Pushdown AccountingAssume a parent company acquires its subsidiary by paying $1,200,000 for all of the outstanding voting shares of the investee. On theacquisition date, subsidiary's assets and liabilities have individual fair values that equal their book values, except for property equipmentwith a fair value greater than book value by $150,000 and license with a fair value greater than book value by $250,000. The parent andsubsidiary have the following balance sheets immediately after the acquisition, but before any pushdown adjustments by the subsidiary:Parent SubsidiaryAssets:Cash & receivables$ 800,000$ 100,000Inventory600,000200,000Property & equipment, net2,300,000775,000Equity investment1,200,000Licenses25,000$ 4,900,000$1,100,000Liabilities and stockholders' equity:Current liabilities$ 400,000$ 150,000Other liabilities300,000Note payable350,000Common stock1,670,000100,000APIC1,430,000200,000Retained earnings1,100,000300,000$4,900,000 $1,100,000a. Compute the amount of goodwill implicit in the acquisition of the subsidiary,.b. Assume the subsidiary elects to apply pushdown accounting immediately after the above financial statements were prepared. Providethe journal entries required for the subsidiary to apply pushdown accounting.DescriptionDebitCreditProperty & equipment, netLicensesC. Prepare the consolidation entry or entries on the date of acquisition, assuming the subsidiary applied pushdown accounting.Description[E] Common stockDebitCreditAPICd. Prepare the consolidated balance sheet on the date of acquisition.Consolidated Balance SheetAssets:Cash & receivables$4InventoryProperty & equipment, netLicensesLiabilities and stockholders equity:Current liabilities%24Other liabilitiesNote payableCommon stockAPICRetained earnings

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Pushdown Accounting Assume a parent company acquires its subsidiary by paying $1,200,000 for all of the outstanding voting shares of the investee. On the acquisition date, subsidiary's assets and liabilities have individual fair values that equal their book values, except for property equipm with a fair value greater than book value by $150,000 and license with a fair value greater than book value by $250,000. The parent an subsidiary have the following balance sheets immediately after the acquisition, but before any pushdown adjustments by the subsidia Parent Subsidiary Assets: Cash & receivables S 800,000 $ 100,000 Inventory 600,000 200,000 Property & equipment, net 2,300,000 775,000 Equiry investment 1,200,000 Licenses 25,000 $ 4,900,000 $1,100,000 Liabilities and stockholders' equity: Current liabilities $ 400,000 $ 150,000

Pushdown Accounting Assume a parent company acquires its subsidiary by paying $1,200,000 for all of the outstanding voting shares of the investee. On the acquisition date, subsidiary's assets and liabilities have individual fair values that equal their book values, except for property equipm with a fair value greater than book value by $150,000 and license with a fair value greater than book value by $250,000. The parent an subsidiary have the following balance sheets immediately after the acquisition, but before any pushdown adjustments by the subsidia Parent Subsidiary Assets: Cash & receivables S 800,000 $ 100,000 Inventory 600,000 200,000 Property & equipment, net 2,300,000 775,000 Equiry investment 1,200,000 Licenses 25,000 $ 4,900,000 $1,100,000 Liabilities and stockholders' equity: Current liabilities $ 400,000 $ 150,000

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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Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

Question

Pushdown Accounting
Assume a parent company acquires its subsidiary by paying $1,200,000 for all of the outstanding voting shares of the investee. On the
acquisition date, subsidiary's assets and liabilities have individual fair values that equal their book values, except for property equipment
with a fair value greater than book value by $150,000 and license with a fair value greater than book value by $250,000. The parent and
subsidiary have the following balance sheets immediately after the acquisition, but before any pushdown adjustments by the subsidiary:
Parent Subsidiary
Assets:
Cash & receivables
$ 800,000
$ 100,000
Inventory
600,000
200,000
Property & equipment, net
2,300,000
775,000
Equity investment
1,200,000
Licenses
25,000
$ 4,900,000
$1,100,000
Liabilities and stockholders' equity:
Current liabilities
$ 400,000
$ 150,000
Other liabilities
300,000
Note payable
350,000
Common stock
1,670,000
100,000
APIC
1,430,000
200,000
Retained earnings
1,100,000
300,000
$4,900,000 $1,100,000
a. Compute the amount of goodwill implicit in the acquisition of the subsidiary,.
b. Assume the subsidiary elects to apply pushdown accounting immediately after the above financial statements were prepared. Provide
the journal entries required for the subsidiary to apply pushdown accounting.
Description
Debit
Credit
Property & equipment, net
Licenses
C. Prepare the consolidation entry or entries on the date of acquisition, assuming the subsidiary applied pushdown accounting.
Description
[E] Common stock
Debit
Credit
APIC
d. Prepare the consolidated balance sheet on the date of acquisition.
Consolidated Balance Sheet
Assets:
Cash & receivables
$4
Inventory
Property & equipment, net
Licenses
Liabilities and stockholders equity:
Current liabilities
%24
Other liabilities
Note payable
Common stock
APIC
Retained earnings

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