On January 1, 2017, Sparky Co. acquired 80% of the outstanding stock of Panda Co. for P225,000 cash. Relevant information for Panda Co. on this date is as follows: Inventory 120,000 Land 240,000 Goodwill 10,000 Liabilities 30,000 Common Stock, P100 par 240,000 Retained earnings 100,000 At acquisition date, the book values of Panda Co.’s net identifiable assets and liabilities approximated their fair values.

On January 1, 2017, Sparky Co. acquired 80% of the outstanding stock of Panda Co. for P225,000 cash. Relevant information for Panda Co. on this date is as follows: Inventory 120,000 Land 240,000 Goodwill 10,000 Liabilities 30,000 Common Stock, P100 par 240,000 Retained earnings 100,000 At acquisition date, the book values of Panda Co.’s net identifiable assets and liabilities approximated their fair values.

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

On March 31, 2024, Wolfson Corporation acquired all of the outstanding common stock of Barney Corporation for $17,400,000 in cash. The book values and fair values of Barney’s assets and liabilities were as follows: Book Value Fair Value Current assets $ 6,400,000 $ 7,900,000 Property, plant, and equipment 11,400,000 14,400,000 Other assets 1,040,000 1,540,000 Current liabilities 4,400,000 4,400,000 Long-term liabilities 6,400,000 5,900,000 Required: Calculate the amount paid for goodwill.
On January 2, 2014, Prunce Company acquired 90% of the outstanding common stock of Sun Company for $180,700 cash. Just before the acquisition, the balance sheets of the two companies were as follows: Prunce Sun Cash $282,130 $ 59,040 Accounts receivable (net) 142,020 24,810 Inventory 118,670 53,230 Plant and equipment (net) 395,640 92,960 Land 62,550 29,220 Total asset $1,001,010 $259,260 Accounts payable $106,440 $ 50,420 Mortgage payable 67,320 37,660 Common stock, $2 par value 421,400 76,960 Other contributed capital 217,440 21,970 Retained earnings 188,410 72,250 Total equities $1,001,010 $259,260 The fair values of Sun Company’s assets and liabilities are equal to their book values with the exception of land. (a) Your answer is correct. Prepare a journal entry to record the purchase of Sun Company’s common stock.…
On January 1, 2016, Monica Company acquired 70 percent of Young Company’s outstanding common stock for $665,000. The fair value of the noncontrolling interest at the acquisition date was $285,000. Young reported stockholders’ equity accounts on that date as follows: Common stock—$10 par value $ 300,000 Additional paid-in capital 90,000 Retained earnings 410,000 In establishing the acquisition value, Monica appraised Young's assets and ascertained that the accounting records undervalued a building (with a five-year remaining life) by $50,000. Any remaining excess acquisition-date fair value was allocated to a franchise agreement to be amortized over 10 years. During the subsequent years, Young sold Monica inventory at a 30 percent gross profit rate. Monica consistently resold this merchandise in the year of acquisition or in the period immediately following. Transfers for the three years after this business combination was created amounted to…
On May 1, Burns Corporation acquired 100 percent of the outstanding ownership shares of Quigley Corporation in exchange for $728,000 cash. At the acquisition date, Quigley's book and fair values were as follows: Cash Receivables Inventory Land Building and equipment (net) Patented technology Total assets Accounts payable Long-term liabilities Common stock ($5 par value) Additional paid-in capital Retained earnings Total liabilities and stockholders equity Total assets Assets Book Value $ 112,000 $ 218,000 232,000 $ 177,000 323,000 0 $1,062,000 $ 162,500 $ 638,000 210,000 90,000 (38,500) $1,062,000 Burns directs Quigley to seek additional financing for expansion through a new long-term debt issue. Consequently, Quigley will issue a set of financial statements separate from that of its new parent to support its request for debt and accompanying regulatory filings. Quigley elects to apply pushdown accounting in order to show recent fair valuations for its assets. Prepare a separate…
On January 1, 2015 P company acquired 80% interest in S Company for P2,000,000 cash. The stockholders' equity of S at the time of acquisition is P 1,875,000. On January 1, 2015, NCI is measured at its implied fair value. The excess of cost over book value of interest acquired is allocated to the following assets: Inventories: 100,000 (sold in 2013) Building: 200,000 (5-year remaining life) During 2015, S company reported total comprehensive income of 500,000 and paid dividends of P 100,000. How much goodwill (gain on bargain purchase) is reported in the consolidated statement of financial position on January 1, 2015? A. 325,000 B. 200,000 C. (325,000) D. (375,000)
On January 1, 2018, Johnsonville Enterprises, Inc., acquired 80 percent of Stayer Company’s oustanding common shares in exchange for $3,000,000 cash. The price paid for the 80 percent ownership interest was proportionately representative of the fair value of all of Stayer’s shares.At acquisition date, Stayer’s books showed assets of $4,200,000 and liabilities of $1,600,000. The recorded assets and liabilities had fair values equal to their individual book values except that a building (10-year remaining life) with book value of $195,000 had an appraised fair value of $345,000. Stayer’s books showed a $175,500 carrying amount for this building at the end of 2018.Also, at acquisition date Stayer possessed unrecorded technology processes (zero book value) with an estimated fair value of $1,000,000 and a 20-year remaining life. For 2018 Johnsonville reported net income of $650,000 (before recognition of Stayer’s income), and Stayer separately reported earnings of $350,000. During 2018,…
