On March 31, 2020, United Corporation acquired for $750,000 cash all the outstanding common stock of National Company when National's balance sheet showed net assets of $500,000. Out-of-pocket costs of the business combination may be disregarded. The current fair values of assets and liabilities

On March 31, 2020, United Corporation acquired for $750,000 cash all the outstanding common stock of National Company when National's balance sheet showed net assets of $500,000. Out-of-pocket costs of the business combination may be disregarded. The current fair values of assets and liabilities

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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6. On January 2, 2019, U Co. purchased 75% of the outstanding shares of N Co. resulting to a goodwill of P60,000. On that date, the non-cash assets of N Co. whose book values did not equal their book values were accounts receivable which was overstated by P4,500 and equipment with a remaining 5 year life on the purchase date which was understated by P50,000. For the year 2010, U and N reported net income of P350,000 and P200,000 each respectively. U’s beginning inventory included merchandise purchased from N Company amounting to P39,000 which was sold to them by N at a 30% markup, 80% of these goods were sold during the year. N, on the other hand, included inventory items which they purchased from U Co. amounting to 18,000. These goods were sold by U at a 25% markup. 90% of these goods were sold by N for the year. What is the Noncontrolling interest's share in the Net income of the subsidiary?
6. ABC and XYZ Inc had the following balance sheets on December 31, 2021: (see image below) On January 1, 2022 ABC purchased all of XYZ Inc’s Common Shares for P40,000 in cash. On that date, XYZ’s Current Assets and Fixed Assets were worth P26,000 and P54,000, respectively. Assuming that Consolidated Financial Statements were prepared on that date, determine the value of the current assets of the combined entity: *
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2.On Feb, 1, Johnson Co. agreed to sell the assets of its Formal Wear Division to Sun Hat Inc. The following additional facts pertain to the transaction: The Formal Wear Division qualifies as a component of the entity according to GAAP regarding discontinued operations. The book value of Formal Wear's assets totaled $48 million on December 31, 2021. Formal Wear's operating income was a pre-tax loss of $10 million in 2021. Tango's income tax rate is 25%. Suppose that the Formal Wear Division's assets had not been sold by December 31, 2021, but were considered held for sale. Assume that the fair value of these assets was $40 million at December 31, 2021. In the income statement for the year ended December 31, 2021, Tango Co. would report discontinued operations of: A) $7.5 million loss. B) $10.0 million loss. C) $18 million loss. D) $13.5 million loss. .
Assume that, on January 1, 2021, Sycamore Corp. paid $2,040,000 for its investment in 36,000 shares of Starfish Inc. Further, assume that Starfish has 120,000 total shares of stock issued and estimates an eight-year remaining useful life and straight-line depreciation with no residual value for its depreciable assets. At January 1, 2021, the book value of Starfish's identifiable net assets was $7,060,000, and the fair value of Starfish was $10,000,000. The difference between Starfish's fair value and the book value of its identifiable net assets is attributable to $1,950,000 of land and the remainder to depreciable assets. Goodwill was not part of this transaction. The following information pertains to Starfish during 2021: Net Income $600,000 Dividends declared and paid $360,000 Market price of common stock on 12/31/2021 $ 80/share What amount would Sycamore Corp. report in its year-end 2021 balance sheet for its investment in Starfish Inc.? Multiple Choice $2,074,875. $2,220,000.…
On January 1, 2023, Flounder Corporation, a public company following IFRS, acquired 17,400 of the 58,000 outstanding common shares of Noah Corp. for $27 per share. Noah's statement of financial position reported the following information at the date of the acquisition: Assets not subject to depreciation $287,800 Assets subject to depreciation 863,600 Liabilities 148,600 Additional information: 1. On the acquisition date, the fair value is the same as the carrying amount for the assets that are not subject to depreciation and for the liabilities. 2. 3. 4. On the acquisition date, the fair value of the assets that are subject to depreciation is $957,600. These assets had a remaining useful life of eight years at that time. Noah reported 2023 net income of $94,000 and paid dividends of $4,500 in December 2023. Noah's shares are not actively traded on the stock exchange, but Flounder has determined that they have a fair value of $25 per share on December 31, 2023. (a) Prepare the journal…
On January 1, 2020, Pail Corporation acquired 75 percent of Sand Company's common stock for $525,000 cash. The fair value of the noncontrolling interest at that date was determined to be $175,000. At the date of the business combination, the book values of Sand's net assets and liabilities approximated fair value except for depreciable plant assets, which were OVERvalued by $4000 and Inventory, which was UNDERvalued by $9000 The remaining useful life of the plant assets was set at 10 years. For the year ended December 31, 2020, Pail reported Cost of Goods Sold of $14000 on its general ledger. Sand reported Cost of Goods Sold of $16000 on its general ledger. What amount of COST OF GOODS SOLD should be reported on the 12/31/20 consolidated Income Statement?
