 P 1,500,000Investments 1,000,000 500,000 500,000Land 10,000,000 5,000,000 6,000,000Buildings (net) 40,000,000 25,000,000 16,000,000Equipment (net) 25,000,000 10,000,000 2,000,000Total assets P 81,000,000 P 42,500,000Current liabilities P 4,000,000 P 1,500,000 1,500,000Long-term liabilities 20,000,000 10,000,000 12,000,000Common stocks, P10par 5,000,000 1,000,000Additional paid-incapital 40,000,000 20,000,000Retained earnings 12,000,000 10,000,000Total liabilities &equity P 81,000,000 P 42,500,000In addition to the above Sicle Co. has identifiable tangibles with a fair value of P5,000,000not recognize on its book but appropriately capitalize by Pop.On January 1, 20x6 Pop issues 400,000 shares of its stock, with a par value of P10/share anda market value of 100/share, to acquire Sicle Company’s…
Sey PROBLEM 2-3 Condensed Statements of Financial Position of Love Corp. and You Corp. as of December 31, 2021 are as follows: Current assets Noncurrent assets Liabilities Ordinary shares, P20 par Share premium Retained earnings Love P175,000 725,000 65,000 550,000 35,000 250,000 You P65,000 425,000 35,000 300,000 25,000 130,000 On January 1, 2022, Love Corp. issued 35,000 shares with a market value of P25/share for the assets and liabilities of You Corp.
E3.5 Acquisition analysis, including fair value adjustment for plant and equipment (Section 3.6.2) On 1 October 20XO, EF Ltd acquired all the issued ordinary shares of GH Ltd. The terms of the acquisition agreement specified that EF Ltd must pay the existing shareholders of GH Ltd $1.5million immediately and a further $1.5million on 30 September 20X1. The incremental cost of short-term finance to EF Ltd is 10% p.a. At acquisition date, the issued capital and reserves of GH Ltd were as follows: Issued capital 1 200000 Retained eamings 1/10/20X0 1400000 At 1 October 20xO, the plant and equipment of GH Ltd had a carrying amount that was $150000 less than its fair value. The company income tax rate is 30%. REQUIRED (a) Prepare the general journal entries for the accounting records of EF Ltd to record: (i) the investment in GH Ltd on 1 October 20X0 (ii) the cash payment of the $1500 000 on 30 September 20X1.
Assume that Company A acquires 70 per cent of Company B for a cash price of $14 million when the share capital and reserves of Company B are: Share capital $8 million Retained earnings $2 million $10 million. A)Pass the necessary consolidation journal entries and the journal entries to record the non-controlling interest if the non-controlling interest in the acquirer is measured at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets. b) What are some of the implications of allowing the group to have two options in accounting for goodwill on consolidation?
Acquisition of Company B by Company A (stock or asset acquisition) Company A is about to acquire 100% of company B. Company B has identifiable net assets with book value of $300,000 and $500,000 respectively. As payment Company A will issue common stock with a fair value of $75,000. How should the transaction be recorded if the acquisition is? a) An acquisition of net assets? b) An acquisition of Company B’s common stock and Company B remains a separate legal entity
If CARDO Co purchases the net assets of SYANO Co by issuing 5,000 shares of their P20 par valueshares with a fair value of P40 per share, incurs a mortgage loan for P90,000, pays P150,000 cash andpaying direct, indirect and stock issue costs of P75,000, P50,000 and P40,000 respective. REQUIREMENTS:A. GoodwillB. Consolidated Total Assets at the date of acquisition