Poppy Corporationacquires Stevens Company,paying the owners of Stevens 1,000,000 newshares with a par value of $0.50 per share and afair value of $50 per share at the date ofacquisition. Poppy also incurs cash registrationfees of $100,000 and consulting fees of$700,000. Included in the agreement is acontingency guaranteeing Stevens shareholdersto pay $400,000 if sales increase 5% in thecurrent year. Poppy' contingency is almostcertain and it is valued at $400,000.What is Poppy's reported acquisition cost?

Given that, Poppy issue 1,000,000 shares to stevens. Par value of share = $0.50 Fair value of share…

Answered: Poppy Corporation acquires Stevens…

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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Mungo Ltd has entered into two contacts involving financial instruments as follows. On 1 July 2020, the company obtained 250,000 shares in Barry Ltd as a long-term investment at a cost of $4 per share. The year ended market prices of Barry Ltd were $5.00 on 30 June 2021 and $4.50 on 30 June 2022. The election is made. On 1 March 2021, the company acquired 150,000 exchange trade call option in OZ Ltd at a cost of $4.00 per option. The options have an exercise price of $45.00 and mature on 20 October 2021. The options have a fair value to the holder of $5.50 each on 30 June 2021 and $6.00 each on 20 October 2021 when the options are exercised. Required Prepare the entries of Mungo Ltd for any financial assets or financial liabilities that arise in case a) and b) above.
H Company acquires 100% of the voting stock of R Company on January 1, 2021 for P400,000 cash. A contingent payment of P16,500 will be paid on April 15, 2022 if Ron Company generates cash flows from operations of P27,000 or more next year. H Company estimates that there is a 20% probability that R Company will generate at least P27,000 next year and uses an interest rate of 5% to incorporate the time value of money. The fair value of P16,500 at 5%, using a probability weighted approach is P3,142. What will H Company record as the acquisition price on January 1, 2021? Your answer
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On January 1, 2020, ABC Co. entered into a contract to acquire a newmachine for its factory. The machine, which had a cash price of $300,000,was paid for as follows: Down payment $30,000; Note payable in 10 equalmonthly installments $240,000; 1,000 shares of Banana Co. ordinaryshares with an agreed value of $50 per share: $50,000 Total $320,000.Prior to the machine's use, installation costs of $8,000 were incurred. Themachine has an estimated useful life of 10 years and salvage value of$10,000. What should the company record as depreciation expense forthe first year under the straight line method?
Matthew, Inc. owns 30 percent of the outstanding stock of Lindman Company and has the ability to significantly influence the investee’s operations and decision making. On January 1, 2018, the balance in the Investment in Lindman account is $365,000. Amortization associated with this acquisition is $12,600 per year. In 2018, Lindman earns an income of $132,000 and declares cash dividends of $33,000. Previously, in 2017, Lindman had sold inventory costing $33,600 to Matthew for $56,000. Matthew consumed all but 20 percent of this merchandise during 2017 and used the rest during 2018. Lindman sold additional inventory costing $44,800 to Matthew for $80,000 in 2018. Matthew did not consume 40 percent of these 2018 purchases from Lindman until 2019. What amount of equity method income would Matthew recognize in 2018 from its ownership interest in Lindman? What is the equity method balance in the Investment in Lindman account at the end of 2018?
An acquiring company pays $45 million in cash, and issues new no-par stock with a fair value of $75 million, to the acquired company's former owners, for the assets and liabilities of the acquired company. Registration fees associated with the new stock issuance are $300,000, paid in cash. Consulting fees for the acquisition are $1 million, paid in cash. The fair value of the acquired company's identifiable net assets is $65 million. The entry or entries the acquiring company makes to record the acquisition have what net effect on its account balances? Select one: O A. Capital stock increases by $75 million. O B. Expenses increase by 1.3 million. C. Goodwill increases by $55 million. O D. Cash decreases by $46 million.
On July 1, 2019, Killearn Company acquired 105,000 of the outstanding shares of Shaun Company for $19 per share. This acquisition gave Killearn a 40 percent ownership of Shaun and allowed Killearn to significantly influence the investee’s decisions. As of July 1, 2019, the investee had assets with a book value of $5 million and liabilities of $1,101,500. At the time, Shaun held equipment appraised at $280,000 more than book value; it was considered to have a seven-year remaining life with no salvage value. Shaun also held a copyright with a five-year remaining life on its books that was undervalued by $650,000. Any remaining excess cost was attributable to goodwill. Depreciation and amortization are computed using the straight-line method. Killearn applies the equity method for its investment in Shaun. Shaun's policy is to declare and pay a $1 per share cash dividend every April 1 and October 1. Shaun's income, earned evenly throughout each year, was $640,000 in 2019, $670,600 in…
As a long-term investment, Painters' Equipment Company purchased 20% of AMC Supplies Incorporated's 430,000 shares for $510,000 at the beginning of the fiscal year of both companies. On the purchase date, the fair value and book value of AMC's net assets were equal. During the year, AMC earned net income of $280,000 and distributed cash dividends of 15 cents per share. At year-end, the fair value of the shares is $538,000. Required: 1. Assume no significant influence was acquired. Prepare the appropriate journal entries from the purchase through the end of the year. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. View transaction list Journal entry worksheet 1 2 3 4 Record the purchase of AMC Supplies shares for $510,000 as a long-term investment. Note: Enter debits before credits. Transactions General Journal Debit Credit
Pitino acquired 90 percent of Brey's outstanding shares on January 1, 2019, in exchange for $351,000 in cash. The subsidiary's stockholders' equity accounts totaled $335,000, and the noncontrolling interest had a fair value of $39,000 on that day. However, a building (with a ten-year remaining life) in Brey's accounting records was undervalued by $15,000. Pitino assigned the rest of the excess fair value over book value to Brey's patented technology (four-year remaining life). Brey reported net income from its own operations of $65,000 in 2019 and $81,000 in 2020. Brey declared dividends of $19,500 in 2019 and $23,500 in 2020. Brey sells inventory to Pitino as follows: Year Cost to Brey Transfer Price to Pitino Inventory Remaining at Year-End (at transfer price) 2019 $ 70,000 $ 120,000 $ 26,000 2020 77,000 140,000 38,000 2021 99,000 165,000 40,000 At December 31, 2021, Pitino owes Brey $17,000 for inventory acquired during the…
Parks, Incorporated paid $10 per share for 80,000 of the 100,000 shares of KO, Incorporated, when KO’s net assets had a total fair value of $950,000. During the weeks before and after this acquisition, the shares of KO, Incorporated have traded for $9 per share. What is the total acquisition business fair value of KO, Incorporated?
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Marigold Corporation purchased 630 common shares of Ditch Inc. for $12,900 on February 21. Marigold paid a 1% commission on the share purchase and, because the shares were not publicly traded, decided to account for them following the cost model. On June 30, Ditch declared and paid a cash dividend of $1.90 per share. (a) Prepare Marigold Corporation's journal entry to record the purchase of the investment. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List debit entry before credit entry.) Date Account Titles and Explanation Feb. 21 Debit Credit

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