Parson Company acquired an 80 percent interest in Syber Company on January 1, 2020. Any portion of Syber's business fair value in excess of its corresponding book value was assigned to trademarks. This intangible asset has subsequently undergone annual amortization based on a 15-year life. Over the past two years, regular intra-entity inventory sales transpired between the two companies. No payment has yet been made on the latest transfer. All dividends are paid in the same period as declared. The individual financial statements for the two companies as well as consolidated totals for 2021 follow (credit balances indicated by parentheses): ParsonCompany SyberCompany ConsolidatedTotals Sales $ (744,000 ) $ (654,000 ) $ (1,223,000 ) Cost of goods sold 450,000 412,000 691,000 Operating expenses 104,000 107,000 213,300 Income of Syber (102,960 ) 0 0 Separate company net income $ (292,960 ) $ (135,000 )…
On December 1, 2021. LETSGO Corporation acquired for $175,000 all the net assets of MARS Company. On the date of the combination , the carrying value of MARS Company’s identifiable net assets was $143,750. The current fair value of all identifiable net assets of MARS Company were equal to their carrying values, except for its inventories and plants assets. The current fair value of MARS Company’s inventories was $25,000 less than their carrying values, and the current fair value of MARS Company’s plant asset was $50,000 more than their carrying amount. What is the journal entry prepared by LETSGO Corporation to record the business combination?
On October 1, 2020, Puna Corporation acquired for cash all the outstanding common stock of Suna Company, which was not liquidated, Consolidated net income for the fiscal year ended December 31, 2021, includes net income of: a. Puna for twelve months, but no income from Suna until it declares a cash dividend b. Puna for twelve months and Suna for three months c. Puna for twelve months and Suna for twelve months d. Puna for three months and Suna for three months
Big Corp. has been undergoing liquidation since December 1, 2020. As of July 31, 2021, the following data are available: P1,500,000 Liabilities not liquidated Liabilities to be liquidated P1,700,000 Assets acquired Assets realized P2,400,000 P2,250,000 Assets not realized P1,375,000 Liabilities assumed P2,625,000 Assets to be realized P2,750,000 Liabilities liquidated P1,750,000 Supplementary charges/debits P2,750,000 Supplementary credits P3,800,000 Answer the following questions: (answers can be repeated) Compute the ending cash balance of cash account (as of July 31, 2021) assuming that Choose... common stock and deficits are P2,750,000 and P750,000, respectively. What is the net gain/(loss) of Big Corp. from the liquidation? Choose...
On September 17, 2024, Ziltech, Incorporated, entered into an agreement to sell one of its divisions that qualifies as a component of the entity according to generally accepted accounting principles. By December 31, 2024, the company's fiscal year - end, the division had not yet been sold, but was considered held for sale. The net fair value (fair value minus costs to sell) of the division's assets at the end of the year was $10 million. The pretax income from operations of the division during 2024 was $2 million. Pretax income from continuing operations for the year totaled $ 13 million. The income tax rate is 25 %. Ziltech reported net income for the year of $5.1 million. Required: Determine the book value of the division's assets on December 31, 2024.