On January 1, 2018, Powers Company acquired 80% of the ordinary share of Scullery Company for $195,000. On this date Scullery had total owners' equity of $200,000 (ordinary share, premium ordinary and retained earnings of $10,000, $90,000, and $100,000 respectively). In that date inventory undervalued $6,250 and equipment undervalued $12,500. The equipment has a remaining life of five years and straight-line depreciation is used. The following transaction occurred during 2018 and 2019: 1) On December 31, 2018, Powers sold equipment to Scullery at a gain of $10,000. During 2019, the equipment was used by Scullery. Depreciation is being computed using the straight-line method, a five-year life, and no salvage value. 2) during 2018scullery sold merchandise inventory 120,000 to powers with gross profit 25% which sold all except 20,000 3) On July 1, 2018 Scullery sold land $100,000 to Powers including 10,000 gain. 4) 1/1/2019 Scullery sold a truck to Powers for 70,000 and book value 50,000…
McCoy has the following account balances as of December 31, 2020 before an acquisition transaction takes place. Inventory $125,000 Land 450,000 Buildings (net) 575,000 Common stock ($10 par) 600,000 Additional paid-in capital 300,000 Retained earnings 250,000 The fair value of McCoy’s Land and Buildings are $650,000 and $600,000, respectively. On December 31, 2020, Ferguson Company issues 30,000 shares of its $10 par value ($30 fair value) common stock in exchange for all of the shares of McCoy’s common stock. Ferguson paid $12,000 for costs to issue the new shares of stock. Before the acquisition, Ferguson has $800,000 in its common stock account and $350,000 in its additional paid-in capital account. What will the consolidated common stock account be as a result of this acquisition?
On May 1, Burns Corporation acquired 100 percent of the outstanding ownership shares of Quigley Corporation in exchange for $733,000 cash. At the acquisition date, Quigley's book and fair values were as follows: Cash Receivables Inventory Land Building and equipment (net) Patented technology Total assets Accounts payable Long-term liabilities Common stock ($5 par value) Additional paid-in capital Retained earnings Total liabilities and stockholders equity Total assets Book Value Fair Value $ 101,000 $ 101,000 229,000 229,000 254,000 323,000 157,500 118,500 330,000 409,000 0 220,000 Assets $1,071,500 $ 1,400,500 $ 146,000 $ 666,000 210,000 90,000 (40,500) $1,071,500 Burns directs Quigley to seek additional financing for expansion through a new long-term debt issue. Consequently, Quigley will issue a set of financial statements separate from that of its new parent to support its request for debt and accompanying regulatory filings. Quigley elects to apply pushdown accounting in order to…
2. Cinema Company acquired 75 percent of Movie Corporation's shares on December 31, 2015, at underlying book value of $98,000. At that date, the fair value of the noncontrolling interest was equal to 25 percent of the book value of Movie Corporation. Movie's balance sheet on January 1, 2018, contained the following balances: Cash Accounts Receivable Inventory Buildings and Equipment Less: Accumulated Depreciation Total Assets $50,000 Accounts Payable 35,000 Bonds Payable 40,000 Common Stock 300,000 Additional Paid-In Capital (100,000) Retained Earnings $325,000 Total Liabilities and Equities $40,000 100,000 50,000 Prepare the entries recorded on the books of each company. 75,000 60,000 $325,000 On January 1, 2018, Movie acquired 3,500 of its own $2 par value comm on shares from Nonaffiliated Corporation for $6 per share.
On January 1, 2017, Palka, Inc., acquired 70 percent of the outstanding shares of Sellinger Company for $1,666,000 in cash. The price paid was proportionate to Sellinger’s total fair value, although at the acquisition date, Sellinger had a total book value of $2,070,000. All assets acquired and liabilities assumed had fair values equal to book values except for a patent (six-year remaining life) that was undervalued on Sellinger’s accounting records by $300,000. On January 1, 2018, Palka acquired an additional 25 percent common stock equity interest in Sellinger Company for $656,250 in cash. On its internal records, Palka uses the equity method to account for its shares of Sellinger. During the two years following the acquisition, Sellinger reported the following net income and dividends: 2017 2018 $525,000 $701,000 Net…
On May 31, 2018, Armstrong Company paid $3,500,000 to acquire all of the common stock of Hall Corporation, which became a division of Armstrong. Hall reported the following balance sheet at the time of the acquisition: Current assets $ 900,000 Current liabilities $ 600,000 Noncurrent assets 2,700,000 Long-term liabilities 500,000 Stockholders' equity 2,500,000 Total liabilities and Total assets $3,600,000 stockholders' equity $3,600,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Hall was $3,100,000. At December 31, 2018, Hall reports the following balance sheet information: Current assets $ 800,000 Noncurrent assets (including goodwill recognized in purchase) 2,600,000 Current liabilities (700,000) Long-term liabilities (500,000) Net assets $2,200,000 It is determined that the fair value of the Hall division is $2,300,000. Instructions (a) Compute the amount of goodwill recognized, if any, on May 31, 2018. (b) Determine the…